Workers, shareholders call GE an ’embarrassment’
General Electric was blasted on Wednesday by workers, retirees and shareholders bemoaning the downfall of the company they love.
At its annual meeting, GE got an earful from employees and investors who pleaded with management to right the ship after a disastrous year.
“I believe it was arrogance and a series of bad business decisions,” former employee Bill Freeda said. “Our board of directors clearly has been AWOL.”
Another shareholder said: “GE, which was once one of the preeminent companies in the world — the bluest of blue chips — is now an embarrassment.”
The past 12 months has been one of the darkest periods in GE’s 126-year history. A cash crisis, brought on by years of bad deal-making, forced GE to cut its dividend in half and lay off thousands of workers. GE’s stock price has crashed by 50%, and calls to kick it out of the Dow have grown louder.
Despite the deep criticism of past and current GE leaders, the company’s nominees to the board were all elected on Wednesday. None of the shareholder proposals calling for reform were adopted, though one pushing for splitting the CEO and chairman roles received strong support.
John Flannery, a veteran GE executive who replaced longtime chairman and CEO Jeff Immelt last year, said he remains “extremely proud” of the company despite its “immensely disappointing” results.
“We’re keenly aware of the pain that our performance has caused,” he said.
Flannery urged investors and employees to keep the faith and said results from the start of 2018 offer hope.
“I want all of you to be proud of the company and not lose heart,” he said. “I assure you we will not let up until this job is complete.”
Former GE workers slammed the company for eliminating their supplemental health insurance plans.
“We built the company. We put it where it is today,” said Ron Flowers, president of the Retiree Association of General Electric.
“Don’t just think financially,” Flowers urged the board. “Think morally also.”
Other retirees lamented GE’s $29 billion pension deficit, the largest among S&P 500 companies. They questioned whether the pension fund, whittled by years of low rates and inattention, will be around to support them.
Flannery said the pension fund is running a “significant deficit,” but he said maintaining its integrity is “a deep priority for us.” He noted GE recently announced plans to contribute $6 billion to the fund.
Freeda, a GE retiree, slammed Immelt for having a back-up jet fly around the world with him on some trips. (GE has said it stopped that practice in 2014. Immelt told the board last year in a letter that he “did not have time to personally direct” the day-to-day operations of GE’s corporate air team. He said use of the spare plane was halted once he became aware of it.)
“Shareowners should wonder: Were there other serious business abuses?” Freeda said. He called for an independent investigation into questionable business practices under Immelt and urged GE to consider clawing back the former CEO’s bonuses.
Flannery said that the GE board would take “appropriate steps” if “evidence of serious misconduct” were to emerge. A spokesperson for Immelt declined to comment.
GE shareholders voiced stronger support for a proposal aimed at boosting oversight by splitting the CEO and chairman roles. About 41% of shares were cast in favor of the bid, up from 24% last year.
In light of accounting concerns at GE, shareholder support for KPMG as the company’s auditor dropped sharply. Just 65% of shares were cast in favor of ratifying KPMG, down from 94% last year. KPMG has been inspecting GE’s books for 109 years, leading critics to argue they’ve become too cozy.
Martin Harangozo said he was fired by GE with no severance after raising questions about “bad” accounting.
“GE transitioned from an honest company to a dishonest company,” Harangozo said.
Underscoring the challenges facing GE, Moody’s lowered its credit outlook on the conglomerate to negative on Wednesday because of the expected costs of a Justice Department investigation into its subprime-mortgages business.
Moody’s warned it could downgrade GE’s credit rating if the company fails to improve cash flow significantly or if revenue keeps shrinking at the beleaguered power division. GE shares dropped nearly 5% on Wednesday, leaving them down 53% over the past year.
One retiree pleaded with Flannery to turn around the company — fast.
“My whole life has been GE,” he said. “Give it all you’ve got. We’re with you.”