In 17 years at Forbes I've helped direct our coverage of everything from Asia to autos and healthcare to housing. Now I write about aerospace and defense. Send tips to jbogaisky[at]forbes.com
Larry Culp, who grew up working in his family's welding shop, has transformed a bloated GE by taking it back to manufacturing basics.. On Tuesday, GE’s CEO will take the final step in a six-year process to break up the once-sprawling conglomerate, splitting off the power business from its crown jewel aircraft engine division. Wall Street is giving Culp a standing ovation—and he’s getting rewarded handsomely.
“There's not many people that have gone into — and particularly a company with a reputational legacy like GE — with that list of things to deal with,” said David Collis, a professor at Harvard Business School who’s written case studies of GE and Danaher and has had Culp as a guest speaker in his classes.Culp’s incentive pay outstrips most of his peers.
Corporate governance advocates and investors weren’t impressed. Roughly 58% of stockholders voted to reject the board’s executive compensation decisions at the 2021 annual meeting, though the measure was non-binding. In recommending a “no” vote, the advisory firm Glass Lewis wrote, “the revised award provides Mr. Culp with the same amount of compensation in dollars for creating less shareholder value.
It might seem ironic that Culp has taken apart America’s most storied conglomerate after building one at Danaher. But Danaher operated at a much smaller scale, with business units with hundreds of millions in revenue, and headquarters added value by providing capital as needed and training subsidiaries’ executives in a management system aimed at driving continuous improvement, points out Harvard’s Collis. “GE’s three remaining businesses, there's no synergy.
With the spinoff done, Culp can devote all his formidable talents to improving performance at GE Aerospace. There are big opportunities for Culp to take a bite out of the company’s estimated $29 billion in costs, analyst Scott Deuschle at Deutsche Bank points out.
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