General Electric Essay

commonplace voltaic automobile is an American conglomerate currently class-conscious 9 on the Fortune 500 list. The firmly operates in quad primary argument segments Energy, Technology Infra bodily structure, Capital Finance and Consumer / Industrial. Headquartered in Fairfield, CT, prevalent voltaic has grown over the past 122 years into a pecuniary behemoth realizing revenue in excess of $146 billion in 2013. passim its existence, General galvanic has demonstrated an inconsistent record in hurt of ethical governance and responsible business practices. Like legion(predicate) of its peers, the firm endured a number of scandals, particularly in the late 1990s and into the 2000s. In response to these issues and in accordance with the Sarbanes-Oxley Act passed in 2002, General electric car has transformed its business practices and is now recognized as star of the frequently respected players in the world of somatic governance and honorable business practices. Contemp orary business practices exercised by the firm invite pull in many accolades including 6 Best Global Brand (Interbrand) 10 Most admire Company (Fortune) 180 Greenest Company (Newsweek)To understand how this corporate evolution occurred, we pick come to the fore to understand the organizational structure and managerial best practices utilize by General electric automobile and the nature of the legislation that necessitated this institutional change. What is Sarbanes-Oxley?The Sarbanes-Oxley Act of 2002 (SOX) is a federal law that mandated new or enhanced standards for all U.S. general bon ton boards, management and commonplace account statement firms. Drafted in response to a number of high-profile corporate scandals that occurred in the late 1990s and archaean 2000s by U.S. Senator Paul Sarbanes and U.S. Representative Michael Oxley the legislation imposed several unchewable mechanisms designed to curb corporate malfeasance and to protect investors. The some signific ant of these mechanisms include individual certification of corporate monetary didacticss by top management, attach penalties for fraudulent activity and the separation of audited accounting and consulting functions in outside business agencies. (www.soxlaw.com) The overarching burden of this legislation was the increased scrutiny of financial statements submitted by publicly tradedcompanies and suppuration corporate auditing expenditures. (Sidime, 2007) batting order Com prospect structure and governanceGeneral galvanizing has been a progressive order in barriers of Board small-arm and governance. (see composition matrix attached)For decades, the company has demonstrated a desire to embolden diversity in governance from three primary perspectives gender, race and age. In attachment, General electric car had historically satisfied many of the obligations outlined in the Sarbanes Oxley legislation well in advance of its passage including listing the translation of indi vidual committees and the number of committee meetings. (General Electric Annual Report 2000) superstar potential conflict that exists with the General Electric governance strategy is the cabal of President / CEO and Chairman roles. This is a practice that the company has exercised since Ralph Cordiner feature these responsibilities in 1958 and continues today with Jeffrey Immelt serving in the role since 2001. An additional contest that exists inwardly the Board structure of General Electric is the lack of term limits. nary(prenominal)inated individuals are approved annually through a judicial age of votes present and may continue to serve in unquestionably. This issue was debated recently when shareholders proposed a 15 year term limit of Board service along with separation of the CEO / Board Chair role. The measure was defeated in a lopsided vote held during the companys April 2013 Board meeting. (Catts, 2013) take rail fashion line CommitteeConsisted of outside directo rs. Held 5 meetings in 2000. Reviewed the activities and license of GEs fencesitter auditors as well as the firms financial account processes. serene of independent directors. Held 11 meetings in 2003. to review the activities and independence of GEs external auditorsand the activities of GEs internal audit staff excessively reviewed GEs system of disclosure controls and procedures. Composed of independent directors. Held 12 meetings in 2013. Primary responsibilities include selection of independent auditor, review the independent audit, oversee the firms financial reporting activities and accounting standards. TenureCombination of cash & stock. $75,000 annual base gain $2,000 per meeting. Combination of cash & stock. $250,000 base, 10% premium for service on auditing or requital committee. Removed contingent service reward of 5,000 shares. Combination of cash, stock & other. $250,000 base. Average honorarium = $302,457The moral of the story as it relates to Board structure and Governance within General Electric is that while the firm did shit to shore up itsregulatory and oversight positions post SOX the company had exercised the staple fibre principles outlined in the legislation for some time. Performance Metrics & administrator CompensationGeneral Electric has functioned for decades under the philosophy of hiring, motivating, rewarding and retaining its decision maker leaders through compensation. The company has maintained an administrator compensation example that includes lucre, bonuses and stock options as the vehicle to achieve this goal for decades. musical composition the numerate compensation packages at the highest levels of leadership are non as moneymaking as they once were General Electric has adapted its compensation policies in order to remain competitive and compliant in an evolving business environment. 2000 cuckoo WelchIn the year 2000, jak Welch stood without peer in the world of American business. Recently named Manager of the Century by Fortune Magazine, (Colvin, 1999) General Electric increased revenues to nearly $130 billion. During this year Mr. Welch earned $16,700,000 in salary and bonus. In addition, Mr. Welch was granted 3,000,000 stock options which became exercisable upon retirement as well as 850,000 restricted stock options. The later options were granted by the board in appreciation of 20 years of service to GE. Further more than, Mr. Welch was granted a split-dollar demeanor insurance policy contingent upon execution of a personal consulting resolution (up to 30 days annually) at the discretion of the acting CEO. Final basis of the consulting contract and retirement package are not listed, but the shelter is estimated to be north of $420 million.2003 Jeffrey ImmeltJeffrey Immelt emerged as the new CEO of General Electric following a highly publicized succession process in 2001. Perhaps due to his relatively short tenure to this point, but more likely due to the passage of the Sarbanes-Oxley Act overall administrator compensation was revised at General Electric in 2003. In addition to a more responsible base salary, executive bonuses and stock options were much more clearly outlined and delineate in the 2003 proxy statement. While the Board Compensation Committee does state Werely upon judgement and not rigid guidelines or formulas or short-term changes in our stock damage in determining the amount and mix of compensation elements for each executive officer official historys include an element of specificity not previously obtainable to investors. Mr. Immelt was paid a $3,000,000 base salary and bonuses totaling $4,325,000 a 10% increase from the previous year.In addition, Mr. Immelt was granted 250,000 effect share units in space of stock options. This is the most significant change related to executive compensation policies that occurred at General Electric post SOX. From the 2003 GE Proxy arguing These performance share units are intended to recognize the unique position of the GE CEO. The committee believes that the CEO of GE needs no retentiveness compensation, and that his equity compensation should be focused entirely on performance and alignment with investors. This change in policy in effect linked 50% of the CEOs equity compensation directly to the companys cash generation performance the remaining 50% would only deepen to shares if specific shareholder return prosody were met. In short the unwrap the performance of the firm the better the compensation for Mr. Immelt. Finally, select executives at GE (including Mr. Immelt) were granted 3-year performance incentive awards. These awards would be paid only upon transaction of unlisted specified goals related to earnings per share, revenue growth, return on total capital and cumulative cash generated.2013 Jeffrey ImmeltToday, the evolution of executive compensation continues at General Electric. The 2013 Proxy Report provides a thorough and defined descript ion of all elements and metrics used to determine final executive compensation. pursual essentially the same compensation model initiated in 2003, Jeffrey Immelt effected total compensation (including projected pension value) of $20,592,769. Leadership, Ethics & Firm setGeneral Electric is a perfect case study in the evolution of an American business. Formed in 1892 primarily as an electric company, the firm has grown into a global dynamo. Today the company operates in several areas including finance, appliances and power systems. This type of evolution and growth does not slip by by accident, it is the result of visionary leadership a quality that has existed within GE for a century. Founded by one of this countrys greatest innovators, General Electric has embodied the vision of Thomas Edison since its inception. The company has dabbled, innovated and revolutionized a number of industries throughout its existence. This truth is a testament to the men that have lead the organiza tion throughout the years. (see past leaders attached) More recently, contemporary General Electric has been molded primarily by dickens individuals who utilized their personal skill to direct the company through a repugn time. Jack Welch (1980 2001)Jack Welch joined GE in 1960 as a junior chemical engineer. Early in his tenure, Welch considered leaving the organization citing a frustration with an overwhelming bureaucracy that existed within the firm. Welch was convinced to stay and worked his way up the ranks becoming Chairman and CEO in 1980. Welch became one of the most successful executives in the history of the United States during his tenure, growing the value of the company by 4000%. He accomplished this by imposing leadership energy practices throughout the company. Welch promoted strong businesses by limiting bureaucratic inefficiencies, trimming enumeration and closing factories. His governing philosophy at GE was that a company should either be number 1 or number 2 in a particular industry or it should get out of that business.Welch adopted Motorolas Six Sigma quality plan in 1995 to elevate streamline operating efficiencies. In addition, Welch instituted a rigorous method of assessing organizational performance and leadership termed Session C. The goal of this program is to provide feedback and point talent to managers within the organization. During Jack Welchs tenure, General Electric became wildly profitable and became recognized as the preeminent organization in terms of operating efficiency and profitability. Mr. Welchs methods, while successful were generally unequivocal and focused on two specific issues profitability and legal compliance. Jeffrey Immelt (2001 present)Jeff Immelt was groom to lead General Electric from a young age. Immelts fuss worked for GE in the Aircraft Engines Division. After receiving his A.B. in Applied Mathematics from Dartmouth College, Immelt earned an M.B.A.from Harvard. Jeffrey Immelt formally join ed General Electric in 1982 and began his professional ascent. Following a public and high-profile convert Immelt was challenged with the difficult task of replacing known GE CEO Jack Welch in 2001. Immelt was immediately dealt two odd challenges upon assuming the position the terrorist attacks of September 11, 2001 and to a lesser extent the public backlash attached to the prominent accounting scandals that occurred at the turn of the century. Immelt began to bring forth an impact immediately, adopting a more people-oriented approach to management than the efficiency-minded approach that had governed GE for the preceding two decades. Immelt launched a series of effectiveness-oriented measures that encouraged innovation and risk-taking. Immelt also began to look to developing markets in search of opportunity.Finally, Jeffrey Immelt moved GEs operational focus to areas not previously considered concentration on semipermanent growth over short-term gains, infrastructure developme nt with an emphasis on green energy and increased marketing efforts focused on loving responsibleness. The contrast between these two vastly different yet passing effective leaders provides an interesting snapshot of the effects of the evolution in American business following the corporate scandals of the late 1990s and early 2000s. While General Electric was not directly attached to a major scandal during that era, the timing of GEs leadership transition was fortuitous. While there is certainly room for a chicken vs. eggs debate regarding the change in managerial philosophy at GE the change in leadership at the top of the company definitely provided an opportunity to shift course in the post-SOX business world. Corporate Sustainability & cordial ResponsibilitySimilar to many traditional American manufacturing powers, General Electric did not exercise sustainable business practices for the bulk of its existence. This, of course, was not unusual in American industry. However, at the turn of the century, the first mention of complaisant responsibility appeared in a GE company document. Integrity the temper and the earn of Our Commitment was a comprehensive document outlining the companys policies related to privacy, supplier relationships, working with governments, environment, health and safety. The initial draft of this document was essentially a rule book seeking to achieve legal compliance inthe miscellaneous nations where General Electric conducted business. The following year, (2001) two share owner proposals sought to amend and bolster the Integrity statement Share Owner Proposal no. 2 which attempted to mitigate the quality of life for employees and their communities by allowing collective bargaining, eliminating discrimination & intimidation and promoting forgo labor, as well as Share Owner Proposal No. 3 which called for the Board to discontinue and renounce a PR be given initiated by the General Electric Company that downplayed the dange rous effects of PCBs dumped in the Hudson river by the company.The GE Board of Directors voted against both proposals. The reality of the Boards actions demonstrates that the early years of General Electrics sustainability and complaisant responsibility programs were based in superficial statements only. In 2003, General Electric launched an interactive, electronic version of its Annual Report. This new medium included a section devoted to the Citizenship initiatives active within the company. The two paragraph overview declare the need for a modern muckle to practice environmental compliance, leadership in corporate governance and high ethical standards. The document lists various social programs supported by the organization and its employees including nebulous philanthropic and voluntary efforts. While a step in the right direction, an outside beholder may still question the level of commitment GE express to its sustainable programming. The strategy did not contain the meas urable, quantifiable objectives required to effectively execute a large-scale sustainability program. (Epstein, 2003)Today, General Electric has created and maintains a robust, independent website dedicated to corporate sustainability. www.gesustainability.com outlines GEs commitment to long-term sustainable business practices including internal processes, (people, governance, compliance and health & safety) sustainability initiatives (health, energy & climate, water and essential resources) and progress (public policy, grassroots activism, lobbying, human rights and research). Most importantly, the site lists and outlines performance metrics used to govern their processes including the GRI G3 Sustainability Reporting Guidelines. The end result of the GE sustainability program has been a complete remake of the GE brand identity. Today General Electric is recognized as a leader in corporate and social responsibility, receiving accolades from The HumanRights Campaign, (Corporate Equa lity) CR Magazine, (100 Best Corporate Citizens) Dow Jones Sustainability Index (Sustainable line of merchandise Practices) and the US Presidents Volunteer Service Award amongst many others. In summary, General Electric is not a company without fault. Issues with comingling of responsibility at the top, lack of diversity in executives, and a series of accounting scandals in the early 2000s are a few of the complications that the organization has witnessed. However in terms of the ability of a large corporation to evolve in order to remain relevant throughout time, GE has fared better than most.Resources Catts, T. (2013, April 24). GE investors reject 15-year term limits for board members. Bloomberg. Retrieved from www.bloomberg.com/news /2013-04-24/ge-investors-reject-15-year-term-limits-for-board-members.html Colvin, G (1999, November 22). The ultimate manager in time of hidebound, formulaic thinking, General Electrics Jack Welch gave power to the worker and the shareholder. He b uilt one hell of a company in the process. Fortune. Retrieved from www.archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269126/index.htm Epstein, M. & Roy, M. (2003). Improving sustainability performance specifying, implementing and measuring key principals. Journal of General Management. Vol.29, No. 1 2003. Sidime, A. (2007, February 18). The good and bad of Sarbanes-oxley. San Antonio Express-News. Retrieved from http//search.proquest.com/docview/262392306?accountid=12381 Rachel, E.S. (2002, October 29). GE adds 2 outside directors in move to boost governance. Wall Street Journal. Retrieved from http//search.proquest.com/docview/398860308?accountid=12381 Watson, I. (2002, June 30). GE caught up in US accounting scandal. Knight Ridder Tribune Business News. Retrieved from http//search.proquest.com/docview/462671234?accountid=12381 General Electric Corporation. Wikipedia. Retrieved from www.en.wikipedia.org/wiki/general_electric Jack Welch. Wikipedia. Retrieved from www.en.wikipedia.org/wiki/jack_welch Jeffrey Immelt. Wikipedia. Retrieved from www.en.wikipedia.org/wiki/jeffrey_immelt General Electric Proxy Statements. (2000,2003,2013). SEC. Retrieved fromwww.sec.gov/archives/edgar/data The Spirit & The Letter (.pdf). GE.com. Retrieved from www.ge.com/files/usa/commitment www.soxlaw.com