The Future
We plan to deliver in a difficult environment. All the GE leaders understand the environment, and we have been planning for it. We are committed to executing the financial goals I have described in this letter. We don’t believe in excuses, and you won’t hear any from us.
We plan to press our advantage in the essential themes that will shape our growth for decades: infrastructure technology, emerging markets, environmental solutions, demographics, digital connections, and creating value from origination. We love the leadership position we are building, and it is already delivering for you.
We will continue to earn the respect of the business world. We regularly rank in the top five of Barron’s and FORTUNE’s “Most Admired” lists. In 2007, we were number one in Chief Executive Magazine’s survey on the “20 Best Companies for Leaders.” And, just this month, Fast Company ranked us the fourth most innovative company in the world behind only Google, Apple, and Facebook — not bad for a 130-year-old company!
Beyond this, we are committed to improving communication around the Company and addressing things that may have frustrated our investors, including accounting adjustments to our historic financial results. We will continue to improve our strong model for controllership, and we have added regulatory resources around the Company to anticipate key issues.
I want investors to see that GE is truly more than the “sum of the parts.” The strength of GE is in the “totality.” It is the ability to deliver in good times and bad. We do this because we invest and deliver. We are winning in the essential themes; we have built leadership businesses; we are a high-performance company; and we develop great leaders.
I am compensated to deliver for you. In 2003, the GE Board’s Management Development and Compensation Committee (MDCC) decided to put all of my equity compensation in performance shares that mature over five years.
The performance shares pay out in a balanced fashion: 50% based on total GE shareholder return versus the S&P 500’s return; and 50% based on our operating performance as reflected by achieving annual cash from operating activities (CFOA) growth of at least 10%. Our theory has been that business performance drives stock performance and, in most periods, they move together.
Our business performance has been solid. CFOA growth has averaged 21% over the last five years. Our total shareholder return over that same period has been a respectable 75%, but we have trailed the S&P 500’s return of 83%. Accordingly, I will receive only half of the performance shares allocated by the MDCC.
This is bad news for me, but good news for investors because our performance is not yet fully reflected in our stock price. This will change. I am so confident in our performance that I continue to buy GE stock in the open market, just like you do.
I, along with all of our leaders, am aligned with investors. We believe in performance and long-term commitment to the Company. In the toughest of times, you can count on us. That is the way we are built, the way we grow, and the way we are paid.
We have averaged earnings growth of 11% over the past 25 years, including 16% in 2007. We have increased our dividend for 32 straight years. We invest and deliver: every day … every quarter … every year … and we will in 2008. Thank you for all of your support. Our best days are ahead.
Jeffrey R. Immelt
Chairman of the Board
and Chief Executive Officer
February 20, 2008