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View from the Top: Jeffrey Immelt, Chairman and CEO of General Electric

FINANCIAL TIMES: There has been some recent legislation on Co2 reduction. I wonder if you see that as one of the big developments of late, and what its significance is.

JEFFREY IMMELT: Yes. I think if you look at what some of the states are doing, California for instance, or even what's happening around the world, what's talked about in the UK, I think that's going to change the way people look at technology and it's going to change the way people look at energy policy in the future. It tends to be the way change starts. I would say in many ways some of the things that have happened in Europe over time have tended to drive technology. For instance, when Europe said it was going to have 10 per cent renewables that's what really opened up the world of wind energy and solar and things like that, so I think it's very meaningful.

This week, Jeffrey Immelt, chief executive of General Electric

FINANCIAL TIMES: There has been some recent legislation on Co2 reduction. I wonder if you see that as one of the big developments of late, and what its significance is.

JEFFREY IMMELT: Yes. I think if you look at what some of the states are doing, California for instance, or even what's happening around the world, what's talked about in the UK, I think that's going to change the way people look at technology and it's going to change the way people look at energy policy in the future. It tends to be the way change starts. I would say in many ways some of the things that have happened in Europe over time have tended to drive technology. For instance, when Europe said it was going to have 10 per cent renewables that's what really opened up the world of wind energy and solar and things like that, so I think it's very meaningful.

FT: And is America lagging behind?

JEFFREY IMMELT: To a certain extent. I would say that America sees it in a different way than the rest of the world. But, as a global business leader, we look at legislation around the world and try to plan our product lines and cost base and the way we're going to run our facilities... more [truncated due to possible copyright]  

This week, Jeffrey Immelt, chief executive of General Electric

FINANCIAL TIMES: There has been some recent legislation on Co2 reduction. I wonder if you see that as one of the big developments of late, and what its significance is.

JEFFREY IMMELT: Yes. I think if you look at what some of the states are doing, California for instance, or even what's happening around the world, what's talked about in the UK, I think that's going to change the way people look at technology and it's going to change the way people look at energy policy in the future. It tends to be the way change starts. I would say in many ways some of the things that have happened in Europe over time have tended to drive technology. For instance, when Europe said it was going to have 10 per cent renewables that's what really opened up the world of wind energy and solar and things like that, so I think it's very meaningful.

FT: And is America lagging behind?

JEFFREY IMMELT: To a certain extent. I would say that America sees it in a different way than the rest of the world. But, as a global business leader, we look at legislation around the world and try to plan our product lines and cost base and the way we're going to run our facilities accordingly. And over time – and sometimes it takes a long period of time – much of the world ends up copying the highest standard and not the lowest standard.

FINANCIAL TIMES: I know you recently came back from Europe. What struck you as the most important development in Europe of late.

JEFFREY IMMELT: You know, I would say a couple of things. One thing is that every one of the companies – and I talk about "old Europe," western Europe – every one of the countries is dealing in the their own way with some of the conflict between competitiveness and social plans, and how that conflict is going to take place, and what kind of legislation has to be passed. I'd say it's moving slower than anybody would like to, but that debate is going on.

The second thing was that the week before I got there, President Putin from Russia had been addressing the European leaders, and I would say it created quite a stir from the standpoint of the importance of energy security, from the standpoint of how much they want to open up the Russian/European trade and dialogue. What kind of dependence Europe wants to have on Russian oil - and that was quite the talk of at least some of the political leaders while I was there.

FINANCIAL TIMES: Is he winning them over?

JEFFREY IMMELT: Not quite. What I'd say is that people see the benefits of closer trade with Russia, but they also see some as the risks as it pertains to too much dependence on natural gas and oil from Russia.

FINANCIAL TIMES: And what about the business risks in Russia? There's lots of opportunity there, but how safe is it?

JEFFREY IMMELT: You know, I think it's to be determined. There's clearly lots of opportunities. There's lots of wealth going into Russia and it's going to be a very important place in the future. The ways in which business is going to be conducted is still a moving target. And, some of the seizures, let's say, or some of the disruptions, as it pertains to what the western oil companies are seeing in Russia – everybody looks at. So, I would say we're optimistic, but aren't moving too quickly from an investment standpoint until we can really see how it's all going to evolve over time.

FINANCIAL TIMES: A little bit closer to home, one of the big and still rumbling issues continues to be executive compensation. Is the focus on it appropriate, and is there kind of a rule of thumb that you think leaders of big companies should be using when thinking about what's appropriate?

JEFFREY IMMELT: I think it is appropriate. You know, these are public jobs and there were so many abuses in the late 90s and in the early part of this century that it creates concern. I mean, backdating of stock options – it's crazy that people would do that and think that that's appropriate. So, every one of those events tend to raise the profile even more, so I think, you know, what are the rules of thumb? I don't think CEOs should have contracts. I think most of what they make should be at risk. And, in terms of an absolute level, I think that has to be based on the good judgment of the compensation committee, the Board, and the CEO. I don't think consultants should be involved. I don't think they necessarily add value from just pure data, but it's got to be the good judgment. Nothing can replace judgment about how much is too much. So, I would say – no contracts, lots at risk, and the good judgment of the Board and the CEO.

FINANCIAL TIMES: Any sort of internal company metrics that you think are appropriate?

JEFFREY IMMELT: For CEO compensation?

FINANCIAL TIMES: Yes.

JEFFREY IMMELT: I would say earnings per share growth, return on total capital, financial metrics that the Board sets out to say, 'this is what the company should do.' I think it should be pretty cut and dry as it pertains to that. In our case, we look at earnings per share growth, return on total capital, revenue growth and total cash flow. And those are four metrics that can tell a Board how the CEO or his/her management team is doing.

FINANCIAL TIMES: Finally, we've had some weak manufacturing data come out this week. I wonder what you think that says about the US economy and prospects for your company?

JEFFREY IMMELT: We still see the US economy as being pretty good. Clearly, the interest rate increases have slowed housing starts, and I think a lot of the manufacturing data is associated with those sets of information. But, by and large, we still think there's a good export environment in terms of the products we make. There's still capital expenditures going into the United States, and we think those will continue to carry the economy forward into the future. So, maybe the economy slowed a little bit, but I still think the US economy as it closes out the year will be as strong as any developed country in the world, and, the momentum in 2007 won't be bad.

FINANCIAL TIMES: And now, the prediction.

JEFFREY IMMELT: I'm a contrarian as it pertains to western Europe. I would say that it's now a good time to invest. I think there's still a lot of uncertainty and unrest in these countries, but I sense that the optimists are beating the pessimists. People don't want to live in countries that are unproductive and uncompetitive vis-à-vis the rest of the world. My belief is that over the next three to five years, there's going to be a sense of competitiveness that re-emerges in Europe, and as a result, it's now a great time to be a contrarian It's now a great time to think about investments in places like Germany, Italy – maybe some of the western parts of Europe that are going to pay dividends over the next 5, 10, 15 years. And that takes courage.

FINANCIAL TIMES: That was Jeff Immelt of GE. Next week, Tom Glocer, chief executive of Reuters, reviews the news on FT.com's View from the Top.


Source: http://www.euro2day.gr/arti...

NOV 3 2006
http://www.windaction.org/posts/5601-view-from-the-top-jeffrey-immelt-chairman-and-ceo-of-general-electric
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