GE 2002 Annual Report Download - page 15
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Please find page 15 of the 2002 GE annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.14 GE 2002 ANNUAL REPORT
We are building a large presence in industries where
we can lead. We have identified six new platforms that
we believe can be big, each having $1 billion of operating
profit within the next few years: healthcare information
technology, water technology and services, oil and gas
technology, security and sensors, Hispanic broadcasting,
and U.S. consumer finance. I view these as our “chil-
dren.” Someday each one can grow to be a full-scale GE
business. Today they represent $9 billion in revenue
and $2 billion in operating profit. They are generating
15% annual organic growth, with even more available
through business development. All can have returns on
capital in excess of 20%. With GE’s people, technology
and experience, we can quickly lead in these markets.
Our entry into water technology is a good example.
It is a $35 billion global industrial market, growing 8%
each year with high margins. It’s a fragmented industry
whose customers are outsourcing more and more of
their water requirements. We acquired Betz Dearborn
and agreed to acquire Osmonics, which together have
a run rate of $1.5 billion in revenues going into 2003,
with operating margins near 20%. Our technical, service
and globalization skills go right to the core of this busi-
ness, and additional acquisitions will help round out
our offerings. We aim to grow it 15% annually and, by
2005, have a $4 billion global business leader.
At the same time, we have businesses that cannot
generate the long-term earnings growth or returns our
investors expect. In 2002, we sold GE Global eXchange
Services for a gain of nearly $500 million. This was not
a bad business; however, we did not believe we could
grow it effectively. We also decided to wind down and
exit our Equity portfolio. This is not an operating busi-
ness, we lack competitive advantage, and it no longer
makes sense for our investors. We will be aggressive
in redeploying capital within the company in 2003.
GE VALUES
Values. Where the culture starts and stops. Where peo-
ple are committed to the greater good of the company,
to our customers’ success and to each other.
We feel great about GE today, and about what it
means for our future. In 2002, for the fifth consecutive
year, we were named “The World’s Most Respected
Company” in a Financial Times survey of 1,000 global
CEOs. They placed GE first for integrity.
Awards are great, but ultimately, integrity is proven
by the actions and decisions — millions each day — of
hundreds of thousands of people across this company.
Meeting our commitments. Performing with integrity.
This is the foundation from which we govern GE.
I want your company to take a leadership role in
governance. So much attention has been paid in the
past year to corporate trust — who has it, who doesn’t.
We believe it’s about action, not about words. That’s
why, in November, we outlined a set of principles and
actions that strengthen GE for the future.
Our Audit Committee oversees a rigorous process
that starts at the top. As CEO, I review these busi-
nesses constantly. Our business leaders report their
results quarterly using standards that conform to SEC
requirements. We have a 450-person internal audit
staff constantly reviewing and improving our financial
rigor. One-third of our business leaders has served on
our audit staff. Led by our CFO, we have very strong
accounting oversight and principles. We have all grown
up in a culture where compliance and integrity come
first. I’ve been signing letters attesting to the validity
of results for years.
GE
has always had a strong and independent board,
and we are updating our practices for the current
environment. We will go beyond the letter of the
Sarbanes-Oxley Act and the New York Stock Exchange
listing requirements to enforce the spirit as well.
We want directors to probe with hard questions that
stretch management and deal in depth with core
issues confronting
GE
. We expect directors to have
even greater involvement and participation both in
understanding the company and in advising the lead-
ership team. Directors must be our most constructive
critics and our wisest counselors.
Our board has created the position of presiding
director to guide its independent activities. My own role
on the GE board is clear. I have two functions: lead
the company as CEO with integrity, clarity and purpose,
as measured by financial performance and reputation;
lead the board as Chairman with vision and openness,
at meetings where we energetically debate the proper
strategic direction for the long-term interest of GE
investors. GE is a very large, multi-business company,
and the board and I believe that you are best served
by having one person fill both roles.
LETTER TO STAKEHOLDERS Our Goal