Good morning. Take a seat, please. Welcome to GE's 2012 Annual Meeting. I'm Jeff Immelt, the Chairman of the Board. Please do not disrupt the meeting, sir. Please do not disrupt the meeting, or we will ask you to leave. Mr. Taylor, could you please escort this man out, please? Could you please escort this man out, please? Here with me today are Keith Sherin, GE's Vice Chairman, Chief Financial Officer, and Brackett Denniston, our General Counsel. Each year, we have our annual meeting at a GE town that epitomizes what the company is about. This year is Detroit, and we're very proud to be here. Please do not disrupt the meeting, or we will ask you to leave. Mr. Taylor, would you please ask these people to leave the meeting? Would you please ask these people to leave the meeting?
A few years ago, when GE was deciding where to open a new state-of-the-art information technology and research development facility, the Detroit area may have seemed like the most obvious choice. The recession hit Michigan particularly hard. Please show these people out. Thank you. I just want everybody in this room to know we like Detroit, OK? We are happy we're here. We're happy we brought jobs here. We want you to know how committed we are to this region. I want you to know that we are proud to be in Detroit today. I want you to know that from the outset. A few years ago, when GE was deciding where to open a new state-of-the-art information technology and research development facility, the Detroit area may not have seemed like the most obvious choice. The recession hit Michigan particularly hard.
Many companies were leaving the area, and Michigan was not viewed as business-friendly. Culture is the foundation of any successful enterprise, and we saw a cultural fit here. This community, like our employees, values work and understands the importance to advance manufacturing to our future. This is home to world-class universities and professionals with deep knowledge in new technology, the kind of skills that allow us to win in the global marketplace. In 2009, we announced GE's Advanced Manufacturing and Software Center in Van Buren Township. We placed 1,300 new jobs. Yesterday, we announced 300 jobs to fill the site to capacity. We'll have over 1,600 people at this site. It's worth a second to talk about this center. This center was the home to Visteon. By 2009, it was empty. You all know how hard the automotive industry was hit during the recession.
Now, this site will be filled with talented Michigan people and a high-tech center who are ready to seize the future. When other people were moving out of this great state, we were moving in. When you add our other great employees in this state, like our aviation team in Grand Rapids, our total employment in Michigan is 3,800 people. We also have 4,000 retirees in Michigan. GE is the world's biggest infrastructure company. Our team is delivering for our company, for our customers, for the community, and for all of you. They're also delivering an important message. The fact is, to grow, we have to win around the world. We can also do that by investing in the United States. What we're doing here, or for that matter in places like Louisville, Schenectady, and Cincinnati, proves that the United States and its workers can compete with anyone.
Our employees in these places epitomize the very best. They show how GE is a company of teamwork. We listen to each other. We respect each other. We believe in each other. We like to compete together, and we want to win. It's why GE works. It's why you can be proud of your company and why your company is positioned for success. Now, to order of business, I'm advised that this meeting is properly convened, that we have a quorum, and that the proposed resolutions set forth in the proxy statement are filed as part of these proceedings. We received proxies representing over 77% of the 10.6 billion outstanding shares eligible to vote. The Management Proxy Committee has voted these shares in accordance with shareowners' wishes. It's now my privilege to introduce the members of your board of directors who are with us today.
I'm going to ask each director to stand briefly as I introduce them so you can see who they are. Sandy Warner, former Chairman of the Board of JPMorgan Sandy is Chairman of the Audit Committee. Roger Penske, Chairman of the Board of Penske Corporation. Sam Nunn, four-term Senator from Georgia, Co-Chairman and Chief Executive Officer of the Nuclear Threat Initiative. Sam is Chairman of our Public Responsibilities Commission. Dr. Jim Cash, James E. Robinson Professor of Business Administration at the Harvard Graduate School of Business. Andrea Jung, Chairman of the Board of Avon. Ann Fudge, former Chairman and Chief Executive Officer, Young & Rubicam. Shelley Lazarus, Chairman and former Chief Executive Officer, Ogilvy & Mather. Shelley is Chairman of the Nominating Corporate Governance Committee. Ralph Larsen, former Chairman of J&J . Ralph is Presiding Director and Chairman of the Management Development Compensation Committee.
AG Lafley, former Chairman of the Board, President of Procter & Gamble. Bob Sweringa, Professor of Accounting and former Dean, Johnson Graduate School of Business, Cornell. Susan Hockfield, President of MIT. Jim Mulva, Chairman and Chief Executive Officer, ConocoPhillips. Jeff Beattie, President and CEO of The Woodbridge Company. Mr. Beattie is Chairman of the Risk Committee. James Tisch, President and Chief Executive Officer, Loews Corporation. I'd also like Mike Neal, John Rice, John Krenicki to stand. They're Vice Chairmen of GE, as is Keith Sherin, who is with me here. Now, onto the second item of the agenda, report on company operations. Keith and I will give you a brief overview of the company. Keith?
Thank you, Jeff, and welcome to Detroit, everyone. I just want to take a few minutes and talk about the operations of GE . I'll start off with how we ended 2011 with some of the financial metrics, and we had a great year. Our earnings were up 22%. We ended the year with $400 billion of backlog, which was a record for us and bodes well for the future. We also ended the year with $85 billion of cash. We have all the cash we need to deal with future maturities of debt in GE Capital, plus to be able to go on offense as we look at the opportunities in the future. Most importantly, we've had four dividend increases in the last two years, and the dividend is up 70%. We've invested a lot in R&D. Our R&D spend was up another 6%.
It's at 6% of revenue last year. It was up about 15%. That's helping us to win in global markets. Our global revenues were up 18% last year. Your company is the number two exporter in the U.S. We had $18 billion exports. We're number two behind Boeing. We're winning globally with our aircraft engines, our medical equipment, our locomotives, our gas turbines. Those are made here in the U.S., and they're exported all around the world. We're winning everywhere. As a result of that, we've been able to add a lot of jobs. Since 2009, we've added 13,000 jobs in the U.S. as of the end of 2011. With the announcements that we've made this year, we're up over 14,000 jobs added in the U.S. A great year and well-positioned as we look at the future. This year of 2012 got off to a great start.
As you know, we announced our earnings last Friday. Our revenue was $35 billion. It was up 4%, excluding the impact of NBC. Our earnings per share were $0.34 a share. It was reported up 3%. If you exclude the one-time items that affected last year's results, operationally, we're up 17%. A nice, strong start. You can see the drivers on the right side. Our industrial segment revenue was up 14%. We are winning in all of our industrial businesses around the world. More importantly, our industrial segment profit was up 10%, up double digits for the first time in a couple of years. A very strong performance and a great start. Our cash flow, $2.1 billion, was up 22%. We have good performance by our businesses delivering cash. That gives us flexibility on capital allocation. One item we're still working on is our industrial margins.
Our goal for the year is to be up 50 basis points. In the quarter, we were down 50 basis points in line with what we expected. The first half starts out a little bit slow, and the second half, it ramps up. We 've got a good outlook there, and the teams are completely dedicated to making sure we deliver on that margin performance. Finally, for financial services, the reported earnings of GE Capital were flat. If you exclude those last year's one-time items, the operating earnings of GE Capital were up 27%. We are off to a great start in 2012. One of the most important things that we do for you with the board and the leadership team is to work on capital allocation. We generate a lot of cash flow, and how we return it to shareholders is important. On the left side is the dividend.
I mentioned we've had four increases. We are going to pay over $7 billion of dividends this year. We have a 45% payout ratio. For every dollar of earnings, we are paying out about $0.45 to shareholders in the form of dividend. Our objective over time is to grow that dividend in line with earnings. We have a pretty good outlook there. In the middle, we continue to buy back stock. Last year, we bought back $5.4 billion of stock, including retiring the Berkshire [preferred]. That was a nice way to retire some high-cost financing that we did. On the right side, we continue to reinvest in the portfolio. We took the proceeds from NBC. As you know, we sold the majority stake. We took that money, and we reinvested it back in energy and oil and gas. Those acquisitions are performing ahead of the performance.
We feel great about the repositioning that we've done with the portfolio. We are returning a lot of capital to shareholders, and the future looks pretty good here. I know some of the people who left wanted to talk about taxes, Jeff, but I'll give you an update. Let's get to the facts here, OK? In 2010, our tax rate was low, a consolidated rate of 7%. Over the 2008 through 2010 time period, we lost over $30 billion in credit losses in GE Capital. That reduced our pre-tax income and also our consolidated rate. In 2011, our rate was 29%. We absolutely are compliant with every law everywhere in the world around how we do our taxes. The number one most important thing is that we have integrity in everything we do around taxes. We paid $2.9 billion of total income taxes last year.
We paid more than $1 billion on top of that of additional taxes in the U.S. for local, state, and federal payroll employee taxes. Our U.S. tax expense last year was $2.6 billion. We are a large taxpayer. We pay our taxes, and we very much support tax reform. We would like to work with the administration and Congress to get a competitive system where the U.S. and GE can compete globally on a level playing field. Finally, let me take a quick look at the outlook. Last year, when we were at this meeting, we talked about the future. It looked pretty bright. In 2011, we delivered $1.38 of earnings per share, up 22%. The outlook for 2012 and the outlook for 2013 is for continued double-digit earnings growth. In 2012, we are going to have double-digit growth out of our industrial businesses.
Again, in 2013, it is driven by a great cycle for our aviation business, our energy business, our oil and gas business, our health care business. Everybody is really participating. In 2012 and 2013, we expect to have double-digit years in GE Capital as well, as our loss rates continue to come down, as we continue to invest more money at high returns, and as our real estate business turns profitable and continues to get a higher amount of income over the next two years. We have a great portfolio. We really appreciate everything that our employees do, and we really appreciate being here with you as shareholders. Thank you. We have got a great portfolio, and I will turn it back to Jeff. Keith, thank you.
Good morning. I just want to talk a little bit about the longer term. Keith brought us up on how we're positioned this year. We've done a lot of work over the last decade on the portfolio. GE today is the world's biggest infrastructure company, and we have a great mid-market lending company in GE Capital. Really, two main core businesses. Our goal is really to expand our infrastructure footprint. We're more than $100 billion globally today and continue to build a valuable, specially financed business. The things we work on are superior technology, leadership in growth regions, services and customer relationships, margin expansion, and smart capital allocation. At our core, we're a technology company. Keith said we invest about 6% of our revenue back into R&D. It's about $6 billion. We'll launch more than 880 new products next year.
They range across the board, but suffice to say that we're well-positioned to take market share. We've got great gas turbines. We're launching in new markets like mining and submersible pumps. We have great content in the oil and gas industry. We'll have about 50% market share of the wind turbine business in the U.S. this year, and we're investing $1 billion in new appliances. We see continued growth based on great products. Services are important for the company. It's about 70% of our industrial earnings, about $45 billion in revenue. Here, we're really just trying to help our customers make more money. We continue to invest in technology that upgrades our customers' performance. In the area of software, monitoring, and diagnostics, some of that work is actually being done here in Detroit. We continue to try to add value to our customers.
This is a core asset for our investors and a key way the company makes money. GE is a very global company, as Keith said. About 60% of our revenue is outside the U.S. Industrial growth regions, these are really the emerging markets like Asia, the Middle East, places like that. We have a lot of leadership there. Our businesses are growing there substantially. In resource-rich regions, we're growing in excess of 20%. In rising Asia, like China and India, we're growing 10% - 15%. We continue to invest in a great global footprint. We're a good exporter. Our ability to win around the world is one of the things that allows us to create jobs, ultimately, in the United States. Margins are important. One of the ways we get margins is through investing in manufacturing. GE is one of the largest manufacturers in the country and around the world.
We're opening 16 new factories since 2009. We invest about $1.5 billion in manufacturing technology, launching a whole series of new technologies. We very much embrace the empowerment of our employees. Many of our factories, like the one in Durham, North Carolina, have one manager, 325 people. The ideas on continuous improvement of productivity come right from the factory floor. We've insourced a bunch of our appliances back to Louisville, Kentucky. We think at a lower cost than Mexico and China, some of the places it came from. As Keith said, we've tripled our exports over the last decade. We're the second biggest exporter in the country. We think this has continued to be successful for the company. Job creation is important. 14,100 new jobs announced since 2009. Fundamentally, one out of every $80 of GDP in the United States comes from GE.
We are an important company in the U.S. context. On the right-hand side, it just shows a picture of the new center we opened up in Van Buren Township, 1,600 new jobs over that time period in Michigan. We remain committed to the region, and we think this is a great story for both the people in this room and for the country. Lastly, we fly under the banner of GE Works. We're really focused on being mission-based, moving, curing, and empowering the world, believing in continuous improvement, really a relentless drive to solve customer problems, to create a world that works better, but very much based on our teams and our people. We think that's what makes GE great. Just a brief update on the company. Now, we're going to move on to the discussion on the voting matters that are set up, set forth in the proxy.
First, we're going to take up the election of directors and the management proposals and the order in which they appear in the proxy statement. After all the management proposals and the directors have been introduced, there'll be an opportunity for questions and discussion. The independent inspectors of election for this year's meeting are representatives of IBS Associates. The inspectors have taken the oath of office required by law and have been at work since the proxy started coming in. If you've already voted by proxy, there's no need to vote by ballot today unless you would like to change your vote. You'll find a ballot on your seat. Let's turn to the election of directors and the four management proposals in the proxy.
I place before the meeting to serve as directors for the coming year the 16 individuals whose names and biographies appear on pages 3 through 8 of the proxy statement, namely directors Beatty, Cash, Fudge, Hochfield, Immelt, Jung, Lafley, Lane, Larsen, Lazarus, Mollo, Nunn, Penske, Swieringa, Tisch, and Warner. Each of these nominees has received the overwhelming majority of more than 8 billion shares voted by proxy. The first management proposal is to ratify the selection of KPMG as independent auditors for 2012, which I place before the meeting. Your Board of Directors recommends the ratification of KPMG as independent auditors for 2012. The second management proposal is an advisory resolution on executive compensation. Your Board of Directors recommends a vote for the advisory resolution to approve executive compensation. The third management proposal is an approval of an amendment to the GE 2007 long-term incentive plan.
Your Board of Directors recommends a vote for the amendment to the 2007 long-term incentive plan. The fourth management proposal is an approval of material terms of senior officer performance goals. Your Board of Directors recommends a vote for the approval of material terms and senior officer performance goals. Now, you have a chance to ask questions or discuss the board nominees and management proposals. If you would like to speak, just go to one of the two aisle microphones. I'll call on you there. Please give your name, and you'll be recognized. Dr. Borelli, let's start with you.
Good morning, Jeff and team. First of all, I'd like to thank General Electric Security, as well as the Detroit Police Department this morning. It was a spectacular performance, and they really did a great job. Speaking of the protests, I really urge the board of directors to really pay attention and not to dismiss the concerns of both the political right and left, because GE is now a target of both. If you really sit back and think about it, I urge the board of directors to really think about this. General Electric over the years has really violated the public trust. General Electric got a $16 billion loan from the Federal Reserve and then lobbied and got over $125 million in grants and contracts from President Obama's stimulus plan.
You see, that kind of violates the public trust, where our taxpayer dollars are going to subsidize a company, of which Mr. Sherin just said how much money you're making. That's a violation of the public trust. Another concern that we have, Mr. Immelt, is with your position on President Obama's jobs advisory board. We're concerned about a conflict of interest. Whose master are you really serving? At last year's meeting, you mentioned that you use your good judgment to try to avoid conflicts of interest. That's a good statement. What we really are concerned about is this conflict of interest. We've noted that when President Obama meets with the board, it's videotaped, and everything is available for public scrutiny. However, the private meetings aren't.
What I'm asking you today as Chairman of the advisory board is to commit to make all the submissions of the individual job panel members publicly available, as well as videotape those proceedings when you're discussing with the jobs panel. That's transparency. That's for both political left and right. This way, people can see really what's going on. Will you make sure in your next panel before your meeting to videotape those and to make all the records public?
You know, Dr. Borelli, we're currently in the implementation phase of the recommendation of the Jobs Council. I'll leave any of the conduct of the meeting really up to the White House. For right now, we're just trying to implement the proposals that have been recommended.
Would you make General Electric submissions public?
Again, I would leave that to the White House.
No, but you know I'm talking about General Electric submissions.
I understand, Dr. Borelli. I understand your point. Again, as I say every year.
That's a note to me.
As I say every year, I respect your views.
I respect you too. I mean, you're a Chairman of a large corporation. Again, why won't you make your submission publicly available?
All the work of the Jobs Council is in the public domain.
I can find what [crosstalk]?
All the work of the Jobs Council is in the public domain.
There is a memo with your name on it saying, this is our idea.
All the work's in the public domain.
Will you send that to us?
Thank you. All the work's in the public domain.
That's kind of a confusing idea.
OK. OK, Dr. Borelli.
OK, thank you.
Bill?
Good morning, Mr. Chairman. My name is Bill Freeda. Before we cast our votes this morning for our board of directors, which includes members of the Management Development and Compensation Committee, there is an issue I want to bring to the attention of my fellow shareowners. I am here this morning to urge you and our board of directors to put an end to the practice that is commonly known as phantom dividends. The issue before us is whether senior executives of GE should be permitted to collect dividends or dividend equivalents on shares of equity compensation they do not own. When I received this year's proxy statement and found no shareowner proposal covering this issue, I was disappointed. It occurred to me, why in the world should there be a need for such a shareowner proposal?
This practice, to me, is so obviously wrong and unfair that it would seem to render the need for a formal proposal to eliminate it unnecessary. I have always been told that GE was a meritocracy, which means you are rewarded for the things you do. The payment of phantom dividends is a contradiction of that theory. What makes phantom dividends even more egregious is that they continue to be paid when, at the very same time, our dividends have been reduced. On some level, Mr. Chairman, you must agree with me, because beginning in September 2006, you declared that you would only accumulate dividends if you actually owned the shares. After that, Jeff, I applaud your leadership. Now is the time for other GE executives to step up and follow your example. From 1986 to 2000, I worked as an NBC GE employee.
During those 14 years, I was required to attend several integrity policy meetings. This integrity policy, I was told, was the cornerstone of the way GE conducts its business. That is why I am dismayed and disappointed that GE would allow its employees, whatever their position, to collect compensation they are not entitled to. Mr. Chairman, if this practice is allowed to continue, it would be disrespectful to your shareowners and retirees who have had to endure a reduction in their income due to the lowering of the dividend, to your current employees who are now required to pay significantly more for their medical benefits, and to your future employees who are now precluded from joining the GE pension plan. All these steps were taken presumably because they were prudent business decisions. Mr. Chairman, I am perplexed to understand how anybody can consider phantom dividends a prudent business decision.
In the past, GE has defended this practice by explaining that it was necessary in order to attract and retain the most qualified people. Jeff, if prospective GE employees need to be rewarded in this manner, perhaps our company would be better off without them. In addition, phantom dividends have been described as being necessary to compete with other major corporations. In this year's letter to the shareowners, you seem to complain that American companies are being unfairly vilified. Mr. Chairman, practices like phantom dividends only give credibility to the critics of big American companies.
Thank you, Bill.
One more sentence, sir. Finally, in this year's letter to the shareowners, you describe GE as a we company, not a me company. What better way to illustrate that theory by eliminating phantom dividends?
Thank you, Bill.
Thank you.
Thank you. Ms. Borelli?
Hi. Good morning. Janine Borelli from Project 21 and also author of Blacklash. I've written extensively about energy in my new book, and also General Electric's crony capitalism is featured in my book. Mr. Immelt, GE lobbied for a de facto ban on the incandescent light bulb, and over 67% of Americans want the ban repealed. My question to you, Mr. Immelt, is will you promise not to oppose the repeal of this ban on incandescent light bulbs?
You know, Ms. Borelli, to be perfectly honest, we really never lobbied for the repeal of the incandescent light bulb. If people want to buy incandescent light bulbs, we will sell them incandescent light bulbs.
With the government mandating that the light bulbs be banned, is this something that the company would not be in the way of?
We don't benefit at all either way. We will sell incandescent bulbs, we will sell other bulbs. We would just like certainty.
As the government is mandating for incandescent bulbs to be eliminated, we have a lot of people who are on fixed income. The other light bulbs are not.
We're ready to do it.
The other light bulbs are much more expensive.
We'll sell whatever.
We're saying that the company.
We'll sell whatever people want.
You're saying that the company will provide what other light bulbs are available?
We will.
Again, Will you lobby for ?
We will lobby for.
We would like certainty.
That's all we've ever asked for. We'll sell whatever people want.
You're in favor of the traditional light bulb?
Look, I really.
I just want to make sure I understand your point.
This is a 130-year-old industry. I really would sell whatever people want. We really haven't lobbied either way.
You're for free market, and you agree with the traditional light bulbs?
Let's sell what people want.
OK, I just want to make sure.
Thanks. We'll move on to the shareowner proposals in the order in which they appear in the agenda to be sure that all the proponents have an opportunity to present their proposals today. We ask that the presenters confine their comments during the portion of the meeting to the subject matter of the proposal being presented. We ask that other speakers wait until all shareowner proposals are presented before providing their comments. We will have an opportunity for discussion of other matters after we finish balloting and report to the inspector of election results. We have four shareowner proposals today, and we're going to do them in order. The first one comes as a proposal on cumulative voting by Evelyn Davis. Number two is a proposal related to nuclear activity submitted by Kevin Kamps and Michael Keegan.
Number three is a proposal for an independent board chairman submitted by Bill Steiner. Number four is a proposal related to shareowner action by written consent submitted by Ken Steiner. Ms. Davis is not here today, so let's begin with number two and Mr. Kamps, Mr. Keegan.
Thank you, Chairman Immelt. My name is Kevin Kamps. I am born and raised in Kalamazoo, Michigan. I serve as Radioactive Waste Specialist at Beyond Nuclear and also on the board of directors at Don't Waste Michigan, the statewide anti-nuclear watchdog. I had the privilege of traveling to Fukushima Daiichi in 2010, seven months before the nuclear catastrophe at the GE reactors there. I was accompanied by a group of local citizens and concerned officials who traveled to the host villages of Fukushima Daiichi, Futaba, and Okuma, and met with the mayors there, also the prefectural nuclear regulators. These people, like the Iwaki City Council member, Mr. Sato, and Saiko Uno, who was a young woman in her 20s, just engaged, felt so important.
These meetings were so important that she put on a very beautiful traditional kimono to deliver petitions to the mayors of these two host towns of Fukushima Daiichi. Mrs. Kaiko also went. She's from Fukushima City, about 50 mi away. The young woman is now a nuclear refugee, one of about 100,000 from Fukushima Prefecture. Mrs. Kaiko in Fukushima City wants to evacuate but cannot afford to. Mr. Sato, bless his heart, stood by his post in Iwaki until all of his people were safe. I also met a political cartoonist who has long warned about the dangers at Fukushima Daiichi. He was very prescient in his poster for our meeting in Okuma, where he showed the explosion. He showed the mushroom cloud. He showed the plume of radioactivity escaping. I have his other work here as well if people would like to see it.
I also have a menu from a local organic cafe down the road from Fukushima Daiichi. This is all a dead zone now, out to a distance of 12.4 mi. It should be much larger. President Obama himself warned Americans in the first days to get 50 mi away. It is my honor to read to you this resolution prepared by the GE Stockholders Alliance, a resolution urging General Electric to withdraw from nuclear energy. Whereas on December 1st, 2009, GE issued a policy statement affirming its support of nuclear energy, even though no safe disposal location or technology exists and may never exist for the permanent isolation of the dangerous radioactive waste that continues to accumulate at all reactor sites. Whereas every nuclear power reactor generates plutonium that is in demand worldwide for weapons production.
On March 11, 2011, a nuclear catastrophe began at Fukushima Daiichi, a site that contains six GE reactors. Motivated by the ongoing Japanese disaster, Germany, Italy, and Switzerland have announced they will abandon nuclear power, with other countries considering the same commitment. On September 18, 2011, German engineering giant Siemens announced it will halt its manufacturing of nuclear products and will focus on solar, wind, and geothermal technologies. Many U.S. reactors are in locations threatened by extreme natural assaults, hurricanes, floods, earthquakes, tornadoes, with the GE Mark I reactors, 23 of them, at especially high risk due to major flaws identified at least as early as 1971. Therefore, be it resolved that as GE stockholders, we urge our company to reverse its nuclear energy policy and as soon as possible phase out all its nuclear activities, including proposed fuel reprocessing and uranium enrichment.
In support, contrary to nuclear industry claims, the U.S. Nuclear Regulatory Commission has not been rigorously regulating nuclear power operations, but instead often reduces safety requirements when needed changes would be impossible or too expensive. Because of the dangerously crowded condition of the irradiated fuel pools at all GE reactors, it is now recommended that fuel rods, at least five years old, should be transferred from the fuel pool to hardened dry storage casks outside the reactor building. I would like everyone to know that we have additional supporting materials on the table outside, including a freeze of Fukushima's campaign brochure. The Fermi 2 reactor that is 35 mi from where we are right now is the largest GE Mark I in the world, almost as big as Fukushima Daiichi units 1 and 2 put together.
There is over 500 tons of high-level radioactive waste in the Fermi 2 pool, more than units 1, 2, 3, and 4 at Fukushima Daiichi combined. If the unit 4 pool at unit 4 Fukushima Daiichi collapses in an earthquake, the radioactivity release could be more catastrophic than what's already occurred in the past 13 months.
Thank you.
Thank you.
Thank you, sir. Proposal number three, I think, is going to be introduced by [Mr. Logh] on independent board chair. Yes, sir.
Hello, I'm Michael Keegan. I was told we made arrangements we would each have five minutes.
OK.
Thank you. Thank you for the opportunity to speak this morning. GE, age of imagination, a few years back, you gave up your logo of GE, we bring good things to life. I'm troubled about bringing good things to life. Yes, sir, The Economist of the U.K. describes the post-crisis of Japan as lingering agony for the people of Japan. We are here today as an opportunity for prevention. We do not have to go there again. It was known that these GE reactors were faulty. In 1976, three GE engineers came forward in testimony to Congress. You are in a cauldron of culpability, liability. You now know that this reactor design will fail. We have the largest of this unit designed in Monroe, Michigan. The situation is that Detroit is in jeopardy. You are approaching culpability when a known situation and a known danger is not addressed.
We are asking that you shut these GE Mark I reactors down. Five out of six of those ESBWR, the new model of the GE reactors, have been canceled. We would ask that you cancel the Fermi 3, the proposed Fermi 3. There is growing opposition. There are 2,500 people on the street as we speak in solidarity in opposition to this reactor design. The problem at the spent fuel pool at the Fermi is abysmal. It is a bad design. It was designed to hold 2,300 unit assemblies. It is now holding close to 4,600, twice what it was designed for. As my colleague mentioned, at 4 hours and 12 minutes into a loss of coolant, the water would begin to boil off. The fuel would begin to spontaneously combust when the water is gone.
Appalling, I found that the utility, Detroit Edison Company, moved for an exemption to have to do inspection and inventory of the spent fuel pool in 2007. Apparently, they want to stick their head in the sand and not know what is going on. The transfer of the fuel out of the spent fuel pool has been hampered because the reactor was not built as designed. The welds were never done on it from the blueprints of 1970. Forty years later, they have to go back and do remedial welds on the fifth floor and on the fourth floor, first floor, 768 welds. The quality assurance at the Fermi 2 is abysmal. That is how it is throughout the land with these GE Mark I reactors of Vermont Yankee, elsewhere. You really are opening this company up to a major liability.
We are here today to provide a service to the company and shareholders and ask you to change course in that direction. Does that take an earthquake or a tsunami to bring about station blackout? In fact, in May 1988, the Fermi 2 reactor had a station blackout because a raccoon shorted out buses. In June 2010, a tornado took the plant into a station blackout. These types of things do occur. You don't need an earthquake and a tsunami to put a plant into a station blackout. The quality assurance at the Fermi 3, virtually the application lacked any quality assurance. This was found by the NRC. We are in a court of law, ASLB proceedings. We are challenging this. We will challenge the ESBWR.
Thank you.
I would just like to kudos to this utility. The major opportunity cost here. You could spend $15 billion pursuing a Fermi 3, or you could take that money and put it into windmills. We appreciate where GE is going with the windmills. They've just announced 650 MW in Ontario.
Thank you, Mr. Chair.
Most appreciative of that.
Thank you.
I urge you, shareholders, if you have already voted, to change your proxy and vote for the proposal that opposes nuclear power.
Thank you.
Thank you.
Thank you, sir. Mr. [Logh], I think you're going to speak next on independent board chair. Apologize if I mispronounced your name.
That's fine. Thank you. The generals are in town. It was exciting to find out that you were going to be here in Detroit, the electrics and General Electric and General Motors. We also share the director, Lafley, who was currently on both boards at one time. There's a great commonality. I'm also a nominee for the board of directors of GM myself. Detroit is ground zero for the problems that are facing our country. The problem is this misdirection that's taking place in the way we're going. For example, here in Detroit, Penske wants to put a trolley down the streets. The Detroit kids have the worst school system in the United States. Our priorities are just out of whack. Basically, there's three icebergs that we've hit as a country. The banks have, because in 2000, they canceled the Glass-Steagall Act and allowed them to do their mischief.
China, we allow them to not pay social security, take our jobs, pollute the planet, and cheat. Nobody is doing anything about this in Washington. That's iceberg number two. China only has 9% of the debt. That's a fact that isn't very well publicized. Everybody thinks they own the country, which they don't. The Social Security Trust Fund owns more than they do and Japan together. If you can talk to NBC about publicizing some of that, that would be helpful.
They don't listen to me anymore, not that they ever did, sir.
They don't listen to me either, so we're even. The third iceberg that we've hit is Mexico. We shipped jobs down there. They took the Electrolux plant out of here. You go down there, it's the same problems: corruption, pollution, and no social security. With this $10 million manufacturing job hole in our economy, there's only one problem. The Titanic has hit the iceberg, and that's where we're at. We've got to fill these holes in our economy. That's the problem. Otherwise, it's the same kind of thing that led to the Titanic disaster. That's what we're facing, the Titanic problem. Moving on, the opportunities are great. The one thing that is encouraging is that you have two new people on the board. Tisch, who was with the Federal Reserve, would certainly have an inside view on what took place.
Beatty, he was from Canada, the Canadian banks, and they did a better job than we did down here. Maybe he could soup this up because this $35 billion loss in that financial hole is a great burden that still remains on the economy. Warner was at Chase when they canceled Steagall. Sweringa was on the accounting people, and they had Rule 140 that is one of the problems. Lazarus at Columbia Business School, so they could help. In China, cash is buying everything at Walmart. I went down there, I couldn't even buy a can opener that was made in the United States. I have one, though, from another store. Nunn, he was with the Senate, and he knows what the threat is with China and that situation. We've got to get on top of this.
As far as enumerating on this proposal, the idea is not to replace you, but to have another partner so that you can do the important things and he can do the work.
Thank you, sir. Thank you.
There is so much in this task that it's beyond one person. If it's shared in that way, people would feel that they could talk to twice as many people to get the message. That's the idea here. The corporate library evaluating our board gave them a D because of high government risk. They flagged Penske because he was on the Delphi board that went bankrupt. I realized Delphi was a big problem, and General Motors was responsible for much of that. It was shifting things overseas in some of the encounters that took place in that issue. In summary, the Titanic, as a country, we've hit this iceberg. This China, it isn't the 10 million jobs that have been lost. It's the 10 million families that can't buy cars, can't buy pizzas, and the families that depend on those. Nothing has been done.
They allow them to cheat on the currency, and it just keeps going. The same thing in Mexico. We bring the people up here, and they say it's OK to bring them all here, but that bankrupts our schools.
Thank you very much.
Thank you.
Thank you, sir.
Best of luck. I like nuclear plants, too.
Finally, the final shareholder proposal is by Mr. Mark. Kevin, good morning.
Good morning.
This is on [Richard].
Good morning, Jeff, and the Board of Directors and fellow shareowners of GE. Hope you had a good dinner last night at the Henry Ford Museum. Ironically, we had a busload of GE retirees who were coming out as they were setting up for your dinner there. I went over to some security people and I said, maybe we're all GE former retirees and employees. Is there room enough for us? You should have seen the look I got. If looks could have killed, I wouldn't be standing here today.
Believe me, he had your picture, Kevin. It's good looking, good looking that it is.
My name is Kevin Meyer, and I'm a retiree of GE from Lynn, Mass. I have 33 years of service in Lynn. Jeff, just as you introduced the Board of Directors for recognition, I would ask the retirees who made this company and devoted nearly all their working lives to make this company what it is today, to stand and be recognized. Let's give the retirees, please stand up and have a round of applause because you are the people. You are the people that have made this company. Thank you. We have been coming to every GE shareowners meeting for 16 years, and sometimes elderly and frail GE retirees have endured bus rides of 12 hours to get here to have their voices heard.
Of course, Helen Querini and Bob Davis and others are here with us in spirit, along with GE retirees from Schenectady and Lynn, where GE was founded on April 15, 1892, between those two cities, and from Louisville, Erie, Pittsfield, Cincinnati, New York City, and Philadelphia. First of all, Jeff, I want to publicly thank you and your team for the historic meeting which took place with you and all the retirees representing those locations on October 18, 2011, at company headquarters in Fairfield. Actually, if you'll go to the proponents' desk, we handed out pictures of Jeff. Maybe he wants to use it for target practice on my picture as a backboard. I don't know. I truly believe that this kind of ongoing discussion has led to many changes in the company and how retirees' problems have been solved.
After the shareowners meeting, I will be in touch with suggestions for future meetings. The annual report states there are 225,000 GE retirees and beneficiaries who are currently receiving pension benefits from our principal pension plan. Since 1996, when we first started attending the annual meeting, hundreds of thousands of GE retirees received three pension increases and two 13th checks. As I told you directly at that Fairfield meeting, Jeff, any increases in pension should be geared so those that are out on pension the longest who receive the least amount of pension should receive the biggest percentage increase. The three pension increases have been structured that way. Don't you think it is patently unfair when a Jim Hohmann from Lynn, Mass, with 30 years' service at the highest rated job in the plant, an IR 23, receives a 13th check of $672?
This check does not include a deduction for health insurance to over $209. At the same time, somebody receives a $5,000 or higher per their 13th check. Jeff, I truly feel most reasonable people would believe that is the wrong kind of structure. It does not address the erosion of purchasing power of a long-time retiree. After all, a Jim Hohmann is hit with tax increases and higher costs and higher living costs. If we had an independent Chairman or shareowners' action by written consent, maybe we could take a look at these kinds of problems in a different light. It would be nice to have a non-management retiree representative on the pension board. That would make a difference. As a result of our meetings with you and your staff, there have been several structural changes.
For example, it used to be that all GE board of directors were eligible for $75,000 pension after five years on the board. That is no longer true for new directors. The increases in our pension trusts were also used as a basis for higher executive bonuses. That also is no longer true. Many other changes, too numerous to say, that retirees have made a big difference in the operation of our GE family and how GE retirees are treated. Jeff, you have consistently stated you want complete transparency. We want it also. We look forward to another high-level meeting and note we have still no answers to our questions from that October 18 meeting. By the way, I suggest the next annual meeting in 2013 be held in Louisville, Kentucky, or Lynn, Massachusetts. We'd welcome you there, believe me. Thank you, Mr. Chairman.
Thanks, Kevin. Thank you.
Great.
We're going to move on to agenda item number four, balloting. Remember, we'll provide an opportunity for discussion of other business matters in a few minutes, but balloting on the items in the proxy statement comes first. You'll find a ballot on your seat. If you have a ballot ready to turn in, please hold it up. I'll ask the ushers to collect it. Ballots collected at this meeting will be reflected in the final vote results tomorrow. I believe the inspectors of election are ready to announce the outcome of the voting. Remember, 8 billion shares have already been voted. Let's go to the inspectors' report. Mr. Barbera of IBS Associates will be presenting the report of the inspectors. Mr. Barbera, do you have a report for us?
Mr. Chairman, the inspectors of election have completed an initial count of the votes cast at this meeting in person or by proxy. Proxies representing approximately 8 billion, 251 million shares, where 78% of the total shares eligible to vote, were received. Other shares have been voted at this meeting by ballot or by proxy. On the basis of our initial count, the inspectors of election announced the following results. On the election of directors, directors each received at least 5.37 billion favorable votes, and all nominees have been elected. On the ratification of selection of independent registered public accounting firm, KPMG, as auditors, 97.5% shares voted for, 2.5% against. On the management proposals, the advisory resolution to approve executive compensation, for 92.5% of shares voted, against 7.5%. On the approval of an amendment to the GE 2007 long-term incentive plan, for 93.1% of shares voted, against 6.9%.
The approval of the material terms of senior officer performance goals, for 92.7% of shares voted, against 7.3%. On the shareowner proposals, proposal one, cumulative voting, for 26.3% of shares voted, against 73.7%. Number two, the nuclear activities proposal, for 2.4% of shares voted, against 97.6%. Proposal number three, the independent board chairman, for 22% of shares voted, against 78%. Shareholder action by written consent, for 47.5% of shares voted, against 52.5%. Mr. Chairman, this initial tally is subject to verification, and the final tabulation may reflect small changes in the vote I have announced. The final tabulation will be set forth in the formal report of the inspectors of election to the secretary of the company, which will be made after the count has been verified. This concludes our report.
Thank you, Mr. Barbera. That is the formal business of our annual meeting. We still have time for one or two questions, which is agenda item number six. We've already heard extensive comments on the issues raised this year, and I'd like to know if anybody else would like to ask a question.
Good morning. My name is [Martin Herrengoso], and I'm grateful for the opportunity to be a shareholder. I love this company, people, and products. I pay gentlemen on stage $50 each year. Twenty-nine of thirty original Dow companies have changed that title in 75 years or less. The 400 richest Americans changed that title by over 80% in 20 years or less. They did not grow [5%]. This can teach us to become and remain the greatest company by taking two simple, humble steps. First, eliminate and then operate with no debt. Second, index one quarter of net income liability-free from the company. This will make us too smart to fail and challenge us to exceed the global business average benchmark to become and remain the greatest company. In seven years, I would like to wear a T-shirt saying, "GE works for me debt-free."
Thank you, sir.
Thank you.
Thank you, Dennis. Good morning.
Hi, Jeff. Good morning. Thank you for the forbearance afforded me while I beat the expired equine of corporate governance one more time, unless I'm fortunate enough to beat your legal team of Gibson, Dunn & Crutcher and get on the proxy. In my view, our board's performance has contributed to our stock's underperformance, as shown on page 139 of our annual report. For me, and I acknowledge that others disagree strongly with my position, Director Fudge's continuing presence on our board is somewhere between lamentable and risible. I voted my 17,000 shares against her. Director Jung's position has become increasingly questionable. If she has submitted her resignation as required by the governance rules, why didn't you accept it? What are your views on term limits for directors?
You know, Dennis, I think we have a really fantastic board, and I'm going to leave it at that. You know, 95% of the shareowners agree with me on this point.
I appreciate it on the first question. On the second question, I would appreciate it if you would be kind enough to illuminate me with your perspective.
Thank you.
Your views on term.
95% of all shareholders agree with me, not you.
Thank you.
Thank you, sir. Yes, ma'am, microphone number one.
[Foreign language ], Mr. Chairman, board of directors, fellow shareholders. Special thank you for coming to this great, great but tired city. Thank you to Mr. Penske, who I adore, and all the board of directors who give back to the community. A lot of the agencies, a lot of the people here do not recognize that, but I do. I represent Detroit Metro, SARE, and National, who have actually granted some workforce development grants. Those are very important that the community-based organizations still can rely on people and GE to give back to the community because we are educating the workforce. I do agree with you that, oh, coming here just, I said, wow. Most global companies use an excuse to leave great cities and urban cities. Oh, we become global, so they don't have to pay attention to the urban population.
I take my hat off to all of you. We have experience that you do care about the urban cities, that you care about the community-based organizations that serve the citizens of this great nation. I do believe that in my heart, and that's why I got through Security Day to make sure that I became part of the record. Again, I'm Jane Garcia, and I'm from this great city of Detroit, Michigan. [Foreign language] .
Thank you, ma'am. Thank you. We'll take two more questions. We'll go back to the man, mic number one, and then Dennis, we'll let you have the last question. Yes, sir, mic number one.
My name is [Dick Max]. I'm from St. Clair Shores, Michigan. I will be brief. I support the resolution urging General Electric to withdraw from nuclear energy. We do not want the GE Hitachi reactor or other reactors from GE. We already suffered the liability of the GE Mark I reactors that continue to release radionuclides and widespread fallout from Fukushima Daiichi's destroyed reactors and the liability of 23 flawed and aged GE Mark I reactors in the U.S. Daily releases from reactors, operator error, equipment failure, and accidents release radionuclide radiation that is cumulative and can produce almost the whole spectrum of human illness, morbidity, and genetic mutations. At least 28 reactor accidents are on record. These are not past historical events, but ongoing assaults on human cell tissue and the rest of the biosphere. There is no solution to the ever-increasing radioactive waste produced by reactors.
In fact, reactors cannot be made safe. Reactor failure cannot be designed out. Worker insolvability can't be achieved. Aging degradation of reactors cannot be adequately tracked and proactively repaired. Reactor explosions will happen. That's the fact of life. The biosphere and the human gene pool is degraded, and that will continue to increase. Reactor owners and the NRC cannot be trusted to honor licensing obligations. Stop public financing of all kinds, and reactors will not be built or re-licensed. Greed and access to public tax dollars and higher utility rates drive reactors. Finally, continued design and production of reactors is the ultimate moral failure, equaled only by the continued production and maintenance of nuclear weapons.
Thank you, sir.
Thank you.
Thank you. Dennis, we'll let you have the last question.
I'd like to have a last answer, too. It's well known that I was a critic of the 2008 stock buyback, and I'd like to take another crack at that issue also, because in my opinion, it's about a $2 billion misstep. Warren Buffett, in his current annual report, says many CEOs never stop believing their stock is cheap. Continuing shareholders are hurt unless shares are purchased below intrinsic value. The first law of capital allocation, whether the money is slated for acquisitions or share repurchases, is what is smart at one price is dumb at another. My question is, do we have similar metrics to those which are in place at Berkshire Hathaway with respect to our current stock buyback program?
Dennis, we do. I think what Keith showed today is we believe in a balanced capital allocation approach. We love the dividend, and we plan to keep increasing the dividend in line with earnings. We continue to do strategic acquisitions, and we'll do buybacks, you know, based on criteria and approved by the board. We appreciate your concern. You've made it consistently. Thanks.
Thank you.
That is it for this year's meeting. I want to thank everybody in the room for attendance. I want to thank all the great public servants of Detroit. It's our honor to be here today. I just want to make one final comment on nuclear reactors. We believe in the safe design of the GE nuclear reactors. The company has no liability, as was misstated earlier. I just want to make sure we say that for the record. Thank you, Detroit. Thank you for GE shareowners.