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 The move, which affects only new stock awards and not old ones,
comes amid growing scrutiny by shareholders of senior executive pay,
which has been on the rise for years even as average Americans'
salaries plateau. The dividends can add up to millions of dollars
for executives with long tenure.
"The change is in response to investor feedback," GE spokesman Seth
Martin said. He declined to elaborate.
GE's policy change affects only stock awards granted this year and
beyond, the company disclosed this week in its annual proxy
statement. That means some executives will continue to receive big
dividend checks on stock awarded in previous years, but which has
not vested.
Vice Chairman Keith Sherin, for example, will continue to receive
dividends over the next decade on 191,250 shares of restricted stock
that he doesn't own, or which is unvested, until his 65th birthday
in 2023, according to GE disclosures.
GE had been paying dividends on unvested restricted stock for years.
But the company was not able to say when the practice began.
While GE and other companies move away from paying dividends on
unvested stock, Apple Inc is picking up where they left off, but
with a twist. Executives at Apple accrue dividends on restricted
stock, but don't get the payouts until shares vest, according to its
latest proxy.
SERIOUS MONEY
Four senior GE executives — Chief Financial Officer Jeffrey
Bornstein and Vice Chairmen Daniel Heintzelman, John Rice and Keith
Sherin — have a combined 1.04 million shares of unvested restricted
stock, according to GE's latest proxy.
At GE's annual dividend payout of 88 cents a share, those executives
in 2014 are in line to receive a combined $914,000 on stock they
don't own.
"It's like you or me getting paid a dividend on GE stock that we're
just thinking about buying," said Paul Hodgson, a corporate
governance expert and a partner in BHJ Partners, in Camden, Maine.
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Vesting or ownership of restricted stock is typically tied to time
in service and meeting performance goals. U.S. companies use
restricted stock to retain executives and to motivate them to do
well.
The dividend payouts have not received as much attention as other
forms of executive compensation. They pale in comparison to some of
the big-ticket bonus and stock option awards that grab headlines.
Still, the dividends can amount to a handsome annuity that can
extend over decades.
Just ask GE's Sherin.
In September 2003, for example, Sherin received 125,000 shares of
restricted stock. A quarter of that award, or 31,250 shares, won't
vest until Sherin turns 65 on November 15, 2023, according to U.S.
regulatory filings.
That means Sherin is set to receive dividends for a total of about
20 years on stock he doesn't actually own. Since the initial award,
he has received about $270,000 in dividend equivalents on those
31,250 shares of unvested stock, according to GE disclosures.
(Reporting by Tim McLaughlin; editing by
Richard Valdmanis and Jan Paschal)
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