As GE’s new CEO, Lawrence Culp has a big incentive to right the ship: as much as $21 million annually in salary, bonuses and equity for the four years, with the potential for hundreds of millions more depending on the company’s stock performance.
The Wall Street Journal reports that GE (GE) made an agreement with Culp to pay him $2.5 million per year in salary, plus an annual bonus targeted at $3.75 million and annual equity awards valued at $15 million starting next year. The details were included in a securities disclosure filed after the end of trading Thursday.
If GE’s shares rise at least 50% from a 30-day average price ending just before his Oct. 1 start date and stay there on average over 30 trading days between now and 2022, Culp would see an even bigger payday.
WSJ calculates a 50% rise would push GE’s share price to $18.60 and bring the new CEO 2.5 million shares, which would be worth about $46.5 million. If the share price rises at least 150% for 30 trading days, to about $31 a share, Mr. Culp would receive 7.5 million shares, or $232.5 million at that price. GE shares closed Thursday at $12.66, about half of the price this time last year.
The proposed pay package without the equity bonuses would put Culp in the middle of the pack of the best-compensated CEOs. But if he’s successful in turning GE’s ship around, he could rocket to the top of the list. If Culp is fired without cause or leaves with “good reason,” he stands to receive $12.5 million in severance.
While at the helm of Danaher Corp. (DHR), Culp made between $17 million and $22 million a year from 2006 through 2013, except during the worst of the financial crisis in 2009, when he made $11 million.
Culp became a GE board member in April and was promoted to the top job in a big shakeup this week that ousted John Flannery. Culp said in a statement he wanted to focus on improving GE’s balance sheet and reduce its debt load.
Flannery had been CEO for just about a year, with a turnaround plan meant to focus on aviation, power and health care and divest other operations. But he couldn’t halt the company’s increasingly poor performance. Flannery made $9 million last year. His separation package is still being finalized, the filing said.