Larry Culp has burnished his reputation as an industrial mastermind with his restructuring of General ElectricGE
. 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.
After a 260% runup in GE’s stock price since the beginning of 2023, Culp has met the performance goals to get the maximum payout from a rich long-term incentive package: 1.74 million shares that are worth roughly $300 million at current prices. Under the terms of the package, Culp could retire and walk away with the money this August. But he’s sticking around to run GE’s aerospace business, the world’s No. 1 maker of aircraft engines, as a standalone company, which will delay the date the shares vest till August 2025. Combined with the rest of his compensation from GE and the fortune he made previously as CEO of the smaller industrial conglomerate Danaher, the massive stock award will make Culp a billionaire, Forbes estimates.
He’ll join a small club of 15 U.S. chief executives who have amassed 10-figure fortunes.
Culp faced knotty challenges when he parachuted into GE as the first outsider to lead it. The iconic company founded by Thomas Edison was foundering under $135 billion in debt following the blowup of the company’s financial arm, GE Capital. Former CEO Jeff Immelt’s costly bet on bulking up in power by buying Alstom’s turbine business had failed. And investors had fled, with the company’s market cap shrinking to $70 billion, down more than half a trillion dollars from August 2000, when it was the most valuable company in the world.
“There’s not many people that have gone into [a company] — 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.
General Electric and Culp declined to comment on his compensation and net worth.
Culp’s incentive pay outstrips most of his peers. In 2022, the median value reported in financial filings by S&P 500 companies for their CEOs’ total compensation and unvested equity awards was $57 million, according to the data provider Equilar. For Culp, the comparable total reported by GE in 2022 was $175 million. In 2023 it was $237 million.
In 2018, General Electric was in crisis when its board offered Culp the job of CEO. It had soured on Immelt’s successor, John Flannery, after only a year, reportedly frustrated with his slow decision making. Culp, who had joined the board the previous year, had earned a reputation as a details-focused whiz at improving manufacturing efficiency at Danaher, which he led from 2001 to 2014. Using a playbook inspired in part by Jack Welch-era GE, Danaher’s revenue and market cap rose fivefold on his watch.
“He’s not a finance weenie.”
Kevin Michaels, managing director of AeroDynamic Advisory
Culp, who turned the board down twice before accepting, extracted a multimillion-share incentive package linked to GE’s share price. At the time, CNBC’s Jim Cramer said it was “the best performance-oriented contract I’ve ever seen.”
In the best case, if the stock rose 150% by 2022, he’d get shares worth at least $230 million. At the low end, a 50% increase would net him shares worth roughly $45 million.
When the pandemic virtually froze air travel in 2020, and with it, demand for GE’s aircraft engines, the board gave Culp a mulligan. It extended his contract at least two years to 2024, giving him more time for his turnaround efforts to bear fruit—and it lowered the stock price targets for Culp to qualify for the incentive shares by roughly a third.
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.”
But three years later, Wall Street seems happy. Even after the steep climb in GE’s share price, 14 of the 20 analysts who follow the company rate the stock a buy, with just one recommending investors sell, according to Bloomberg.
Culp sharply reduced GE’s debt, raising money by divesting units including its biopharma and aircraft leasing businesses. He preached a renewed focus on the customer and a philosophy of process optimization called lean, which is based in part on Toyota’s vaunted kaizen methods. Culp has spent weeks at a time at GE factories, walking the floor with managers and engineers as they sought to speed up workflows and eliminate inefficiencies.
With operations and finances improved, Culp moved to split the company in three, first spinning off GE HealthCareGEHC
last January.
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, where there were synergies to be gained from centralized management and finance, points out Harvard’s Collis. “GE’s three remaining businesses, there’s no synergy. They’re big enough to stand alone and fund themselves, recruit talent, all of those things.”
Culp’s operational zeal stands in sharp contrast to the focus on boosting shareholder returns through dividends and buybacks that have contributed to Boeing’sBA
troubles, aerospace industry experts say.
“He’s not a finance weenie,” said Kevin Michaels, managing director of AeroDynamic Advisory, which has done consulting work for GE. “His philosophy is first and foremost, make a high-quality product and take care of your customers.”
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.
In aviation, there’s no better business to be in than making and servicing aircraft engines, which account for 50% to 70% of the value of airliners. Amid a strong rebound in air travel post-pandemic, Boeing and Airbus have struggled to raise production to satisfy airlines’ hunger for new jets. That’s keeping older planes in service longer, which boosts GE’s revenue from engine maintenance, the cash cow of the business.
GE Aerospace’s profit hit $6.1 billion in 2023, more than double 2021, with revenue up roughly 50% over that span to $31.8 billion. Revenue could near $40 billion in 2025, the company predicts, with operating margins of roughly 20% that promise to give Culp the firepower to buy other companies and invest heavily in R&D projects. Chief among them: a next-generation, open-rotor engine dubbed Rise that the company says could reduce fuel use and carbon emissions by 20%.
“They’re probably three, four innings into a nine-inning ballgame,” says Michaels. “And I think there’s a lot to follow when Larry Culp starts to focus all of his time on GE Aerospace.”
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