GE CEO Blasted by Shareholders For Dividend Cut

General Electric Chief Executive Jeff Immelt faced a roomful of irate shareholders Wednesday, many of whom blasted him for the decision to cut the dividend by 68 percent.

Several retirees and shareholders criticized Immelt, 53, for saying as late as January that the largest U.S. conglomerate would stand by its 2009 dividend plan. In February, GE cut its dividend effective in the second half of the year.

"By Mr. Immelt cutting the dividend by two-thirds, it hits the retirees who can no longer afford to live the lifestyle they are used to," said Jack Richards, 68, a Fort Lauderdale resident who was in a crowd of several dozen GE retirees picketing outside the meeting. "I can't afford to do the things I used to do. I've cut back on travel; I can't go back to visit my son in Boston."

GE is the parent company of CNBC and CNBC.com.

Immelt said the world's largest maker of jet engines and electricity-producing turbines had to change course in the face of a rapidly deteriorating economy, which is taking a heavy toll on its GE Capital finance arm. The dividend cut will save GE about $9 billion a year, GE said.

"The world got worse," Immelt said. He said that when the Federal Reserve had announced it would be evaluating the stability of the U.S. banks: "We thought it was important that we had extra safety so we could pass all the tests."

At the meeting, Immelt noted: "It's been an extraordinary time since the Lehman Brothers bankruptcy, and companies had to adjust quickly to the circumstances."

The meeting, which lasted more than two hours and drew about 600 shareholders, took a more rancorous tone than GE's most recent shareholder gatherings.

"Cutting the GE dividend was a tough decision," Immelt told reporters afterwards. "Days like today my job is to sit and listen. We've got the company well positioned, as well positioned as the company can be in the environment we're in."

Pay Criticized

Other shareholders blasted the level of executive pay at a company whose shares have fallen about 65 percent over the last year, a deeper drop than the approximate 37 percent fall of the Dow Jones industrial average. GE is the sole original member to remain in that widely watched group.

Much of the investor concern has focused on the company's GE Money finance arm -- which has operations ranging from U.S. store credit cards to financing jet engine purchases -- and has dragged heavily on its results.

Noting that Immelt had volunteered not to take a bonus in 2008, shareholder and retiree Kevin Maher of Lynn, Massachusetts, asked why the CEO had qualified for one.

"What kind of system would produce a $12 million bonus based on what the facts are?" Maher said. "I wish I could get a system like that that would pay me when we were doing so badly."

Immelt was awarded total compensation last year worth $14.1 million, down 28 percent, according to a filing with the U.S. Securities and Exchange Commission.

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GE officials said 43.1 percent of shareholders had voted in favor of a shareholder proposal to give shareholders a vote on executive pay, more than the 38 percent who had voted for that resolution last year. Four shareholder resolutions on the ballot were voted down.

GE last week reported a 36 percent drop in profit, dragged down by the finance business and by its NBC Universal media business, which is based in Orlando.

Also this year, GE has been stripped of its top-tier "AAA" credit ratings by Standard & Poor's and Moody's.

'Point of Peril'

Another shareholder, Richard Wills of York, Pennsylvania, criticized the level of pay for all of GE's top officials.

"This company has reached a point of peril," Wills said. "We cannot afford you folks anymore. And even if we could, we can buy your level of incompetence for a hell of a lot less."

Chief Financial Officer Keith Sherin said GE is dissatisfied with its stock performance.

"The concerns about GE Capital have certainly been weighing ïn our stock. We're up off the lows of March, which we feel good about," Sherin said. "At the end of the day the stock performance in 2008 and 2009 is disappointing to all of us, but it's not like it's an isolated event."

GE shares in March fell to $5.87, their lowest since 1991. On Wednesday they were up 3 percent to $12.07 on the New York Stock Exchange.

Shareholders also faced a proposal for the board to commission an independent study into whether the conglomerate should be broken up. GE officials said 5.4 percent of shareholders voted in favor.

"Long-term GE shareowners during the present decade have fared badly," said John Hepburn, an investor from New Zealand, who submitted that proposal. "It has become very evident in recent years that GE suffers from a holding company diversification discount in which the market value of the conglomerate is lower than the value of the parts individually."

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