The actions made public Thursday implement requirements of this year’s Sarbanes-Oxley financial reform legislation, proposed stricter listing requirements from the New York Stock Exchange (NYSE), and GE management’s policy decisions, the company said. GE said the changes were developed over the last 90 days.
The changes are contained in GE’s corporate governance documents, which are available on a new corporate governance Web site :
The changes include:
- deferred stock units (DSUs) will be 60% of the annual director compensation in the future. These DSUs will not pay out until one year after a director leaves the board. DSUs will replace stock options as the equity portion of annual director compensation. When directors exercise existing stock options they will be subject to the same one-year holding period that applies to GE senior management.
- board Audit Committee responsibilities will increase and it will meet at least seven times per year. These responsibilities include: review of public disclosure processes and public financial disclosures, review of key auditing principles and decisions, approval of independent auditor and all audit and non-audit work and concurrence in the appointment of the head of the internal corporate audit staff.
- as of January 1, 2003, 11 of GE’s 17 directors will be independent under NYSE standards. GE will consider directors independent if the sales to, and purchases from, GE total less than 1% of the revenues of the companies they serve as executive officers.
- audit committee members must meet an additional “independence” test under Sarbanes-Oxley – their directors’ fees must be the only compensation they receive from the company
- directors who also serve as CEOs should not serve on more than two public company boards in addition to the GE board, and other directors should not serve on more than four public company boards in addition to the GE board
- each director will visit two of GE’s businesses a year without corporate management so that directors can have direct exchanges with operating leadership
Unless otherwise required GE said that the actions will become effective on January 1, 2003.