The current compensation and benefit program for non-management directors has been in effect since January 1, 2003, and is designed to achieve the following goals: compensation should fairly pay directors for work required for a company of GE’s size and scope; compensation should align directors’ interests with the long-term interests of shareowners; and the structure of the compensation should be simple, transparent and easy for shareowners to understand. The table below on non-management directors’ compensation includes the following compensation elements:
Annual Compensation. In 2006, annual compensation of $250,000 was paid to each non-management director in four installments following the end of each quarter of service, 40% (or $100,000) in cash and 60% (or $150,000) in deferred stock units (DSUs). Non-management directors have the option of deferring some or all of their cash compensation in DSUs. There are no meeting fees. Each DSU is equal in value to a share of GE stock and is fully vested upon grant, but does not have voting rights. DSUs accumulate quarterly dividend-equivalent payments, which are reinvested in additional DSUs. The DSUs will be paid out in cash to non-management directors beginning one year after they leave the Board. Directors may elect to take their DSU payments as a lump sum or in payments spread out for up to ten years.
Audit Committee Compensation and MDCC Compensation. Additional compensation, equal to 10% of the $250,000 annual compensation, was paid to directors serving on the Audit Committee and the MDCC, due to the workload and broad-based responsibilities of these two committees. Directors serving on both committees received compensation equal to 20% of their annual compensation. This additional compensation was made in the same 40%/60% proportion between cash and DSUs, respectively, and was payable in the same manner as the annual compensation.
All Other Compensation. The column below showing “All Other Compensation” includes the following items if the total for the director exceeds $10,000:
1. Executive Products and Lighting Program. Non-management directors participate in our Executive Products and Lighting Program on the same basis as our named executives. Under this program, upon request, directors can receive GE appliances for use in their homes. Income is imputed based on the fair market value of the products received. Non-management directors may also purchase lighting products at cost.
2. Matching Gifts. Non-management directors may participate in the GE Foundation’s Matching Gifts Program on the same terms as GE’s senior executive officers. Under this program, the GE Foundation will match up to $100,000 a year in contributions by the director to a charity approved by the GE Foundation. The maximum matching gifts per year for GE employees other than senior executive officers is $50,000 a year. The amounts shown in note 4 of the table below represents the additional match on charitable contributions made by the director above the limit available to all employees.
3. Charitable Award. GE maintains a plan that permits each director to designate up to five charitable organizations (excluding a director’s private foundation) to share in a $1 million contribution to be made by the company upon the director’s termination of service. The company will fund the contribution from corporate assets upon such termination. The directors do not receive any financial benefit from this program since the charitable deductions accrue solely to the company. To avoid any appearance that a director might be unduly influenced by the prospect of receiving this benefit at retirement, the award vests upon the commencement of board service.
| Name of Director | Fees Earned or Paid in Cash1 | Stock Awards2 | Option Awards3 | All Other Compensation4 | Total | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| James I. Cash, Jr. | $110,000 | $252,336 | $1,135 | $36,224 | $399,695 | ||||||||||
| William M. Castell5 | 75,000 | 120,092 | — | — | 195,092 | ||||||||||
| Ann M. Fudge | 50,000 | 321,873 | 1,135 | 16,793 | 389,801 | ||||||||||
| Claudio X. Gonzalez | 0 | 700,200 | — | — | 700,200 | ||||||||||
| Susan Hockfield6 | — | — | — | — | — | ||||||||||
| Andrea Jung | 110,000 | 273,783 | 1,135 | 50,000 | 434,918 | ||||||||||
| Alan G. Lafley | 0 | 361,066 | — | 50,000 | 411,066 | ||||||||||
| Robert W. Lane | 0 | 311,878 | — | — | 311,878 | ||||||||||
| Ralph S. Larsen | 0 | 394,745 | — | 60,218 | 454,963 | ||||||||||
| Rochelle B. Lazarus | 0 | 393,011 | 1,135 | 50,196 | 444,342 | ||||||||||
| Sam Nunn | 0 | 487,670 | — | 48,563 | 536,233 | ||||||||||
| Roger S. Penske | 0 | 530,407 | — | 50,000 | 580,407 | ||||||||||
| Robert J. Swieringa | 44,000 | 336,129 | — | — | 380,129 | ||||||||||
| Douglas A. Warner III | 120,000 | 274,573 | 1,135 | 51,209 | 446,917 | ||||||||||
| 1 | This column reports the amount of cash compensation earned in 2006 for Board and committee service. |
| 2 | This column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2006 fiscal year for the fair value of DSUs granted in 2006 as well as prior fiscal years, in accordance with SFAS 123R. Fair value is initially calculated using the closing price of GE stock on the date of grant, and is then evaluated at the end of every reporting period and adjusted for a more recent stock price. The differences in the amounts shown among Board members largely reflect length of service and amount of fees deferred in DSUs. Mr. Castell also has 200,000 PSUs outstanding at 2006 fiscal year-end, which were previously granted to him as a senior executive of the company. |
| 3 | This column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2006 fiscal year for the fair value of stock options previously granted to the directors. The fair value was estimated using the Black-Scholes optionpricing model in accordance with SFAS 123R. The fair value per option was $11.89, based on assumptions of 6.0 years expected life, expected volatility of 31.4%, expected dividend yield of 2.0%, and a risk free rate of 4.84%. We ceased granting stock options to directors in 2002. The following directors have outstanding option awards at 2006 fiscal year-end: Mr. Cash (90,000), Ms. Fudge (54,000), Ms. Jung (72,000), Mr. Gonzales (108,000), Ms. Lazarus (36,000), Mr. Nunn (108,000), Mr. Penske (108,000) and Mr. Warner (108,000). Mr. Castell has 200,000 stock options outstanding, which were previously granted to him as a senior executive of the company. |
| 4 | Mr. Cash participated in the Executive Products and Lighting Program ($166) and the Matching Gifts Program ($36,058). Ms. Fudge participated in the Executive Products and Lighting Program ($3,543) and the Matching Gifts Program ($13,250). Mr. Larsen participated in the Executive Products and Lighting Program ($10,218) and the Matching Gifts Program ($50,000). Ms. Lazarus participated in the Executive Products and Lighting Program ($274) and the Matching Gifts Program ($49,922). Mr. Nunn participated in the Executive Products and Lighting Program ($2,887) and the Matching Gifts Program ($45,676). Mr. Warner participated in the Executive Products and Lighting Program ($1,208) and the Matching Gifts Program ($50,000). Ms. Jung, Mr. Lafley and Mr. Penske also participated in the Matching Gifts Program, each with a benefit of $50,000. |
| 5 | Mr. Castell began his tenure as a non-management director in April 2006. |
| 6 | Ms. Hockfield joined the Board in December 2006 and did not earn any fees for 2006. |
No Other Compensation. Non-management directors do not receive any non-equity incentive compensation, hold deferred compensation cash balances or receive pension benefits. Since 2003, DSUs have been the only equity incentive compensation awarded to the non-management directors. Any outstanding stock options held by non-management directors from prior years’ grants are subject to the same holding period requirement as stock options held by senior executives. Specifically, like the senior executives, the non-management directors are required to hold for at least one year the net shares obtained from exercising stock options after selling sufficient shares to cover the exercise price, taxes and broker commissions.
Stock Ownership Requirement. All non-management directors are required to hold at least $500,000 worth of GE stock and/or DSUs while serving as a director of GE. Directors will have five years to attain this ownership threshold.
Insurance. GE has provided liability insurance for its directors and officers since 1968. Corporate Officers & Directors Assurance Ltd. and XL Insurance are the principal underwriters of the current coverage, which extends until June 2007. The annual cost of this coverage is approximately $20.7 million.
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