fb-pixel Skip to main content

General Electric’s board extended chief executive officer Larry Culp’s contract by two years after the coronavirus pandemic upended his plan to turn around the ailing industrial giant.

Culp will lead GE through at least August 2024 with the option for a one-year extension after that, the company said in a regulatory filing. The board also revised how Culp would be compensated, making it easier for him to take home as much as $230 million at the end of his contract.

The extension represents an endorsement of Culp’s revitalization strategy even after the shares tumbled 44 percent this year as the pandemic gutted demand for GE’s jet engines, power equipment, and medical scanners. The new contract also preserves a key stock-based piece of his compensation package to offset the share drop.

Advertisement



JPMorgan Chase analyst Steve Tusa expressed surprise at the new plan and noted that it came after Trian Fund Management sold nearly half its GE stake earlier this month.

‘‘While shareholders are down another 44 percent since the new CEO was appointed, executive comp continues to not seem to be suffering nearly as much,’’ he said in a Friday note to investors titled ‘‘Redefining Winning.’’ The bank has kept its cautious ‘‘neutral’’ rating on the shares, expecting that ‘‘the near term V-shape embedded in consensus is not going to happen.’’

The stock was little changed Friday, closing at $6.31

Since taking the reins in late 2018, Culp has slashed debt, sold assets, and focused on turning around GE’s beleaguered gas turbine business, a major source of the company’s cash woes. His efforts caught on with Wall Street last year as GE posted its biggest share-price gain since 1982, when Jack Welch was starting in the top job.

‘‘Larry has made significant progress in transforming GE’s operations and culture,’’ lead director Tom Horton said by e-mail. ‘‘Larry’s compensation remains overwhelmingly tied to producing results for shareholders, with nearly 90 percent of his annual pay at risk.’’

Advertisement



The Boston-based company last month reported double-digit declines in orders across the board for the second quarter. Jet-engine revenue plunged 44 percent as the pandemic crushed air travel, dimming the outlook for aircraft sales.

‘‘COVID-19 clearly put us back,’’ Culp said at the time. ‘‘It will take us a little longer, just because of what’s happened in aviation, in particular. But that said, I have more confidence today than I ever have that we’re going to see this transformation through.’’

The pandemic also dealt Culp a personal blow by drastically reducing his chances for a big stock payout, a fate the board remedied with his new contract.

When Culp signed on to take the CEO job, the stock fetched around $12.40, less than half where it had traded two years earlier and far below its peak two decades ago. To push Culp to boost the stock price, the board put in place a big incentive. If GE rose to $31 a share within a few years — a 250 percent increase — Culp would receive as many as 7.5 million shares, valued at more than $230 million at that price. He could earn a partial payout, amounting to tens of millions of dollars, if the stock price increased at least 50 percent. If the price fell short of that threshold, he wouldn’t get any shares.

Advertisement



By February of this year, that lower benchmark was within striking distance. But as the pandemic worsened, GE plummeted.

Culp’s new employment agreement, announced Thursday evening, cancels the old equity grant and replaces it with another that is identical in size and structure but essentially halves the price targets.

Under the new terms, Culp will earn his $230 million windfall if the shares reach $16.68 within a few years. If they only get to $13.34, roughly 10 percent above the mark when he became CEO, he will take home $124 million.