GE 2010 Annual Report Download - page 29

GE 2010 ANNUAL REPORT 27
GE takes a long-term view of governance. We consider it to be
the foundation upon which we build our leadership culture and
reputation for integrity, which in turn provides investors with
competitive returns over the long term. We believe that the Board
is best positioned to oversee management, and that investors
should have fair means to propose directors and elect them by
a majority vote, and use other appropriate tools to hold us
accountable for company performance.
Fourteen of our 16 directors are independent of
management. We seek director candidates with diverse
backgrounds, demonstrated leadership qualities, sound judgment,
and domain expertise in fields relevant to GE’s businesses.
For example, last year we added Loews CEO Jim Tisch, an expert
in global finance and leader of one of the largest diversified
corporations in the United States. The Chairman and the
independent Presiding Director provide Board leadership. This
model recognizes that in most instances the Chairman speaks
for the Company and the Board, but still provides the benefits of
independent Board oversight. As GE’s Presiding Director,
I work with the Chairman and all of GE’s independent directors
to shape and monitor strategy and set the Board’s agenda.
I coordinate with the chairpersons of the Board’s committees to
ensure that committees and the Board are functioning to
our collective expectations, and that directors are receiving the
information they require.
Successful governance depends first on the skill, dedication
and integrity of the Company’s leaders and the strength of internal
management processes. The Board reviews the performance
of senior executives each year and has succession plans in place
for key positions to ensure continuity of leadership. GE has
sound practices for developing management talent, developing
and executing strategy, managing risk and complying with
the spirit and letter of laws and regulations.
Compensation is a critical element in leadership
development. We reward long-term performance. Our approach
is not formula-driven but instead depends on our view of
an executive’s performance and potential over many years. We
design compensation to encourage balanced risk-taking with
a mix of cash and equity and long- and short-term incentives.
Strategy and risk oversight also are core Board
functions. Each July we conduct a comprehensive review of GE
strategy and monitor and discuss progress throughout the year.
While the full Board is responsible for risk oversight, we allocate
responsibility for various risk matters to Board committees
with specific competence in those areas. To enhance risk
oversight, in February 2011 we formed a Risk Committee of the
GE Board that oversees GE’s and GE Capital’s risk assessment
and risk management structures and processes.
We make certain our view stays current. At least once
a year we conduct a comprehensive review of governance
trends and evaluate GE’s framework for possible changes. We
ask management to solicit the views of the Company’s large
shareholders on governance matters at least twice a year and
report to us on their findings. Directors also meet with
shareholders to discuss governance matters. I met recently
with large investors to discuss executive compensation and
Board structure issues. We have made changes to our
governance policies and practices based on investor input.
While we strive to continually improve our governance
practices, we avoid making changes simply because they are
deemed fashionable or expedient. We base our decisions on our
collective experience and judgment about what will work best
for GE. We consider the interaction of all parts of our corporate
governance structures to ensure that they work together in
a way that produces long-term value for you, our shareowners,
without undesirable cost or bureaucracy. Finally, the independent
directors of GE are committed to continue working on your
behalf and being transparent in explaining why we believe our
approach works for our company. I would encourage you to
learn more on GE’s Web site at www.ge.com/company/
governance/index.html.
Sincerely,
Ralph S. Larsen
Presiding Director
February 25, 2011
To Our Shareowners:
As Presiding Director of the GE Board of Directors, I write to share our perspective
on corporate governance and compensation. I will talk first about our overarching philosophy,
and then I will focus on a few areas—independent Board oversight; talent development,
performance and compensation; strategy and risk oversight—and I will finish with how we
as a Board ensure that GE governance retains an important business-building advantage.