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Payout of 2000-2002 Award
As reported in the 2000 proxy statement, the management development and
compensation committee granted a contingent long-term performance award
to select executives in that year. The awards would be payable in 2003 if
the company met certain financial performance goals set by the committee
for the three years from 2000 to 2002. As shown in the table on the next
page, our average operating margin rate, average return on total capital
and cash flow growth rate excluding progress collections for the three years
from 2000 through 2002 exceeded the threshold financial performance goals
the committee set in 2000. GE’s earnings per share fell short of the
committee’s threshold goal because of the charge for increasing ERC
reserves in the fourth quarter of 2002, and no payout was made with respect
to that measurement. Nonetheless, even with the ERC charge, GE’s EPS
grew at an average rate of 12% during the three-year award period. This
exceeded the EPS performance of the S&P 500, where EPS declined from
the end of 1999 through the third quarter of 2002, the last period for which
data are available.
 Because the company exceeded the committee’s threshold goals in two
of the four measurements, and the target goal in one of the four measurements,
payments of about $165,000,000 will be made in March 2003 in cash or stock
to the 355 select executives who received these awards. These payments aggregate
less than 50% of the total aggregate payments that would have been made
if the company had met all of the maximum performance goals that had been
set by the committee. The value of this payout to the named executive officers
is shown in the "LTIP Payouts" column of the Summary Compensation
Table on page 27 (Long-Term Compensation and All Other Compensation). Payments to the CEO and the vice chairmen were based in
part on the performance of the specific business units they headed during
some or all of the award period. As noted in the Compensation Committee
Report above, Mr. Immelt has elected to receive his payout in GE stock to
be credited towards his stock ownership requirement described on page 21 (Key Executive Compensation Actions Last Year).
The other named executives have already satisfied their stock ownership
requirement. The committee believes that the incentives provided by these
awards contributed to our financial and operating performance for this three-year
period, during which we achieved solid financial results in an increasingly
difficult environment.
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Terms of 2003-2005 Award
In February 2003, the management development and compensation committee
granted new long-term contingent performance incentive awards to select
executives for the 2003-2005 period to provide a continued emphasis on specified
financial performance goals which the committee considers to be important
contributors to long-term shareowner value. The awards will only be payable
if the company achieves, on an overall basis for the three-year 2003-2005
period, specified goals for one or more of the following four measurements,
all as adjusted by the committee to remove the effects of unusual events
and the effect of pensions on income: average earnings per share growth
rate; average revenue growth rate; average return on total capital; and
cumulative cash generated. The use of the average revenue growth rate measurement
is contingent on future shareowner approval, which the company currently
expects to request before the award would be payable in 2006. The new awards
will be subject to forfeiture if the executive’s employment terminates
for any reason other than disability, death, or retirement before December
31, 2005.
The following table shows the multiple of the named executives’ salary
rate in effect and the annual bonus awarded in February 2003 that would
be payable in 2006 under these awards if the company precisely attained
the threshold, target, or maximum goals set by the committee for all applicable
performance measurements.
Each measurement is weighted equally, and payments will be made for achieving
any of the three goals (threshold, target or maximum) for any of the four
measurements. For example, the executives in the table above would receive
only one-quarter of the threshold payment if the company met at the end
of the three-year period only a single threshold goal for a single measurement.
Also, payments will be prorated for performance that falls between goals.
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