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CWA Prompts New GE Executive Pay Formula
General Electric, in response to a shareholder proposal submitted by CWA, has agreed to exclude pension fund income from a factor used for determining executive compensation.
The decision clarifies a distorted inflation of earnings per share, one of the key measures GE's board of directors has until now used as a measure of top executives' performance and in determining their bonus and other incentive compensation.
Linking executive pay to pension income creates an incentive for companies to cut pension benefits for workers and to withhold cost-of-living increases. GE has frozen pension benefits at 2000 levels while continuing to lay off workers and increase health care copayments for IUE-CWA members.
"This is a step in the right direction," said IUE-CWA President Ed Fire told the Wall Street Journal on Feb. 21.
"We hope GE will take further steps to address the huge gulf between executives' and front line workers' pensions and pay," he said. "Basing compensation for 4,000 executives on the performance of a pension plan built up by the contributions of 200,000 GE workers is simply not fair."
"GE has taken an important first step that we hope other CWA employers will consider," CWA President Morton Bahr said.
The huge conglomerate's pension plan generated more than $2 billion in income for 2001, or about $1.4 billion after taxes - about 10 percent of the company's total $14.1 billion in earnings.
GE's board will adopt a new long-term incentive plan next month for compensating executives through 2006. While, as in the past, the plan will use earnings per share as a measure of executive performance, the board's compensation committee will see two figures: total earnings per share and earnings per share without pension income.
"The board can, at its discretion, use this measure for establishing annual bonuses," CWA Research Economist Sumantra Ray said.
Ray, who has been in talks with the company, said GE has also agreed to provide information and continue discussions with the union regarding the management and financial integrity of the GE pension system.
CWA has agreed to withdraw its shareholder proposal. The union is supporting similar proposals at other companies including IBM.
The decision clarifies a distorted inflation of earnings per share, one of the key measures GE's board of directors has until now used as a measure of top executives' performance and in determining their bonus and other incentive compensation.
Linking executive pay to pension income creates an incentive for companies to cut pension benefits for workers and to withhold cost-of-living increases. GE has frozen pension benefits at 2000 levels while continuing to lay off workers and increase health care copayments for IUE-CWA members.
"This is a step in the right direction," said IUE-CWA President Ed Fire told the Wall Street Journal on Feb. 21.
"We hope GE will take further steps to address the huge gulf between executives' and front line workers' pensions and pay," he said. "Basing compensation for 4,000 executives on the performance of a pension plan built up by the contributions of 200,000 GE workers is simply not fair."
"GE has taken an important first step that we hope other CWA employers will consider," CWA President Morton Bahr said.
The huge conglomerate's pension plan generated more than $2 billion in income for 2001, or about $1.4 billion after taxes - about 10 percent of the company's total $14.1 billion in earnings.
GE's board will adopt a new long-term incentive plan next month for compensating executives through 2006. While, as in the past, the plan will use earnings per share as a measure of executive performance, the board's compensation committee will see two figures: total earnings per share and earnings per share without pension income.
"The board can, at its discretion, use this measure for establishing annual bonuses," CWA Research Economist Sumantra Ray said.
Ray, who has been in talks with the company, said GE has also agreed to provide information and continue discussions with the union regarding the management and financial integrity of the GE pension system.
CWA has agreed to withdraw its shareholder proposal. The union is supporting similar proposals at other companies including IBM.