GE 2002 Annual Report Download - page 6
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Please find page 6 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.However, as measured by the stock price, this was a
disappointing year for GE investors — including GE
employees, who own almost 10% of our stock. We had
targeted higher earnings growth, but as I will explain
below, we had to increase reserves at ERC (Employers
Reinsurance Corporation), our reinsurance business.
We had to work through the general swirl around busi-
ness practices and, perhaps most important, address
concerns about our future growth. Our stock was down
39% for the year, more than the S&P 500, and GE now
trades near the same level it did at the end of 1997.
As managers, it is our principal job to make and
sell great products and services that people need and
thereby increase earnings. Since 1997, our earnings
have grown more than 80%…far in excess of the S&P
500’s performance. If you have held GE stock for 10
years or more, the average total annual return on your
shares has been 15% — more than one and a half
times the 9% of the S&P 500. Through the cycles, your
GE management team has consistently grown earnings,
and I, along with our many managers, have no doubt
that we will be able to continue to do this.
This was not a great year to be a rookie CEO. With
a tough economy, a volatile political environment, and
the impact of 9/11 and industry cycles, business chal-
lenges were plentiful. Add to that the presumption of
widespread corporate fraud and there were not too
many normal days in 2002.
GE 2002 ANNUAL REPORT 5
However, I am an optimist. In many ways, this was
the best time to take over a company. That is because
the role of the CEO will, and should, change. And a
new CEO — especially an optimistic one — can embrace
change with an open mind. Let me share a few thoughts
with you on how I am leading GE in this environment.
I believe that our reputation for integrity and honor-
able dealings is our most important asset. GE has not
been immune to the fallout from recent bull and bubble
markets. I hear from investors who are concerned
about the quality of corporate earnings, the need for a
solid balance sheet and sustainable cash flow, and the
importance of responsible executive compensation
and accounting standards. Let me assure you that GE
will lead on all of these fronts.
As one example, a substantial portion of my com-
pensation is linked to the performance of GE stock.
Nearly 70% of my net worth is in GE stock. I hold my
stock options to term (10 years), a practice I adopted
when I became chairman and which I will continue. At
the same time, I have asked our board’s Compensation
Committee to explore best practices on linking my pay
even more closely with investor interests.
I strive for openness. I am committed to putting
investors inside GE every day. It will take some time to
get this right, but I am committed to the process. I
want investors to understand how GE grows, and that
our fundamentals are real and sustainable. When you
DEAR STAKEHOLDERS:
GE is strong. In 2002, we grew earnings 7% and
cash 10% in a tough economy, and our businesses
improved their global positions with investments
in technology and customer focus. We maintained
our financial strength, remaining one of only seven
Triple A-rated industrial companies, and GE’s terrific
people prepared your company for success in the
21st century. There is much to be proud of.