This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

General Electric: Value Play or Stay Away?

BOSTON ( TheStreet) -- General Electric (GE), the world's largest conglomerate with products ranging from light bulbs to turbines, has been rocked by controversies and dogged by slow growth during the tenure of Chief Executive Officer Jeffrey Immelt, dividing investors on whether the company's stock is a buy or sell.

>>GE Beats Estimates, Raises Dividend

Albert Meyer, manager of the Mirzam Capital Appreciation Fund (MIRZX), recalls a client who owned GE shares in 2007. Meyer's investment strategy shuns companies that have egregious executive compensation programs, so he dug into pay plans for Immelt and other executives. What Meyer found astounded him.

Jeff Immelt, CEO of General Electric

"GE exists for the benefit of the executives and the directors," Meyer says. "The four executives I looked at received and realized total compensation of roughly $30 million a year during a time when the stock price declined and underperformed the S&P 500. Immelt totally underperformed and totally missed expectations."

Meyer made the right move for his client, as GE shares are down more than 45% since the beginning of 2007, before the financial crisis that crushed GE Capital, one of the company's many business units. While the finance unit has stabilized in recent quarters after Immelt shrunk it, GE's reputation has been tarnished in other ways.

In March, the earthquake and subsequent tsunami in Japan brought new criticism to GE's design of nuclear reactors at the crippled Fukushima power plant. That same month, The New York Times reported that despite earning more than $14 billion in profit last year, GE received a tax benefit and didn't owe taxes for 2010. That's as unemployment was stuck at nearly 10% after 8 million Americans lost their jobs in the recession.

And earlier this week, GE disclosed in a regulatory filing that it would more closely tie options granted to Immelt last year to performance metrics. This came after GE shareholders "expressed the view that additional performance conditions should be applied to Mr. Immelt's 2010 stock option award," according to the filing with the Securities and Exchange Commission. One of the conditions Immelt agreed to would see 50% of the 2 million granted stock options vest only if GE's total returns meet or exceed that of the S&P 500 over the same period.

"The whole option thing is so crooked. It's so absurd," Meyer contends. "They should have performance linked to United Technologies (UTX), Berkshire Hathaway (BRK-A) or another big conglomerate. The S&P 500 is mediocrity. Being above average is easy. A guy who takes that kind of money with such performance tells me he has bought into this whole culture."

GE spokesperson Anne Eisele disagreed with the characterization that the company's compensation plans were egregious.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,283.28 +17.29 0.10%
S&P 500 2,010.80 -0.56 -0.03%
NASDAQ 4,575.72 -17.7050 -0.39%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs