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The audit committee of
the board of directors of General Electric Company shall consist of a minimum
of four directors. Members of the committee shall be appointed by the board of
directors upon the recommendation of the nominating and corporate governance
committee and may be removed by the board of directors in its discretion. All
members of the committee shall be independent directors under the standard
proposed by the New York Stock Exchange, and shall also satisfy the New York
Stock Exchange’s more rigorous independence requirement for members of
the audit committee. All members shall have sufficient financial experience and
ability to enable them to discharge their responsibilities and at least one
member shall be a financial expert.
 The purpose of the
committee shall be to assist the board in its oversight of the integrity of the
financial statements of the company, of the company’s compliance with
legal and regulatory requirements, of the independence and qualifications of
the independent auditor, and of the performance of the company’s internal
audit function and independent auditors.
In furtherance of the purpose, the committee shall have the following authority and responsibilities:
| 1. | To discuss with management and the independent auditor the annual
audited financial statements and quarterly financial statements, including
matters required to be reviewed under applicable legal, regulatory or New York
Stock Exchange requirements.
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| 2. | To discuss with management and the independent auditor, as
appropriate, earnings press releases and financial information and earnings
guidance provided to analysts and to rating agencies.
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| 3. | To recommend, for shareowner approval, the independent auditor to
examine the company’s accounts, controls and financial statements. The
committee shall have the sole authority and responsibility to select, evaluate
and if necessary replace the independent auditor. The committee shall have the
sole authority to approve all audit engagement fees and terms and the
committee, or a member of the committee, must pre-approve any non-audit service
provided to the company by the company's independent auditor.
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| 4. | To discuss with management and the independent auditor, as
appropriate, any audit problems or difficulties and management’s
response, and the company’s risk assessment and risk management policies,
including the company’s major financial risk exposure and steps taken by
management to monitor and mitigate such exposure.
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| 5. | To review the company’s financial reporting and accounting
standards and principles, significant changes in such standards or principles
or in their application and the key
accounting decisions affecting the company’s financial statements, including
alternatives to, and the rationale for, the decisions made.
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| 6. | To review and approve the internal corporate audit staff functions,
including: (i) purpose, authority and organizational reporting lines; (ii)
annual audit plan, budget and staffing; and (iii) concurrence in the
appointment, compensation and rotation of the vice president – corporate
audit staff.
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| 7. | To review, with the senior vice president – finance, the vice
president – corporate audit staff, or such others as the committee deems
appropriate, the company's internal system of audit and financial controls and
the results of internal audits.
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| 8. | To obtain and review at least annually a formal written report from
the independent auditor delineating: the auditing firm’s internal
quality-control procedures; any material issues raised within the preceding
five years by the auditing firm's internal quality-control reviews, by peer
reviews of the firm, or by any governmental or other inquiry or investigation
relating to any audit conducted by the firm. The committee will also review
steps taken by the auditing firm to address any findings in any of the
foregoing reviews. Also, in order to assess auditor independence, the committee
will review at least annually all relationships between the independent auditor
and the company.
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| 9. | To prepare and publish an annual committee report in the
company’s proxy statement.
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| 10. | To set policies for the hiring of employees or former employees of
the company’s independent auditor.
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| 11. | To review and investigate any matters pertaining to the integrity
of management, including conflicts of interest, or adherence to standards of
business conduct as required in the policies of the company. This should
include regular reviews of the compliance processes in general and the
corporate ombudsman process in particular. In connection with these reviews,
the committee will meet, as deemed appropriate, with the general counsel and
other company officers or employees.
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Audit Committee Key Practices
The audit committee
has adopted the following key practices to assist it in undertaking the
functions and responsibilities set forth in its charter:
| 1. | Meetings. The committee will meet at least 7 times a year,
generally on a day different than the regularly scheduled board meeting to
allow time for in-depth discussion.
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| 2. | Review of Financial Statements. The committee will review the
company’s 10-K in detail with the CEO, the CFO and the full board at an
extended February board meeting. The committee will meet to review the
company's 10-Qs with the CFO. The head of the corporate audit staff and the
company's independent auditor will be present at these meetings.
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| 3. | Quarterly Review of CEO and CFO Certification Process. In
conjunction with its reviews of the 10-Ks and 10-Qs, the committee will also
review the process for the CEO and CFO quarterly certifications required by the
SEC with respect to the financial statements and the company’s disclosure
and internal controls, including any material changes or deficiencies in such
controls. The committee shall also meet twice a year with the corporate
disclosure committee responsible for reviewing the company's disclosure
controls and procedures.
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| 4. | Review of
Earnings Releases and Information Provided to Analysts and Rating Agencies.
The CFO shall review earnings releases with the chair of the committee prior to
their release to the public. Prior to the event, the CEO or the CFO shall
review with the committee, or the full board, the substance of any
presentations to analysts or rating agencies which constitute a shift in
company strategy or outlook. In addition, the CEO or CFO shall review
subsequently with the committee, or the full board, a summary of major
presentations that have been given to analysts or rating agencies that do not
constitute a shift in strategy or outlook.
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| 5. | Approval of Audit and Non-audit Services. In addition to
approving the engagement of the independent auditor to audit the
company’s consolidated financial statements, the committee will approve
all use of the company's independent auditor for non-audit services prior to
any such engagement. To minimize relationships which could appear to impair the
objectivity of the independent auditor, it is the committee’s practice to
restrict the non-audit services that may be provided to the company by the
company's independent auditor solely to tax services and merger and acquisition
due diligence and integration services. The company will obtain such limited
non-audit services from the company’s auditor only when the services
offered by the auditor's firm are more effective or economical than services
available from other providers, and, to the extent possible, only following
competitive bidding for such services.
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| 6 | Hiring Guidelines for Independent Auditor Employees. The
committee has adopted the following practices regarding the hiring by the
company of any partner, director, manager, staff, advising member of the
department of professional practice, reviewing actuary, reviewing tax
professional and any other persons having
responsibility for providing audit assurance to the company's independent
auditor on any aspect of their certification of the company's financial
statements. “Audit assurance” includes all work that results in the
expression of an opinion on financial statements, including audits of statutory
accounts.
- No member of the audit team that is auditing a GE
business can be hired into that GE business or into a position to which
that business reports for a period of 2 years following association with
that audit.
- No former employee of the independent auditor may
sign a GE or GE affiliate’s SEC filing for 5 years following
employment with the independent auditor.
- No former employee of the independent auditor may
be named a GE or major affiliate officer for 3 years following employment
by the independent auditor.
- GE’s CFO must approve all executive-band
and higher hires from the independent auditor.
- GE’s CFO shall report annually to the audit
committee the profile of the preceding year’s hires from the
independent auditor.
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| 7. | Process for
Handling Complaints About Accounting Matters. As part of the board's
procedure for receiving and handling complaints or concerns about the
company’s conduct, the committee has established the following procedures
for: (i) the receipt, retention, and treatment of complaints received by the
company regarding accounting, internal accounting controls, or auditing
matters; and (ii) the confidential, anonymous submission by GE employees of
concerns regarding questionable accounting or auditing matters.
- GE has established and published on its Web site
special mail and e-mail addresses and a toll-free telephone number for
receiving complaints regarding accounting, internal accounting controls,
or auditing matters.
- All such complaints will be sent to the presiding
director and to the chair of the audit committee.
- All complaints will be tracked on a separate
board of directors’ ombuds docket, but handled by the
company’s ombuds, finance and legal staffs in the normal manner,
except as the audit committee may request.
- The status of the specially docketed complaints
will be reported on a quarterly basis to the presiding director and the
chair of the audit committee and, if they so direct, to the committee or
the full board.
- The presiding director or audit committee chair
may request special treatment, including the retention of outside counsel
or other advisors, for any complaint addressed to it.
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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.
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| 8. | Audit Committee
Memberships. The committee has determined that in view of the increasing
demands and responsibilities of the audit committee, members of the committee
should not serve on more than two additional audit committees of other public
companies, and the chair of the committee should not serve on more than one
other audit committee of a public company. Existing relationships exceeding
these limits may continue in place provided that the full board of directors determines
that such relationships do not impair the member's ability to serve effectively
on the committee.
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| 9. | Code of Ethics
for CEO and Senior Financial Officers. GE’s integrity manual, The Spirit & Letter of Our Commitment,
applies to all of the company’s employees, including the CEO and all
financial professionals. GE’s policy 30.5, Conflicts of Interest, and policy 30.7, Controllership, require all employees, including the CEO and senior
financial officers, to resolve ethically any actual or apparent conflicts of
interest, and to comply with all generally accepted accounting principles, laws
and regulations designed to produce full, fair, accurate, timely, and
understandable disclosure in the company’s periodic reports filed with
the SEC. Annual acknowledgement of the Spirit & Letter is required of all salaried employees, including the
company’s CEO and financial professionals.
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| 10. | Conflict of
Interest Review. The committee will review twice a year the corporate audit
staff's audit of the application of GE’s policy 30.5, Conflicts of
Interest, to the company’s officers
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| 11. | Member with
Financial Expertise. To add a member of the board and the committee with
extensive financial expertise, on October 28, 2002, the board elected Robert J.
Swieringa, dean of the S. C. Johnson Graduate School of Management and
professor of accounting at Cornell University, to the board and appointed him
to the committee. Prior to becoming dean of the Johnson School in 1997, Dr.
Swieringa was a member of the Financial Accounting Standards Board from 1986 to
1996. He was also president of the Financial Accounting and Reporting Section
of the American Accounting Association in 1998 and 1999. At its February 2003
meeting, the board of directors determined that Dr. Swieringa, as defined by
SEC rules, is both independent and an audit committee financial expert.
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| 12. | Audit Partner
Rotation. The committee shall ensure that the lead audit partners assigned
by the company’s independent auditor to the company, and to each of its
subsidiaries that have securities registered with the SEC, as well as the audit
partner responsible for reviewing the company’s audit shall be changed at
least every five years.
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| 13. | Shareowner
Ratification of Independent Auditor. Although the committee has the sole
authority to appoint the independent auditor, the committee will continue its
longstanding practice of recommending that the board ask the shareowners, at
their annual meeting, to approve the committee's selection of independent
auditor.
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