HBR at Large
It's not what you think. The outrage over exorbitant Wall Street compensation was just the beginning
JEFF IMMELT is not happy.
The GE chief was one of the few CEOs to voluntarily forgo a huge performance-based bonus this year: In April he declined a $12 million payout that the GE board had approved. At a time when the public's fury over executive pay was cresting and GE's own earnings had fallen, it was an important gesture for him to make. "When we're doing such massive restructuring, where the financial performance of the company has been better than the stock price, I wanted to send a message of loyalty and support to the employees," he told Harvard Business Review.
But it's not giving up the sizable bonus that's vexing him. It's the other casualties the focus on executive pay might cause. A bill that will give public company shareholders "say on pay" is now winding its way through Congress, and if it becomes law, it might damage GE in the long term, Immelt worries. He's not afraid of shareholders' weighing in on his own pay package, which was more than $3 million in cash in 2008. "No matter what is decided, I'll work just as hard tomorrow as I work today," Immelt says. "But what I have to fight for is the ability to determine how the other 300,000 people in GE are paid. I can't run this company if I have to worry about asking for shareholder approval to determine how the guy who is running, say, the energy business is paid. We won't be able to compete with the Chinese, the Japanese, and others who will have more freedom to make decisions about talent and leadership."
In the past year public outrage over executive pay has pushed the issue to the top of the domestic policy agenda in the United States and Europe. It's been widely recognized that the excessive bonuses and compensation paid by financial services companies not only rewarded risky behavior but encouraged it. That, says U.S. Representative Barney Frank, leader of the...