General Electric 2004 Proxy Statement

GE.com - 2003 Annual Report


	Notice of 2004 Annual Meeting of Shareowners Proxy Statement Election of Directors Corporate Governance Board of Directors and Committees Information Relating to Directors, Nominees and Executive Officers Compensation Committee Report Contingent Long-Term Performance Incentive Awards Stock Options and Stock Appreciation Rights Summary Compensation Table Five-Year Financial Performance Graph Retirement Benefits Audit Committee Report Independent Auditor Ratification of Selection of Independent Auditor Proposal to Add a Revenue Measurement to Executive Officer Performance Goals for Long-Term Performance Awards Shareowner Proposals Additional Information Appendix: Governance Principles Advance Registration


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Information Relating to Directors, Nominees and Executive Officers

Non-employee Directors’ Compensation and Benefit Program
The board approved a new compensation and benefit program for non-employee directors, which went into effect on January 1, 2003. In recommending this program to the board, the nominating and corporate governance committee was guided by 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.

Compensation.
In 2003, annual compensation of $250,000 was paid to each non-employee 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-employee directors had the option of deferring some or all of their cash payments in DSUs. There were no meeting fees because attendance is expected at all scheduled board and committee meetings, absent exceptional cause. Each DSU is equal in value to a share of GE stock, but does not have voting rights. DSUs will accumulate regular quarterly dividends, which are reinvested in additional DSUs. The DSUs will be paid out in cash to nonemployee directors beginning one year after they leave the board. Directors may elect to take their DSU payments as a lump sum or in equal payments spread out for up to ten years.

Additional compensation, equal to 10% of the $250,000 annual compensation, was paid to directors serving on the audit committee or the management development and compensation committee, due to the workload and broad-based responsibilities of these two committees. Directors serving on both committees received additional compensation equal to 20% of their annual compensation. 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. Non-employee directors had the option of deferring some or all of their cash payments in DSUs.

Stock Options.
There is no stock option plan for non-employee directors, and no stock options were granted to non-employee directors in 2003. The board determined not to renew the 1996 Stock Option Plan for Non-Employee Directors in order to simplify directors’ compensation and because DSUs more closely align the directors’ interests with the long-term interests of shareowners. In addition, the non-employee directors waived their right to receive a final grant under the 1996 Stock Option Plan that would otherwise have been made on January 31, 2003. The board also determined that options that were previously granted to non-employee directors and that are still outstanding will be subject to the same holding period requirements as options held by senior executives. Specifically, like the management directors and other senior executives, the non-employee directors will be 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 and taxes.

Retirement Programs.
As of January 1, 2003, the retirement programs for non-employee directors were terminated. For non-employee directors initially elected at or prior to the 2001 Annual Meeting, the director who retired directly from the board at age 65 or older after at least five years of service could elect to receive either: (1) an annual retirement benefit for the lives of the director and eligible surviving spouse in the amount of the retainer fee in effect at retirement; or (2) a life insurance benefit in the amount of $450,000. In 2001, the board terminated this retirement program on a prospective basis and replaced it with a contingent stock unit award for non-employee directors who are initially elected to the board after the 2001 Annual Meeting. All of these directors would receive a one-time contingent award of 5,000 GE restricted stock units, to be accounted for as GE stock including dividends, payable only if the director retires from the board at age 65 or older and after at least five years of service on the board.

Effective January 1, 2003, the board terminated both programs on a retroactive and prospective basis. With respect to the program for non-employee directors initially elected at or prior to the 2001 Annual Meeting, the board replaced the grandfathered actuarial values that directors had under the program with DSUs having an equivalent value. The board did this to remove any possibility that a director’s conduct could appear to be influenced by a personal interest in remaining a director until retirement age in order to qualify for retirement payments. Like the DSUs the directors receive as part of their annual compensation, these DSUs precisely track performance of GE stock, will accumulate dividends and will be payable beginning one year after the director leaves the board. The actuarial values of the grandfathered pension rights, as determined by an independent actuary, that were replaced with DSUs for the directors who had such rights, were: Cash ($167,955); Fudge ($147,095); Gonzalez ($506,341); Jung ($71,859); Langone ($424,331); Lazarus ($177,498); Nunn ($313,769); Penske ($446,817); Sigler ($578,360); and Warner ($178,056). With respect to the program for non-employee directors elected after the 2001 Annual Meeting, the contingent stock units granted to these directors when they joined the board in 2002 have been converted to DSUs payable beginning one year after they leave the board. All of these DSUs were fully vested when granted.

Matching Gifts.
To further GE’s support for charities, non-employee directors are able to participate in GE’s educational and more gifts-more givers programs on the same terms as GE’s senior officers. Under those programs, GE will match up to $100,000 a year in contributions by the director to an institution of higher education or other charity approved by the GE Fund.

Charitable Award.
As part of our overall support for charitable institutions, and in order to preserve our ability to attract directors with outstanding experience and ability, GE maintains a plan that permits each director to recommend up to five charitable organizations that would share in a $1 million contribution to be made by the company upon the director’s termination of service. The directors do not receive any financial benefit from this program since the charitable deductions accrue solely to the company. The overall program does not result in a material cost to the company. To avoid any appearance that a director might be influenced by the prospect of receiving this benefit at retirement, the award vests upon the commencement of board service.

Insurance.
GE has provided liability insurance for its directors and officers since 1968. ACE Insurance, XL Insurance and AIG are the principal underwriters of the current coverage, which extends until June 11, 2004. The annual cost of this coverage is approximately $25.2 million.

Stock Ownership Table
The table below includes all GE stock-based holdings, as of February 13, 2004, of our directors and five most highly paid executive officers. This table indicates the alignment of the named individuals’ financial interests with the interests of our shareowners because the value of their total GE holdings will increase or decrease in line with the price of GE’s stock.

Common Stock and Total Stock-Based Holdings




Name	Stock¹		Total²	Name	Stock¹		Total²




James I. Cash, Jr.	92,936		118,862	Ralph S. Larsen	19,659	³	32,273
Dennis D. Dammerman	2,962,517		6,705,225	Rochelle B. Lazarus	27,043	³	62,492
Ann M. Fudge	45,853		81,521	Sam Nunn	97,500		151,456
Claudio X. Gonzalez	221,652		328,289	Roger S. Penske	154,500		230,099
Benjamin W. Heineman, Jr.	2,079,409		3,274,900	Gary L. Rogers	3,088,504		4,169,566
Jeffrey R. Immelt	2,624,420		5,603,179	Andrew C. Sigler	140,936		186,327
Andrea Jung	64,500	³	96,693	Robert J. Swieringa	2,686		15,073
Alan G. Lafley	5,755		18,369	Douglas A. Warner III	181,888	³	208,738
Kenneth G. Langone	340,649		394,861	Robert C. Wright	3,596,318		7,381,324




Common stock holdings of all directors and all executive officers as a group were 29,688,469.⁴

Notes:
1	This column lists voting securities, including restricted stock held by the executive officers over which they have voting power but no investment power. Otherwise, each director or executive officer has sole voting and investment power over the shares reported, except as noted. In accordance with SEC rules, this column also includes shares that may be acquired pursuant to non-voting stock options that are or will become exercisable within 60 days as follows: 76,500 shares for Dr. Cash; 40,500 shares for Ms. Fudge and Mr. Langone; 130,500 shares for Mr. Gonzalez and Mr. Warner; 58,500 shares for Ms. Jung; 22,500 shares for Ms. Lazarus; 94,500 shares for Mr. Nunn; 99,000 shares for Mr. Penske; 112,500 shares for Mr. Sigler; 2,549,999 shares for Mr. Dammerman; 1,449,500 shares for Mr. Heineman; 1,986,500 shares for Mr. Immelt; 2,402,500 shares for Mr. Rogers; and 2,495,000 shares for Mr. Wright. No director or executive officer owns more than one-tenth of one percent of the total outstanding shares, nor do all directors and executive officers as a group own more than one percent of the total outstanding shares.
2	This column shows the individual’s total GE stock-based holdings, including the voting securities shown in the “Stock” column (as described in note 1), plus non-voting interests, including, as appropriate, performance share units, stock appreciation rights, restricted stock units, deferred compensation accounted for as units of GE stock and stock options which will not become exercisable within 60 days.
3	Includes the following numbers of shares over which the identified director has shared voting and investment power but as to which he or she disclaims beneficial interest: Ms. Jung (975 shares); Mr. Larsen (7,500 shares); Ms. Lazarus (1,300 shares); and Mr. Warner (4,800 shares).
4	Includes 1,544,692 shares over which there are shared voting and investment powers.

Certain Relationships and Related Transactions
This section discusses certain direct and indirect relationships and transactions involving the company and any director or executive officer. GE and its subsidiaries also have purchase, lease, finance, insurance and other transactions and relationships in the normal course of business with companies and organizations with which our directors are associated, but which are not sufficiently significant to be reportable. The board has determined that, in view of the relationships described below, Mr. Penske does not qualify as an independent director, but makes extremely valuable contributions to the board and to the company by reason of his experience and wisdom.

Mr. Penske has an indirect financial interest in Penske Truck Leasing Co., L.P., a limited partnership formed in 1988 between a subsidiary of Penske Corporation and a subsidiary of GE Capital Corporation (GE Capital) in order to operate a truck leasing and rental business. In connection with a 1996 restructuring that increased GE Capital’s interest in the partnership from 50% to 79%, the Penske Corporation subsidiary, which serves as the general partner of the partnership, in 1997 commenced receiving ten annual payments, which began at $11.3 million and will decline to $9.3 million, with the majority of such payments contingent upon the partnership achieving certain revenue thresholds. GE Capital also extends acquisition and working capital loans and guarantees to the partnership, which totaled about $4.2 billion as of December 31, 2003. GE Capital provides this funding on the same terms as those extended to its operating subsidiaries. The company will consolidate Penske Truck Leasing Co., L.P. in its audited financial statements for the year ended December 31, 2004.

GE Capital also holds 3.5 million shares of Class B Preferred Stock in the Penske Corporation subsidiary that is the general partner of Penske Truck Leasing Co., L.P. An annual dividend of $0.70 per share is payable to holders of the Class B Preferred Stock. Although the Class B Preferred Stock was scheduled to be redeemed on March 15, 2003 for $10 per share, in March 2003, the parties agreed to extend the redemption date to March 15, 2013.

Mr. Penske has a direct financial interest in and controls Penske Capital Partners, LLC (PCP). In April 2002, GE Capital Equity Holdings, Inc. (GE Equity) invested $15 million in Worldwide Training Group LLC (WTG), which was formed by PCP, as WTG’s managing member, in order to make an investment in Universal Technical Institute, Inc. (UTI). In WTG’s LLC agreement, GE Equity agreed that, after it recovered its investment and received a preferred return on its investment, PCP would then receive a 15% carried interest in the remaining profits of GE Equity’s investment. On December 17, 2003, UTI completed its initial public offering. Through a simultaneous secondary offering, WTG sold 31% of its holding in UTI. GE Equity received $19.8 million (on an original cost basis of $4.68 million) in cash from this transaction after paying PCP $1.88 million in carried interest.

In July 2003, GE Commercial Finance (GECF) entered into a limited partnership agreement with Transportation Resource Partners, LP, a new $265 million investment fund formed by Transportation Resource Management, LLC (TRM), as its general partner. Mr. Penske has a direct financial interest in and controls TRM. GECF may invest up to $50 million in return for its agreement to pay TRM an annual fee of up to $750,000. GECF agreed that, after it recovered its investments and received a preferred return on any such investments, TRM would then receive a 20% carried interest in the remaining profits from the GECF investments. As of December 31, 2003, GECF had not made any investments in Transportation Resource Partners, LP.

GE has, for a number of years, used the services of the law firm of King & Spalding LLP for a variety of matters. Mr. Nunn practiced law with King & Spalding from 1997 until he retired on December 31, 2003. Upon Mr. Nunn’s retirement, the board determined that he qualified as an independent director, based on the New York Stock Exchange listing rules and GE’s independence guidelines.

Mr. Wright’s son-in-law is employed by a GE subsidiary, where his compensation exceeds $60,000 annually.

The company believes that these transactions and relationships during 2003 were reasonable and in the best interest of the company.