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Bonuses give GE chief incentive to acquire

Tim Catts

NEW YORK – General Electric’s new incentive pay plan gives Chief Executive Officer Jeffrey Immelt motive to tap $16.7 billion from February’s sale of the rest of NBC to fund industrial acquisitions.

The three-year program will pay Immelt in part for increasing the share of GE’s profit from manufacturing businesses, the company said in a late March Securities and Exchange Commission filing. It replaces an arrangement from 2010 to 2012 that rewarded his success in shrinking the finance unit.

Immelt, who earned $12.1 million under the previous pact, must also boost earnings per share while amassing cash and increasing return on capital to receive the maximum payout, which the company didn’t disclose. GE will probably look for more deals like its $4.3 billion purchase of Avio, which bolsters its jet-engine business, Daniel Holland, an analyst with Chicago-based Morningstar Inc., said in a telephone interview.

“There’s a good opportunity for the company to grow this year on the acquisition front,” Holland said. “If that’s how I’m going to get paid as the leader of the company and my bonus is dependent on growing a certain side of the business, and I have this cash available to me now, I’m going to do everything within my power to make that happen.”

Seth Martin, a spokesman for Fairfield, Conn.-based GE, declined to comment on compensation practices for the company, which has operations in Fort Wayne.

Earnings at divisions making products from locomotives to medical scanners will account for about 65 percent of GE’s operating earnings by 2015, the final year in which Immelt’s performance will be measured under the new plan, the company predicted at a meeting with investors and analysts in December.

At the same time, sales growth at the company’s industrial units is projected to slow this year, excluding any benefit from acquisitions. So-called organic revenue growth will fall to as low as 2 percent in 2013, compared with 8 percent last year, executives said in December.

By divesting assets including the Business Property Lending Inc. unit and its Irish mortgage business, GE Capital reduced its ending net investment, a measure of its size, to $419 billion as of Dec. 31.

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