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Financial Times, November 3, 2006 article


Immelt wades into debate over pay
By Francesco Guerrera andChrystia Freeland in New York
Published: November 3 2006 02:00 | Last updated: November 3 2006 02:00


Jeffrey Immelt, chairman and chief executive of GeneralElectric, has urged company leaders in the US to ensure their pay does not dramatically outstrip that of their senior managers and to limit the influence of compensation consultants.

Mr Immelt's intervention in the debate over executive pay -featured in a video interview with the Financial Times - underlines the growing importance of the issue for shareholders and executives of America's largest companies.

"These are public jobs, there were so many abuses in the late 90s and in the early part of this century and that createdconcerns," he said.

Mr Immelt argued that chief executives should not have multi-year contracts, which could lead to large pay-offs if they were dismissed, and the bulk of theircompensation should be linked to performance.

Yesterday, the FT revealed that a group of leading public pension funds had urged the top 25 companies in the US, including GE, to ban pay consultants from advising the board and working on other company matters.

Mr Immelt, who took over the leadership of the industrial conglomerate five years ago from Jack Welch, did not mention the letter but said the board should be the final judge of executive pay. "I think it should be based on the good judgement of the compensation committees, the board and the CEO," he said.

"I don't think consultants should be involved."

In a separate conversation with the FT, he said that, to motivate staff and avoid excesses, chief executives' pay should remain within a small multiple of the pay of their 25 most senior managers.

"The key relationship is the one between the CEO and the top 25 managers in the company because that is the key team. Should the CEO make five times, three times or twice what this group make? That is debatable, but 20 times is lunacy," he said.

Mr Immelt, who last year received $3.2m in salary and no cash bonus, added that his pay was within the 2-3 times range.

On GE's investment strategy, Mr Immelt said that, contrary to many other business leaders, he thought it was a good time to invest in Europe.

"It's now a great time to be a contrarian. It's a great timeto think about investments in places like Germany, maybe Italy, maybe some western parts of Europe that are going to pay dividends over the next five, 10 or 15 years. And that takes courage," he said.






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