General Electric’s CEO John Flannery, who took the helm Aug. 1, is wasting no time trying to make things simpler at the 125-year-old conglomerate. One of his first moves was to significantly shave down the company's board size as a way to make it more efficient and profitable.
GE will go from 18 to 12 board members, clarifying during its investor day that the remaining 12 directors will be on the slate at the 2018 shareholders meeting in April. Included will be three new directors "with relevant industry experience for GE going forward," the Investor Update (PDF) said.
In its update to investors, the company also announced it will establish a new Finance & Capital Allocation committee on the board. The focus will primarily be increased oversight of M&A and stock buybacks, said the report.
Moves like this “rejuvenate boards, allowing for different opinions,” said Stephanie Resnick, chair of the Directors’ and Officers’ Practice Group at law firm Fox Rothschild.
The changes may be due in part to decisions that were made as part of a 3-month board self-assessment exercise.
The company is also setting a 15-year term limit for board members. The Street reported that at least two current board members have served more than 17 years.
"GE should be applauded for downsizing the board," Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, told The Street, stressing that the board size should have been reduced years earlier.
Resnick sees the term limit as a positive as well. “You want to maintain consistency, but you don’t want someone serving on a board forever,” Resnick said.
During the investor update, Flannery also disclosed plans to shed $20 billion of assets over the next two years
“They are trying to make the company more efficient,” Resnick said. “They are doing things that can make the company more profitable.”