GE links bonuses to cost-cutting targets after talks with Trian

Wed Mar 22, 2017 11:27am EDT
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(Reuters) - General Electric Co (GE.N: Quote) said it expected to cut costs and boost operating profit in its industrial unit and linked the bonuses of its senior management to meeting these goals, as it bows to pressure from Nelson Peltz's Trian Fund Management.

GE, considered a bellwether for the U.S. economy, has been streamlining its operations over several quarters to become a simpler industrial business instead of an unwieldy mix of banking and manufacturing.

The company said on Wednesday it expected industrial structural costs of $23.9 billion in 2017 and $22.9 billion in 2018. GE had reported costs of $24.9 billion in 2016.

Operating profit from the unit is expected to rise 10.5 percent to $17.2 billion in the current year.

GE said 2017 bonuses for Chief Executive Officer Jeff Immelt and his direct reports at the senior vice president level and above will be raised or lowered by 20 percent depending on whether these targets are met.

For 2018, GE said it would review its performance goals to further align incentives.

The company shed its designation as a non-bank systemically important financial institution after divesting most of its GE Capital business. The change is expected to free about $18 billion in capital, which GE had pledged to return to shareholders through buybacks.

Peltz, through his hedge fund Trian, currently owns 66.8 million shares - less than a 1 percent stake - in GE.

Trian had disclosed an about $2.5 billion investment in the company in October 2015, making it one of the top 10 shareholders at the time. (   Continued...

The logo of Down Jones Industrial Average stock market index listed company General Electric is shown at their subsidiary company GE Aviation in Santa Ana, California April 13, 2016.  REUTERS/Mike Blake