00:00 Here's your Forbes Daily Briefing for Monday, April 1st.
00:05 Today on Forbes, CEO Larry Culp's overhaul of GE will make him a billionaire.
00:13 Larry Culp has burnished his reputation as an industrial mastermind with his restructuring
00:17 of General Electric.
00:19 On Tuesday, GE's CEO will take the final step in a six-year process to break up the once-sprawling
00:25 conglomerate, splitting off the power business from its crown jewel aircraft engine division.
00:31 Wall Street is giving Culp a standing ovation, and he's getting rewarded handsomely.
00:37 After a 260% run-up in GE's stock price since the beginning of 2023, Culp has met the performance
00:43 goals to get the maximum payout from a rich long-term incentive package, 1.74 million
00:49 shares that are worth roughly $300 million at current prices.
00:54 Under the terms of the package, Culp could retire and walk away with the money this August.
00:59 But he's sticking around to run GE's aerospace business, the world's number one maker of
01:04 aircraft engines, as a standalone company, which will delay the date the shares vest
01:08 till August 2025.
01:11 Combined with the rest of his compensation from GE and the fortune he made previously
01:16 as CEO of the smaller industrial conglomerate, Danaher, the massive stock award will make
01:22 Culp a billionaire, Forbes estimates.
01:25 He'll join a small club of 15 U.S. chief executives who have amassed 10-figure fortunes.
01:32 Culp faced knotty challenges when he parachuted into GE as the first outsider to lead it.
01:37 The iconic company founded by Thomas Edison was foundering under $135 billion in debt
01:43 following the blow-up of the company's financial arm, GE Capital.
01:48 Former CEO Jeff Immelt's costly bet on bulking up in power by buying Alstom's turbine business
01:54 had failed, and investors had fled, with the company's market cap shrinking to $70 billion,
02:00 down more than half a trillion dollars from August 2000, when it was the most valuable
02:05 company in the world.
02:08 David Collis, a professor at Harvard Business School who's written case studies of GE and
02:12 Danaher, and has had Culp as a guest speaker in his classes, said, quote, "There's not
02:17 many people that have gone into a company, and particularly a company with a reputational
02:21 legacy like GE, with that list of things to deal with."
02:27 General Electric and Culp declined to comment on his compensation and net worth.
02:32 Culp's incentive pay outstrips most of his peers.
02:35 In 2022, the median value reported in financial filings by S&P 500 companies for their CEOs'
02:42 total compensation and unvested equity awards was $57 million, according to the data provider
02:48 Equilar.
02:49 For Culp, the comparable total reported by GE in 2022 was $175 million.
02:57 In 2023, it was $237 million.
03:02 In 2018, General Electric was in crisis when its board offered Culp the job of CEO.
03:08 It had soured on Immelt's successor, John Flannery, after only a year, reportedly frustrated
03:13 with his slow decision making.
03:15 Culp, who had joined the board the previous year, had earned a reputation as a details-focused
03:20 whiz at improving manufacturing efficiency at Danaher, which he led from 2001 to 2014.
03:27 Using a playbook inspired in part by the Jack Welch-era GE, Danaher's revenue and market
03:32 cap rose fivefold on his watch.
03:35 Culp, who turned the board down twice before accepting, extracted a multi-million share
03:40 incentive package linked to GE's share price.
03:44 At the time, CNBC's Jim Cramer said it was "the best performance-oriented contract I've
03:49 ever seen."
03:50 In the best case, if the stock rose 150% by 2022, he'd get shares worth at least $230
03:58 million.
04:00 At the low end, a 50% increase would net him shares worth roughly $45 million.
04:06 After the pandemic virtually froze air travel in 2020, and with it, demand for GE's aircraft
04:12 engines, Culp's turnaround efforts seem to have paid off.
04:16 Now a few years later, Wall Street seems happy.
04:19 Even after the steep climb in GE's share price, 14 of the 20 analysts who follow the company
04:24 rate the stock a buy, with just one recommending investors sell, according to Bloomberg.
04:30 Culp sharply reduced GE's debt, raising money by divesting units including its biopharma
04:35 and aircraft leasing businesses.
04:38 He preached a renewed focus on the customer and a philosophy of process optimization called
04:43 Lean, which is based in part on Toyota's vaunted Kaizen methods.
04:48 Culp has spent weeks at a time at GE factories, walking the floor with managers and engineers
04:53 as they sought to speed up workflows and eliminate inefficiencies.
04:58 For full coverage, check out Jeremy Bogaski's piece on Forbes.com.
05:04 This is Kieran Meadows from Forbes.
05:06 Thanks for tuning in.
05:07 [music]
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