| |
The following
principles have been approved by the board of directors and, along with the
charters and key practices of the board committees, provide the framework for the
governance of GE. The board recognizes that there is an on-going and energetic
debate about corporate governance, and it will review these principles and
other aspects of GE governance annually or more often if deemed necessary.
| 1. | Role of Board and Management.
GE’s business is conducted by its employees, managers and officers, under
the direction of the chief executive officer (CEO) and the oversight of the
board, to enhance the long-term value of the company for its shareowners. The
board of directors is elected by the share-owners to oversee management and to
assure that the long-term interests of the shareowners are being served. Both
the board of directors and management recognize that the long-term interests of
shareowners are advanced by responsibly addressing the concerns of other
stakeholders and interested parties including employees, recruits, customers,
suppliers, GE communities, government officials and the public at large.
|
| 2. | Functions of Board.
The board of directors has 8 scheduled meetings a year at which it reviews and
discusses reports by management on the performance of the company, its plans
and prospects, as well as immediate issues facing the company. Directors are
expected to attend all scheduled board and committee meetings. In addition to
its general oversight of management, the board also performs a number of
specific functions, including:
- selecting, evaluating and compensating the CEO
and overseeing CEO succession planning;
- providing counsel and oversight on the selection,
evaluation, development and compensation of senior management;
- reviewing, monitoring and, where appropriate,
approving fundamental financial and business strategies and major
corporate actions;
- assessing major risks facing the
company—and reviewing options for their mitigation;
- ensuring processes are in place for maintaining
the integrity of the company—the integrity of the financial
statements, the integrity of compliance with law and ethics, the integrity
of relationships with customers and suppliers, and the integrity of
relationships with other stakeholders.
|
| 3. | Qualifications.
Directors should possess the highest personal and professional ethics,
integrity and values, and be committed to representing the long-term interests
of the shareowners. They must also have an inquisitive and objective
perspective, practical wisdom and mature judgment. We endeavor to have a board
representing diverse experience at policy-making levels in business,
government, education and technology, and in areas that are relevant to the
company’s global activities.
|
| |  Directors must be
willing to devote sufficient time to carrying out their duties and
responsibilities effectively, and should be committed to serve on the board for
an extended period of time. Directors should offer their resignation in the
event of any significant change in their personal circumstances, including a
change in their principal job responsibilities.
|
| | Directors who also
serve as CEOs or in equivalent positions should not serve on more than two
boards of public companies in addition to the GE board, and other directors
should not serve on more than four other boards of public companies in addition
to the GE board. Current positions in excess of these limits may be maintained
unless the board determines that doing so would impair the director’s
service on the GE board.
|
| | The board does not
believe that arbitrary term limits on directors’ service are appropriate,
nor does it believe that directors should expect to be renominated annually
until they reach the mandatory retirement age. The board self-evaluation
process described below will be an important determinant for board tenure.
Directors will not be nominated for election to the board after their 73rd
birthday, although the full board may nominate candidates over 73 for special
circumstances.
|
| 4. | Independence of
Directors. A majority of the directors will be independent directors under
the proposed New York Stock Exchange (NYSE) rules. The board has determined
that 11 of GE’s 17 directors are independent.
|
| | All future
non-employee directors will be independent. GE will seek to have a minimum of
ten independent directors at all times, and it is the board’s goal that
at least two-thirds of the directors will be independent under the NYSE
guidelines. Directors who do not meet the NYSE’s independence standards
also make valuable contributions to the board and to the company by reason of
their experience and wisdom.
|
| | To be considered
independent under the proposed NYSE rules, the board must determine that a
director does not have any direct or indirect material relationship with GE.
The board has established the following guidelines to assist it in determining
director independence in accordance with that proposed rule:
- A director will not be independent if, within the
preceding five years: (i) the director was employed by GE; (ii) an
immediate family member of the director was employed by GE as an officer;
(iii) the director was employed by or affiliated with GE’s
independent auditor; (iv) an immediate family member of the director was
employed by GE’s independent auditor as a partner, principal or
manager; or (v) a GE executive officer was on the board of directors of a
company which employed the GE director, or which employed an immediate
family member of the director as an officer;
- The following commercial or charitable
relationships will not be considered to be material relationships that
would impair a director's independence: (i) if a GE director is an
executive officer of another company that does business with GE and the
annual sales to, or purchases from, GE are less than one percent of the
annual revenues of the company he or she serves as an executive officer;
(ii) if a GE director is an executive officer of another company which is
indebted to GE, or to which GE is indebted, and the total amount of either
company's indebtedness to the other is less than one percent of the total
consolidated assets of the company he or she serves as an executive
officer; and (iii) if a GE director serves as an officer, director or
trustee of a charitable organization, and GE’s discretionary
charitable contributions to the organization are less than one percent of
that organization’s total annual charitable receipts. (GE’s
automatic matching of employee charitable contributions will not be
included in the amount of GE’s contributions for this purpose.) The
board will annually review all commercial and charitable relationships of
directors. Whether directors meet these categorical independence tests
will be reviewed and will be made public annually prior to their standing
for re-election to the board.
- The following 11 directors are independent under
the foregoing guidelines: Cash, Fudge, Gonzalez, Jung, Langone, Lafley,
Larsen, Lazarus, Sigler, Swieringa and Warner.
- For relationships not covered by the guidelines
in subsection (b) above, the determination of whether the relationship is
material or not, and therefore whether the director would be independent
or not, shall be made by the directors who satisfy the independence guidelines
set forth in subsections (a) and (b) above. For example, if a director is
the CEO of a company that purchases products and services from GE that are
more than one percent of that company’s annual revenues, the
independent directors could determine, after considering all of the
relevant circumstances, whether such a relationship was material or
immaterial, and whether the director would therefore be considered
independent under the proposed NYSE rules. The company would explain in
the next proxy statement the basis for any board determination that a
relationship was immaterial despite the fact that it did not meet the
categorical standards of immateriality set forth in subsection (b) above.
|
The company will not make
any personal loans or extensions of credit to directors or executive officers,
other than consumer loans or credit card services on terms offered to the
general public. No director or family member may provide personal services for
compensation to the company.
|
| 5 . | Size of Board and
Selection Process. The directors are elected each year by the shareowners
at the annual meeting of shareowners. Shareholders may propose nominees for
consideration by the nominating and corporate governance committee by
submitting the names and supporting information to: Secretary, General Electric
Company, 3135 Easton Turnpike, Fairfield, CT 06828. The board proposes a slate
of nominees to the shareowners for election to the board. The board also
determines the number of directors on the board provided that there are at
least 10. Between annual shareowner meetings, the board may elect directors to
serve until the next annual meeting. The board believes that, given the size
and breadth of GE and the need for diversity of board views, the size of the
board should be in the range of 15 directors.
|
| 6. | Board Committees.
The board has established the following committees to assist the board in
discharging its responsibilities: (i) audit; (ii) management development and
compensation; (iii) nominating and corporate governance; and (iv) public
responsibilities. The current charters and key practices of these committees
are published on the GE Web site, and will be mailed to shareowners on written
request. The committee chairs report the highlights of their meetings to the full
board following each meeting of the respective committees. The committees
occasionally hold meetings in conjunction with the full board. For example, it
is the practice of the audit committee to meet in conjunction with the full
board in February so that all directors may participate in the review of the
annual financial statements for the prior year and financial plans for the
current year.
|
| 7. | Independence of
Committee Members. In addition to the requirement that a majority of the
board satisfy the independence standards discussed in section 4 above, members
of the audit committee must also satisfy an additional NYSE independence
requirement. Specifically, they may not directly or indirectly receive any
compensation from the company other than their directors’ compensation.
As a matter of policy, the board will also apply this additional requirement to
members of the management development and compensation committee and to members
of the nominating and corporate governance committee.
|
| 8. | Meetings of Non-Employee
Directors. The board will have at least three regularly scheduled meetings
a year for the non-employee directors without management present. The directors
have determined that the chairman of the management development and
compensation committee will preside at such meetings, and will serve as the
presiding director in performing such other functions as the board may direct,
including advising on the selection of committee chairs and advising management
on the agenda for board meetings. The non-employee directors may meet without
management present at such other times as determined by the presiding director.
|
| 9. | Self-Evaluation.
As described more fully in the key practices of the nominating and corporate
governance committee, the board and each of the committees will perform an
annual self-evaluation. Each November, the directors will be requested to
provide their assessments of the effectiveness of the board and the committees
on which they serve. The individual assessments will be organized and summarized
by an independent corporate governance expert for discussion with the board and
the committees in December.
|
| 10. | Setting Board
Agenda. The board shall be responsible for its agenda. At the December
board meeting, the CEO will propose for the board’s approval key issues
of strategy, risk and integrity to be scheduled and discussed during the course
of the next calendar year. Before that meeting, the board will be invited to offer its suggestions. As a result of this
process, a schedule of major discussion items for the following year will be
established. Prior to each board meeting, the CEO will discuss the other
specific agenda items for the meeting with the presiding director. The CEO and
the presiding director, or committee chair as appropriate, shall determine the
nature and extent of information that shall be provided regularly to the
directors before each scheduled board or committee meeting. Directors are urged
to make suggestions for agenda items, or additional pre-meeting materials, to
the CEO, the presiding director, or appropriate committee chair at any time.
|
| 11. | Ethics and Conflicts
of Interest. The board expects GE directors, as well as officers and
employees, to act ethically at all times and to acknowledge their adherence to
the policies comprising GE’s code of conduct set forth in the company's
integrity manual, The Spirit and Letter of Our Commitment. The board will not permit any waiver of any ethics
policy for any director or executive officer. If an actual or potential
conflict of interest arises for a director, the director shall promptly inform
the CEO and the presiding director. If a significant conflict exists and cannot
be resolved, the director should resign. All directors will recuse themselves
from any discussion or decision affecting their personal, business or
professional interests.
|
| 12. | Reporting of
Concerns to Non-employee Directors or the Audit Committee. Anyone who has a
concern about GE's conduct, or about the company’s accounting, internal
accounting controls or auditing matters, may communicate that concern directly
to the presiding director, to the non-employee directors, or to the audit
committee. Such communications may be confidential or anonymous, and may be
e-mailed, submitted in writing, or reported by phone to special addresses and a
toll-free phone number that are published on the company’s Web site.
Concerns relating to accounting, internal controls, auditing or officer conduct
shall be sent immediately to the presiding director and to the chair of the audit
committee and will be simultaneously reviewed and addressed by GE’s
ombudsman in the same way that other concerns are addressed by the company. The
status of all outstanding concerns addressed to the non-employee directors, the
presiding director, or the audit committee will be reported to the presiding
director and the chair of the audit committee on a quarterly basis. The
presiding director, or the audit committee chair may direct that certain
matters be presented to the audit committee or the full board and may direct
special treatment, including the retention of outside advisors or counsel, for
any concern addressed to them. The company’s integrity manual prohibits
any employee from retaliating or taking any adverse action against anyone for raising
or helping to resolve an integrity concern.
|
| 13. | Compensation of the
Board. The nominating and corporate governance committee shall have the
responsibility for recommending to the board compensation and benefits for
non-employee directors. In discharging this duty, the committee shall be guided
by three goals: compensation should fairly pay directors for work required in 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. As discussed more
fully in the key practices of the nominating and corporate governance
committee, the committee believes these goals will be served by providing 40%
of non-employee director compensation in cash and 60% in deferred stock units
starting in 2003. At the end of each year, the nominating and corporate
governance committee shall review non-employee director compensation and
benefits.
|
| 14. | Succession Plan.
The board shall approve and maintain a succession plan for the CEO and senior
executives, based upon recommendations from the management development and
compensation committee.
|
| 15. | Annual Compensation
Review of Senior Management. The management development and compensation
committee shall annually approve the goals and objectives for compensating the
CEO. That committee shall evaluate the CEO’s performance in light of
these goals before setting the CEO’s salary, bonus and other incentive and
equity compensation. The committee shall also annually approve the compensation
structure for the company's officers, and shall evaluate the performance of the
company’s senior executive officers before approving their salary, bonus
and other incentive and equity compensation.
|
| 16. | Access to Senior
Management. Non-employee directors are encouraged to contact senior
managers of the company without senior corporate management present. To
facilitate such contact, non-employee directors are expected to make two
regularly scheduled visits to GE businesses a year without corporate management
being present.
|
| 17. | Access to
Independent Advisors. The board and its committees shall have the right at
any time to retain independent outside financial, legal or other advisors.
|
| 18. | Director
Orientation. The general counsel and the chief financial officer shall be
responsible for providing an orientation for new directors, and for
periodically providing materials or briefing sessions for all directors on
subjects that would assist them in discharging their duties. Each new director
shall, within six months of election to the board, spend a day at corporate
headquarters for personal briefing by senior management on the company's
strategic plans, its financial statements, and its key policies and practices.
|
|
|
|
|
|
|
