As we guided GE through a multi-year strategic transformation into three distinct companies in the health care, energy, and aerospace industries, the board worked to navigate it all and ultimately create significant value for shareholders. GE Aerospace, GE Vernova, and GE Healthcare now have a combined market capitalization of $230 billion, more than triple GE's valuation in November 2021, before the spinoff was announced.
Providing rigorous oversight during a period of intense structural change required the board's determination, despite stakeholder skepticism.
“The courage our Board of Directors has shown through the transformation of GE and the launch of GE Aerospace, GE Vernova and GE Healthcare cannot be overstated,” said Larry Culp, Chairman and CEO of GE Aerospace. “This is not just a board running towards a fire. Our board balanced urgency with thoughtful oversight, encouraging each other and our leadership team to challenge our own assumptions, while never losing sight of the company's purpose of building a world that works.”
In charting a new direction, GE's board and management team have faced intense investor scrutiny and weathered a combination of internal failures and external headwinds, including the Boeing MAX grounding, the pandemic and various geopolitical and economic disruptions. To stabilize the business and reposition it for long-term strength, we needed to accept the reality of “what is, not what we want it to be'' and face the challenges head-on. GE's Board of Directors' critical role in this process began by critically supporting the winning and losing decisions that paved the way. The $20 billion sale of GE's biopharma business, completed in early 2020, provided GE with liquidity to weather new headwinds from COVID-19, and the combined $30 billion in funding from its GECAS business and AerCap in 2021 enabled GE to undertake a major deleveraging.
These moves strengthened the company's operations and enabled the board to take on its next challenge: considering whether GE's individual businesses could grow better on their own. That conclusion came down to two factors. One is the prospect of tangible benefits from managing the business in a more centralized, decentralized, bottom-up manner, and the other is understanding how conglomerates are undervalued by sectoral investors. While investor skepticism about conglomerate values and limited sector-specific ownership were key concerns, the board was able to validate the separation with data on the value creation potential of three focused, independent, market-leading companies.
But building consensus around decisions and overcoming shareholder concerns was just the beginning. Once the separation was announced, the board needed to address execution risk by ensuring strong leadership continuity, tying leadership incentives to multi-year transformation goals (including free cash flow targets and operational performance), prioritizing stakeholder engagement, and holding frequent in-depth meetings and strategy sessions to measure progress.
“During this period of significant financial and operational challenges, GE's Board of Directors recognized the tremendous opportunity for these leading companies in leading industries and demonstrated unwavering commitment,” said Tom Horton, Principal Director, GE Aerospace, which reported a 2024 TSR of 57.7% compared to 11.7% for its peers. “The board, along with a world-class leadership team, worked to drive clarity, accountability and conviction to pursue bold change. The path is now clear for GE Aerospace, GE Vernova and GE Healthcare to succeed as independent companies.”
