General Electric investors are souring on the company’s plans revealed at analyst day earlier this week, with the stock falling as much as 14% over the past two-days.
The company announced plans to combine its GE Capital Aviation Services unit with AerCap in an effort to reduce its debt burden by about $30 billion. On top of that, the industrial company said it plans to initiative a 1-for-8 reverse stock split to bring down its nearly 9 billion share count.
JPMorgan analyst Stephen Tusa thinks there’s more downside left for General Electric. Tusa reiterated his Neutral rating on the company and maintained his $5 price target in a note on Thursday, representing potential decline of 59% from current levels.
Tusa argues that General Electric bulls can no longer point to the GE Capital Services unit as a source of value for the stock since the company is merging the unit with AerCap.
“Starting yesterday, there are no longer GE Capital assets around which Sell Side Bulls can argue there is enough value/equity to support related debt,” Tusa said. The average sell side price target for General Electric is $13, Tusa noted.
Some investors have cheered General Electric’s decision to offload GE Capital Services, as it is now a pure play industrial company. But Tusa still sees weakness in those businesses as well.
“We continue to see structural concerns in the key Power markets, and now structural weakness at Aviation, combined with still relatively high financial leverage, and numerous tail liabilities for both GE and GE Capital Services, all hurdles to a speedy turnaround,” Tusa said.
CEOs like Alphabet’s Sundar Pichai and Microsoft’s Satya Nadella are among the top 100 most overpaid CEOs, according to a new report from As You Sow.
It’s no secret that CEOs of S&P 500 companies make good money. However, As You Sow’s list doesn’t rank by the size of a CEO’s salary. Instead, the corporate responsibility non-profit uses different metrics to identify whether or not a CEO is being overpaid.
To do this, the study took three main factors into account: the amount of extra dollars a CEO receives based on past company performance and pay, the number of shareholders who voted against a CEO’s pay package, and the ratio comparing the executive’s compensation to the company’s median employee pay. The latter was weighed less heavily.
Coincidentally, the highest salary on the list happens to belong to the most overpaid CEO: Alphabet’s Sundar Pichai, who receives a pay of $280,621,552, according to the report. To compare, the median pay of Alphabet workers sits at $258,708, which is a CEO to worker pay ratio of 1,085 to one.
Pichai is being paid an excess of $266,698,263, according to As You Sow.
To compare, the median employee pay at Facebook is $247,883. This amounts to a CEO to worker pay ratio of 94 to one, lower than both Microsoft and Alphabet’s.
However, the list wasn’t just dominated by tech leaders. Bob Iger, the former CEO of the Walt Disney Company, Lachlan Murdoch of Fox Corporation, and Miguel Patricio of the Kraft Heinz Company were all listed among the top 30 most overpaid CEOs.
And according to the study, companies that have consistently graced the list are performing worse than those that have never been mentioned. As You Sow has published this report annually since 2015, and nine CEOs have made the list every year, amounting to a total pay of $2 billion. However, these nine businesses have seen a lower annualized shareholder return compared to S&P 500 companies that have never made the overpaid CEO list.
These nine companies include: Discovery, Walt Disney, Comcast, AT&T, Goldman Sachs, IBM, McKesson, Ralph Lauren, and Regeneron.
This consistent overpaying of CEOs can signal several concerns, specifically “poor accountability, weak governance, and lack of concern for shareholder interests,” the study notes.
However, this overcompensation issue may soon be changing as more shareholders are beginning to vote against these hefty CEO paychecks, according to Rosanna Landis Weaver, the report’s author.
“We might be going into a spring where we see higher votes against pay, particularly at companies that try to insulate their executive compensation from the effects of the COVID-19 pandemic,” Weaver told Insider.
These were the top 30 most overpaid CEOs, according to As You Sow’s new report: