GE GE Aerospace

By Theo Francis 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 5, 2018).

General Electric Co. will pay former chief executive John Flannery $4.25 million cash in severance over the next 12 months, the company said in a securities filing Friday. GE also agreed to let Mr. Flannery keep equity awards that could add up to several million dollars more depending on GE's performance.

In addition, when he turns 60 in about three years, Mr. Flannery will receive a pension accumulated over more than 30 years at the industrial giant that was valued at $23.6 million at the end of last year.

GE fired Mr. Flannery in early October after just 14 months on the job. His termination came after the board learned of deepening problems at the troubled power unit, which caused GE to warn it would miss its profit and cash-flow goals for 2018. The company named board member Larry Culp its new chairman and CEO, effective immediately.

While GE disclosed a summary of what Mr. Flannery would be entitled to under the Oct. 29 separation agreement, it omitted some details necessary to calculate the total; others depend on performance in future periods.

In return for signing a noncompetition agreement, Mr. Flannery will receive the $4.25 million and could also receive a prorated long-term incentive award tied to company performance. That award would be based on a figure double his year-end 2018 salary of $2 million, plus mostly undisclosed bonuses for 2016 through 2018. However, the ultimate value of the award depends on the company meeting profit, cash-flow and other targets that were largely set before the extent of the company's most recent financial troubles became clear.

GE said Mr. Flannery would be entitled to keep stock options and restricted stock awards granted before Sept. 30 last year -- a year before his official departure -- except some that weren't scheduled to vest, or become fully his, before 2021.

At the end of last year, those awards were worth about $4 million; at Friday's close of about $9.29 a share, they would have likely been worth closer to $1.4 million. A portion of the restricted shares vested during the course of 2018, leaving about $400,000 today, according to an analysis by pay-data form Equilar, which pegged the total value of Mr. Flannery's severance at about $8 million. Options would be exercisable through 2020, meaning they could recover some value if the company's share price rises.

The company also said Mr. Flannery could keep 333,333 of the 800,000 performance-share units granted him in February, which pay out based on how GE's total shareholder return compares to that of companies in the S&P 500 through 2020. If GE's performance reaches the 55th percentile of index companies -- seemingly a stretch in current circumstances -- his remaining portion of the award could be worth $3.1 million at current prices.

Write to Theo Francis at theo.francis@wsj.com

(END) Dow Jones Newswires

November 05, 2018 02:47 ET (07:47 GMT)

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