Summary
- General Electric's proposed nominees for the board of directors include four individuals with no outright ownership of the company's common shares.
- The situation has become worse with the reduction in the number of board members with 40% of nominees having invested no personal funds in the company.
- It behooves shareholders to question how good governance can be when so many individuals proposing to represent them can't bother to join them as shareholders.
General Electric (GE) shareholders have or will soon begin seeing the company’s annual report and proxy statement appear in their mailboxes. The company’s financial travails – which have been extensively discussed in this forum as well as across the financial press – will of course be reflected in the company’s reported results. However, rather than focusing on the well documented, we instead turn our attention for a moment to the rather more obscure proxy statement and the share ownership of the company’s board of directors. In particular, the notable lack of direct and indirect ownership of the company’s shares is a phenomenon which has only been made worse by the company’s recent decision to reduce the size of the board of directors.
General Electric is not alone in having directors with limited personal investment in the company. However, General Electric’s reconstituted board takes this lack of personal investment to an unusual level in that fully 40% of the ten nominees for the company’s board of directors have no outright common stock ownership of the company’s shares on either a direct or indirect basis. In essence, even the smallest General Electric shareholder has invested more personal funds into the company’s shares than a near majority of the company’s board of directors.
