The announcement yesterday that GE would retrospectively apply performance conditions to stock options awarded in March 2010 as a result of “constructive conversations with our shareowners” is another sign that even the threat of defeat in a Say on Pay vote can effectively change compensation policy.
GE has awarded performance stock units to CEO Immelt for several years now and the switch to time-vesting stock options, albeit delayed vesting ones, was clearly a backwards policy step. Shareholders took them to task, and the company applied the same sort of cash flow and TSR metrics to the options as it had done to the stock units.
And why not?
See, Say on Pay works.
And in case anyone gets all “one swallow doth not a summer make” on me, just remember Disney’s backpedalling on excise tax gross-up payments when it looked likely it might have suffered a Say on Pay defeat.
And remember, it’s early days. There’s bound to be more examples.
Paul Hodgson – Senior Research Associate