Morning. Welcome to GE's 2013 annual meeting. I'm Jeff Immelt, chairman of the board at GE. Here with me today are Keith Sherin, our CFO, and Brackett Denniston, our general counsel. Each year, we have our annual meeting in a GE town that epitomizes what our company is about and that our shareowners deserve to see. This year, it's New Orleans. We're very proud to be here. New Orleans is a great, vibrant city. The state of Louisiana is a great place to do business. We have more than 1,300 employees working across the state in businesses such as energy management, oil and gas, healthcare, and GE Capital. We have 1,300 retirees across the state. At GE, we take on the world's toughest challenges. We find ways to build a better future.
We want to be in places where the people share that same spirit. New Orleans has faced its share of challenges. Its people have only made this city stronger. That commitment to making a better future is a critical part of GE's culture. That's why we've invested millions of dollars in a state-of-the-art IT facility here in New Orleans. We officially opened the GE Capital Technology Center this week. Have already begun staffing the facility. We'll bring more than 300 jobs to New Orleans. These are high-tech jobs that'll add to the city's economy. Over the years, we've developed solutions for our customers that build on strong relationships and help communities. Ochsner has been a partner to GE Healthcare for years. This is a great relationship on several levels: technology, efficiency, and culture.
Across the U.S., we must develop new models of healthcare, building both the structure and culture that allows us to move faster. This week, we also announced a donation to the Congressional Medal of Honor Foundation for the educational programs with World War II Museum here in New Orleans. It's a way for us to support a great organization. The local teachers and students will help benefit from these programs. This is a special place for GE and its shareowners to be. I welcome all of you. We like to think that GE is a company that can compete. Help our customers compete in today's environment. We're focused on big productivity drivers of our time.
This includes things like unconventional resources, the shale gas revolution, advanced manufacturing, owning the analytical layers around our products. Simplification, which we're working on very hard in GE to move faster and be more competitive. Today, with $100 billion in revenue and 15% margins, we're the largest and most profitable infrastructure company in the world, selling in more than 160 countries. We put about 6% of our revenue back into R&D. We invest some $10 billion to launch products and build global capability. We're big financial service players, with an emphasis on specialty finance for small and medium-sized business. The culture of our company is based on four principles. We're mission based. We believe that the products we make change the world. We build, we power, we move, we cure. We're constantly searching for a better way. We always learn more and do better.
We're working on solutions for our customers and our society, like we do here in New Orleans. We're working on affordable healthcare, energy, and the big problems that shape the 21st century. We're a we company. We believe in teamwork. Those are the principles that have allowed us to grow and be successful over the past 130 years, and really, that's what keeps us hungry and humble as we look at the future. This is who we are, it's why GE works, and it's why you can be proud of your company and why your company's positioned for success. Now on 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 79% of the approximately 10.4 billion outstanding shares eligible to vote. The Management Proxy Committee has voted these shares in accordance with shareowner wishes. It's now my privilege to introduce the director nominees and the members of your board of directors who are here with us today. I'm going to ask the directors to stand briefly as I introduce them so you can see who they are. Sandy Warner, former chairman of the board, JPMorgan Chase, and director since 1992. Sandy is chairman of the audit committee. Jim Cash, emeritus James E. Robison Professor of Business Administration at Harvard Business School, a director since 1997. Andrea Jung, former chairman and chief executive officer of Avon, a director since 1998. Anne Fudge, former chairman and chief executive officer, Young & Rubicam, a director since 1999.
Shelley Lazarus, chairman emeritus and former chief executive officer, Ogilvy & Mather, a director since 2000. Shelley is chairman of the nominating and corporate governance committee. Ralph Larsen, former chairman and chief executive officer, Johnson & Johnson, a director since 2002. Ralph is presiding director and chairman of the management development compensation committee. Bob Swieringa, professor of accounting and former dean of Johnson Graduate School of Management, Cornell University, a director since 2002. Bob Lane, former chairman and chief executive of Deere, a director since 2005. Susan Hockfield, president emerita and professor of neuroscience, MIT, a director since 2006. Jim Mulva, former chairman and chief executive officer, ConocoPhillips, a director since 2008. James E. Rohr, deputy chairman, Thomson Reuters, a director since 2009. Mr. Rohr is chairman of our risk committee. Jim Tisch, president and chief executive officer, Loews Corporation, a director since 2010.
Jack Brennan, chairman emeritus and senior advisor of The Vanguard Group, a director since 2012. Frank D'Souza, chief executive, Cognizant Technology Solutions, a director since 2013. Mary Schapiro, former chairman, Securities and Exchange Commission, a director nominee. I would like to acknowledge three directors who are not attending this meeting and not standing for election today. Roger Penske has been a GE director for 19 years. We'll always appreciate Roger's entrepreneurial spirit and operational insight. Sam Nunn, a director for 16 years. We will always miss his wisdom and judgment across every business. A.G. Lafley was a GE director for 10 years. We'll always remember A.G.'s strategic and operational skills. Please acknowledge all of their great work, the board and emeriti, for their great work on behalf of GE. I would also like to ask Mike Neal and John Rice to stand briefly.
They're Vice Chairman of GE as is Keith Sherin, who is here today, is with me. Mike and John. Now to the second item on our agenda, our report on company operations. Keith Sherin will review GE's financial performance and strategy, and then I'll review the long-term outlook and key strategy items. Keith?
Jeff, thank you. Good morning, everyone. It's great to be here in New Orleans. I'm going to just cover a couple of charts about our financial performance. I thought I'd start with the economy. We see 2013 to be shaping up sort of similar to 2012. We have slow growth in the developed world, like the U.S. and Western Europe and Japan, and we have pretty strong growth in the emerging markets, and that's continuing. You can see for our outlook, the U.S., we expect to have around 2% GDP growth, about flat with last year. We can see that unemployment remains stubbornly high. One of the bright spots that we're experiencing is in housing. We see quite an increase in both single-family housing starts as well as multifamily housing starts. That's good for the economy. It's good for our appliance business.
Then one of the challenges that we continue to face are our large fiscal deficits. With programs like sequestration, that's going to continue to provide a drag on growth. Europe, tougher than we expected. Europe was slow growth last year. This year, it could be down a bit. For us in the quarter, it was down quite a bit. We expect that to continue through the year as they wrestle with their austerity and fiscal challenges. The bright spot is in the global markets. Places like China, the Middle East, Africa, Latin America, we continue to see very strong growth. Our orders were up 17% in the first quarter. The recovery is mixed. The strength for us is in the emerging markets, and we continue to shift the center of gravity of the company to take advantage of those opportunities.
For 2012, we laid out a number of objectives with investors. We had five big commitments we made at the end of 2011, and we had a pretty good year in terms of performance. Number one, we wanted to grow our industrial earnings double digit. We grew them 10%. That was a great performance. Number two, we want to increase our pre-tax profitability, our operating margins. We grew them by 30 basis points. Number three, we wanted to restart the dividend out of GE Capital, and the team did a great job. We received $6.4 billion from GE Capital back to the parent last year, which helped a lot with capital allocation. Number four, we want to continue to run off our non-core assets in GE Capital, make the non-core assets smaller, and invest in our mid-market leasing and lending business. The team exceeded all of their targets.
Number five, we wanted to have a good year on balanced capital allocation, returning cash back to you, back to our shareholders. We had a good year with a mix of about $5 billion of buyback and $7 billion of dividends, so $12 billion back to shareholders. On the right side, you can see we still have just tremendously strong fundamentals in the company. We ended the year with a record backlog, $210 billion of products and services that we'll deliver over the next several years. We had $77 billion of cash between the cash of GE Capital and the cash of the parent. That keeps GE Capital safe and secure, and it gives GE the ability to do a lot of different things in capital allocation. We want a strong dividend. Our yield last year averaged 3.3%, and it's very important to us.
I'll cover more on that in a minute. Jeff's going to talk about the growth enablers. We continue to invest in our global growth. We continue to invest in new technology, and we continue to invest in our services platform. We had a pretty good year. We met or exceeded all of our investment commitments that we laid out at the end of 2011. When I talk about investor-friendly capital allocation, here's really on top of what we invest organically for our new product introduction or globalization or other technology investments. Here's what we do with investors. On the left side, the dividend's the number one priority for us. Last year, we paid $7.2 billion of dividends to our investors. In December, our board of directors approved a dividend increase of 12%, and this year we expect to pay about $8 billion of dividends.
With the dividend increase, even though the stock is higher, the yield is up to 3.5% in an environment where the 10-year Treasuries are trading at 1.7%. It's a pretty nice return for shareholders on an ongoing basis. In the middle is the buyback. We're buying back shares. Last year, we bought back a little over $5 billion of stock. With the closing of the NBC transaction, we received the cash for selling the remaining 49% back to Comcast. We've increased the buyback objective this year. We expect to do almost twice as much as we did last year. Finally, on the right side are strategic acquisitions. We continue to invest in inorganic capability. We're adding new capability to the company. We have $8 billion of announced transactions.
The two biggest ones that you're all familiar with are Avio and our aviation space, which is going to add a lot of capability to the aircraft engine team, as well as Lufkin, an oil and gas deal that we announced two weeks ago that builds out our oil and gas space. We're very excited about both of those acquisitions. I talked about dividends being our number one priority. I thought I'd put this chart in to put some numbers to put that in perspective. This is the amount of dividends the company paid in the decade of the '70s, '80s, and '90s, and then from 2000 to 2000 and the first quarter, the amount of dividends we paid.
If you look at from 2000 to the first quarter, that's about a 13-year period. We paid two and a half times the amount of dividend that we paid over the previous 30-year periods. This is really a big priority for us. Our objective is to have an attractive payout ratio, and what we mean by that is that for every dollar of net income we generate, we're going to pay out about 45% of that back to shareholders in the form of the dividend. We'd like to have an attractive yield. When you buy a share of GE stock and you get that dividend of $0.19 every quarter on an annual basis today, as I said, that's about a 3.5% yield, which is a premium versus the S&P 500 and a significant premium to some of the other alternative investments out there.
We want to grow the dividend in line with earnings. As we grow the company, we expect to continue to grow the dividend. As we said, the board last increased the dividend in December, and it's at a very attractive level. Finally, including the buyback, we do have a significant amount of capital we're returning back to investors. To wrap up our performance, how the company performs is what's going to drive the total shareholder return that you all get. This is a chart of our operating earnings per share from 2009 through 2012. You can see through that period, we've been able to deliver double-digit earnings growth. Through that period, on a cash basis, we've delivered $36 billion back to investors in the form of dividends and buybacks.
You can see on the bottom that from that time, 2009 to today, the GE total shareholder return has exceeded that of the S&P 500. In 2012, we delivered a 21% total shareholder return based on our performance, and that also exceeded the return of the S&P 500. While year to date, we're off to a slow start, we've always known that we have a plan that has a first half with lower equipment deliveries and a second half that's got a much better profile. Our expectation is that we're going to have a pretty good year in terms of operating EPS. We'd like to deliver double-digit operating EPS. If we deliver that performance, we think we're going to have another very good year for investors.
We plan on returning $18 billion of cash to our investors this year, $10 billion through the buyback, $8 billion through the dividend, and most of that is still to come in the second, third, and fourth quarter. We have a good outlook for the year, we have a good expectation, and we look forward to a good performance delivering good returns. Thank you, and I'll turn it back to Jeff.
Great, Keith. Thanks. Just a few comments on where we're taking the company next. We really have two pieces to the portfolio, a great infrastructure company and a very valuable, especially finance company. We expect to get dividends as we grow and strengthen our financial service company to back and to invest in a strong infrastructure company. Our enterprise capabilities are really technology, very strong focus on services and growing that into analytics, a very good capability and market share in our growth markets, and a simple and competitive cost structure. We as a company really focus on those four things. From a portfolio standpoint, we really aspire to get our industrial percentage of earnings over time up close to 70%. We want to have good relative performance versus our peers.
We just want to keep investing in great markets where we have long-term tailwinds, continue to build our strength in infrastructure, drive returns and margins, and again, as I said, continue to create great value in our GE Capital franchise. This is something we communicate very frequently. A good example of how we create fast growth industrial businesses is in oil and gas. This is a place where we've put a lot of capital over the last 15 years to kind of grow the business and establish a strong competitive position. We've got a business that's in excess of $15 billion today. Should be higher than '13 with good margins and returns. It really leverages the capabilities that I talked about earlier. It leverages all of the GE industrial capability. It allows us to build integrated solutions for our customers.
We can leverage our global capability and our global footprint, we can utilize our cost base and our operating capabilities on margins to build good margins and returns in this business as well. The financial services team has done a great job of repositioning in the new world for financial service markets. As you can see on the left, we're down at about $400 billion of assets, we've got very strong liquidity and have really improved the funding profile. A very strong Tier 1 capital. We believe that GE Capital ought to be able to increase their dividends back to the GE parent. The right-hand side just takes a look at GE Capital versus some of our peer banks. On a lot of the metrics that are important that investors follow, GE Capital has a very strong position.
We've got a great franchise in mid-market areas. We're generating substantial excess cash, we have a lot of financial strength. Strong industrial, strong infrastructure, strong financial services. As Keith said, we continue to invest in R&D. I think this is a core strength of the company. We invest between 5% and 6% of our revenues back into R&D, and you see that output in terms of a great array of new technologies and jet engines and blowout preventers, new healthcare products, mining equipment, appliances. Again, we think this is the key competitive advantage as we look at the 21st century, and it's a place where GE wants to invest and grow. Our service business is incredible driver of profitability. We've grown our revenue by more than two times over the last decade. This is a very high-margin business.
In the service business, we want to continue to grow around our installed base. We want to continue to add technology to improve our customers' performance, and we want to drive analytics that are going to help drive better product performance and help our customers be more profitable. Services continues to be a big thrust when we look at the company. One of the places where we're investing a lot of money in R&D is in analytics. This kind of shows you one of the reasons why we do that is to make our customers more profitable. Our big customer base is where our installed base is in places like aviation and power and rail and healthcare. A 1% improvement in fuel savings over 15 years for our airline customers is worth $30 billion of profit to them.
These small changes in our product performance really bleed through into great performance enhancements for our customers. The right-hand side just shows you some of the opportunities we have to work with customers from a software and analytics standpoint. RailConnect goes to our railroad customers and helps make them more productive. Taleris goes to our airline customers and helps them reduce their operations costs and help their asset utilization. AgileTrac is kind of an air traffic control system for hospitals. We have customers for all these, and this is a key way that we can use our service business to add customer value. We're winning around the world. We have a business and a framework in our growth markets that's growing 10-15% every year.
We've added commercial resources, and we want you to think about your company as one that can really invest and grow on all these global markets. We can compete in places like China very successfully, India, Russia, all around the world. We are a very strong global company. More than half our revenues are outside the U.S., and I expect that will continue into the future. We've seen great growth. We had 17% orders growth in these growth markets in the first quarter, and we see this big theme continuing into the future. Costs and margins are very important to all of us in terms of how we run the company. We've got a commitment to grow margin rates by 70 basis points in 2013.
One of the key ways we're doing that is by simplifying our cost structure and continuing to drive lower costs in our administrative costs. We see that going down to probably 15% by 2014. We continue to grow and work on margins, which we are expanding, and we continue to simplify the company to really only be putting the resources where we can get the most bang for the buck. It's all about speed, accountability, and compliance when we look at the company. One of the big investments you saw in some of the videos and some of the things we've done is to invest in advanced manufacturing. Just like technology, we think manufacturing is a core part of the company's strength.
When you read about things like additive manufacturing or design to cost or 3D printing or some of the new themes in technologies and technology, this is going to allow us to be faster to market, lower our product costs, improve cycle times, and we think, again, this is a place where GE has a strong leadership position. Lastly, when you think about and you read the annual report in the proxy, we always have a three-year plan that holds managers accountable for certain metrics. We just launched another one in 2013, 2014, and 2015, and that's all about operating EPS growth, overall cash, both CFOA and cash from disposition growth in our industrial percent of earnings, and growth in return on total capital. We think these four metrics really capture what's most important to our investors.
It's the way that we'll align managers looking forward into the future. Again, we think this makes sure that we are focused on what's most important to you and your colleagues around the world. Culture counts at GE. We talk about the culture of GE Works, mission-based, search for a better way, solutions-oriented for our customers, and a team that works together, working on a way to make the world more valuable and understand our context and fit with the world. That's just a brief update on the company operations. Now we're going to move forward with the agenda. Let's move on to discussion and voting on matters set forth in the proxy statement. We'll take up the election of directors and the management and shareholder proposals in the order in which they appear in the proxy statement.
After the election of directors and management proposals are introduced, what we're going to do is go up through all the management proposals. There's going to be an opportunity for questions and discussion at that time. Then after the shareholder proposals are introduced, there'll be a chance to discuss those as well. There'll be time later on in the meeting for discussion on other business matters, but first we need to address the items that are presented in the proxy statement. The independent inspectors of election for this year's meeting are representatives of IVS 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 change your vote by ballot today unless you'd like to change your vote.
You will find a ballot on your seat. Let's return to the election of directors and to the presentation of proposals in the proxy statement. The first matter is the election of directors. I placed before the meeting to serve as directors for the coming year, the 17 individuals whose names and biographies appear on pages three through nine of the proxy statement. Namely, those nominees are Beattie, Brennan, Cash, D'Souza, Dekkers, Fudge, Hockfield, Immelt, Jung, Lane, Larsen, Lazarus, Mulva, Schapiro, Swieringa, Tisch and Warner. Each of those nominees has received the overwhelming majority of the 8 billion shares voted by proxy. The next on the agenda is a proposal to approve our named executives' compensation. Your board of directors recommends a vote for the approval of the named executives' compensation. Then there's the proposal to ratify the selection of KPMG as independent auditors for 2013.
We have with us today John Demeyer, Bill O'Mara of KPMG, responsible for the GE audit, who are available after the meeting to respond to your appropriate questions. Your board of directors recommends a vote for the ratification of KPMG as independent auditors. If you'd like to speak, go to one of the two aisle microphones and I'll call on you there. Give your name when you're recognized. Is there any discussion on the board nominees for the management proposals? Dr. Borelli, I'm going to start with you, Tom, and on microphone number one.
Good morning, Mr. Immelt, and shareholders. My name is Dr. Tom Borelli. I'm with Senior Fellow at FreedomWorks, a national grassroots organization, and I'm managing the Market Freedom Project there. Before we have a chance to vote on the board and yourself, I'd like to explore your statements you've made about our national debt. As you know, our national debt is $17 trillion and counting, and it's not only bad for citizens, it's actually bad for shareholders. To your credit, you've recently joined a Fix the Debt commission with Mr. Bowles and Mr. Simpson, as well as other 80 CEOs who want the government to do something about this massive debt. The problem we have here, though, Mr. Immelt, is that your actions as CEO undermines the reduction of our debt.
As you know, General Electric lobby for Obama's $787 billion stimulus, which added almost a trillion to our debt. Making matters worse, our profitable company took $100 million in grants from taxpayers.
One grant was for $30 million, and we ended up hiring five or six people. Come on, that just doesn't make any sense. I think it represents a real reputational risk for the company to lobby for big government, to say we're for cutting the deficit, and then on the back end, a profitable company that last year made $16 billion ends up taking grant money from taxpayers. That's outrageous. We have a solution. We think it's in the company's best interest and your best interest to return the $100 million back to the taxpayers. We think that's a noble initiative. You're making plenty of money. You really don't need the $100 million. It would make a great statement for General Electric's leadership and to make sure you understand that grassroots activists understand this issue and mean business.
We launched a website, ge give it back, and we have an online petition that's being directed to the board of directors, encouraging them to return the money, our taxpayer money, back to we, the people. I'd like your reaction to our request that you return our money back to the people.
Dr. Borelli, I always listen to what you have to say. I appreciate your comments at this year's meeting. Thank you.
Is that a yes or a no?
I always listen to what you say.
You're not going to return the money?
Kevin, let's go to microphone number 2.
Return the people and your shareholders. Answer the question, please.
Again, Dr. Borrelli, I always appreciate having you here at the meeting.
Shareholders, now you know.
Okay, Kevin, good morning.
My name is Kevin Maher, and I'm a 19-year-old veteran of every shareowners meeting. This morning I rise on the basis of the board of directors to give a statement from Bill Freeda, whose wife was hurt in an accident, and he had to take her home. Bill asked me to make this statement for him. Good morning. My name is Bill Freeda. I'm here this morning to ask that shareowners vote against the members of the Management Development and Compensation Committee of our board of directors, Ralph Larsen, chairman, James Cash Jr., Andrea Jung, Robert Lane, and Douglas Warner III. I do not take this action lightly. I find it necessary because I believe these directors bear at least some of the responsibility for the continuing and disturbing policy of phantom dividends.
This is the practice where GE senior executives are permitted to collect dividends or dividend equivalents on shares of GE stock they do not currently and may never own. This year, there were two shareowner proposals submitted on this subject. It disappoints me to tell you all that GE did everything it could and was successful in its efforts to convince the Securities and Exchange Commission to disqualify the proposal on phantom dividends. In fact, GE paid a considerable amount of shareowners' money to the law firms of Gibson, Dunn & Crutcher to have the shareowners' proposal disqualified. Please keep in mind that the executives who profit from this practice spent our money, not their own, just so we, the shareowners, would not have a voice as to whether we wanted this practice to continue.
What makes this practice so egregious this year is the fact that in 2012, GE notified those who retired as salaried employees and their spouses that if they had not reached the age of 65 and enrolled in Medicare by January 1st, 2015, they would no longer be offered post-65 retirement benefits, which include a Medicare supplement, prescription plan, and life insurance plan. GE claims they had taken this action to remain competitive. The beginning of 2005, all newly hired GE employees were told that they would not be permitted to participate in the GE pension plan. Again, GE claims it was necessary to remain competitive. When asked if the supplementary pension plan, a plan reserved for the privileged few, would continue after January 1st, 2005, the answer from GE was, yes, it was necessary to remain competitive.
When GE was asked why they do not end the practice of phantom dividends, GE answer was, you guessed it, we need to be more competitive. Is it possible, Mr. Chairman, that the only way the General Electric company can remain competitive is to take benefits away from employees and retirees who make, design, and sell GE products and give even more to among those of the three of you on the stage? Really. This past election season, we heard quite a bit about the makers and the takers. I ask GE shareowners to consider who at the GE company are truly the makers and who are the takers. Thank you.
Thanks, Kevin. Ms. Borelli?
Were you going to answer his question?
No, he had a proposal for the board.
Good morning. I'm Deneen Borelli. I'm with FreedomWorks. I'm a shareholder. Mr. Immelt, GE has benefited from the fiscal cliff deal where there were wind production tax credits, and GE has also taken a substantial amount in grants and government contracts. My question to you is, do you stand for free market, or do you stand for government support when it comes to companies that are profitable, are turning a profit, and issuing dividends?
Again, we run a global company, globally competitive company. Our sales to the government are less than 3% of our total revenue, 55% of our industrial company is outside the United States. We try to compete and use the same rules of every other company in the U.S.
By using our tax dollars, how dependent is the wind production? How dependent is the wind energy industry regarding General Electric without government assistance? How dependent would that industry be?
Our customers would be better off answering that question, the cost of-
You're the CEO.
Our customers are the ones that really have the benefits there. Cost of electricity is probably $0.07 or $0.08 a kilowatt hour now.
Is much more higher than it would be for fossil fuel.
Half of the revenue is outside the U.S., it'll find its fit.
Regarding the wind energy product that you produce, you're gaining the benefit from the government propping up that industry, which clearly can't stand on its own, does General Electric highly depend on government support in order to produce those products and sell them?
Again, we make the products, we'll see where they fit in the market.
You're not for a free market, you prefer government support.
We make the technology. We'll see where they fit.
Thank you.
Thank you. We'll now move to the six shareholder proposals in the order that they appear on the agenda. We have six shareholder proposals being presented. The first proposal asks the board to cease all executives stock option and bonus programs, was submitted by Mr. Timothy Roberts of Louisville, Kentucky. The second proposal relates to director term limits and was submitted by Dennis Rocheleau of Fairfield, Connecticut. The third proposal requests that the board have a policy that the chairman be an independent director and was submitted by the American Federation of State, County and Municipal Employees. The fourth proposal relates to shareholder action by written consent, was submitted by Mr. William Steiner. The fifth proposal requests that senior executives retain a significant percentage of GE shares until reaching retirement age. It was also submitted by Mr. Steiner.
The sixth proposal relates to multiple candidate elections was submitted by Mr. Martin Harangozo of Louisville, Kentucky. We ask that the presenters confine their comments during this portion of the meeting to the subject matter of the proposal being presented, We ask that the other speakers wait until all the shareholder proposals are presented before providing their comments. We will have an opportunity for discussion of other matters after we have finished the balloting and report of inspectors of election on the voting results. Let me begin with Mr. Timothy Roberts, who I believe is here today to present proposal number 1. Mr. Roberts? Good morning.
Good morning. My name is Tim Roberts. It's great to be here. Please turn to the back of the annual report to the performance chart on page 143. The market is at near record highs, yet our stocks, our dividends, and our earnings are trailing like a caboose. When the company underperforms the market, bonuses are paid. This is accomplished by taking the company nearly bankrupt, according to Forbes, then claiming a slight recovery as an outperformance to the market. Purchasing agents can be told to beg GE suppliers to raise prices, harming net income and performance to produce trading and recovery opportunity. Trading patterns show that both Mr. Welch and Mr. Immelt made enormous amounts of money on options and trading GE stock. Collectively, they earned hundreds of millions doing this. Welch and Immelt become rich utilizing the shareholders as useful idiots.
Their inside trading, even if legal, is outperforming the buy and hold shareholders. Shareholders do not have the same inside control, and we lose money. Again, see the GE performance chart on page 143 in fine print. Welch said to the Financial Times effectively that much of GE valuation was unsustainably driven by debt. Welch did not, however, return to the GE shareholders the hundreds of millions he collected in creating that GE bubble. Welch and Immelt kept their money as shareholders lost their shirts. Again, see page 143. Given the size of the valuation declines and dividend declines, and Welch's acknowledgment that debt-driven profits are not sustainable, profit increases should only offer salary increases when profits increase with debt simultaneously decreasing.
Increasing the profits by increasing debt continues the insanity, as Welch discussed in the Financial Times. As my home address is on the proposal, I have received correspondence from several shareholders. All have been positive. One wrote that he lost both his shirt and his underwear. Shareholders, I urge you to make proxy recommendations and ask me if you need any help in doing so. The proposal: the board of directors are requested to consider voting a cessation of all executive stock option programs and bonus programs. If you look at the chart on page 143, Mr. Immelt, you see that $100 invested in the market becomes $109. You see $100 invested in the Dow becomes $114. Yet we see $100 invested in GE become $69. This raises questions collectively for you, Mr. Immelt. Would you rather have $69 or $109? How does $69 outperform $109?
Will GE catch up to the market beginning your tenure? Why is the GE performance chart in the back of the book and not in the front of the book? Next year, will you put the performance chart in the front of the book? Finally, can you chart the GE performance to the market since your tenure in the front of the annual report? Please vote yes for proposal number one. Thank you.
Thank you. I understand that Dennis Rocheleau will present proposal number two. Dennis?
Thank you, Jeff. Contrary to the ad hominem argumentation of attorney Mueller and his associates at Gibson, Dunn & Crutcher, this proposal is pure process, and GE's obduracy is its wellspring. That said, I'll reserve my time for another matter.
Okay. I believe that Mr. John Keenan is here to present proposals number three, four, and five. Mr. Keenan?
Yes. Thank you. Fellow share owners and members of the board, my name is John Keenan, and I'm representing the AFSCME Employees Pension Plan and co-filers Missionary Oblates, Congregation of the Sisters of Charity of the Incarnate Word, Congregation of Divine Providence, Benedictine Sisters of Mount St. Scholastica, and Benedictine Sisters of Virginia. I hereby move share owner proposal three, asking the company to adopt a policy that the chairman of the board be an independent director. We believe an independent board chair provides a better balance of power between the CEO and the board and supports strong independent board leadership and functioning. The proposal boils down to preventing an inherent conflict of interest. It's the board's job to monitor the CEO, and the chair's job to run the board.
If the CEO is also the chair, then he or she is effectively in charge of monitoring his or her own performance. We believe that independent board leadership would be constructive here at General Electric, where our chairman and CEO, Jeffrey Immelt, has served in both positions since 2001. According to Forbes 2012 rankings of pay efficiencies for CEOs serving at least six years, Mr. Immelt was named one of the worst CEOs for pay for performance, ranking 200 out of 206 for executives who delivered the most to shareholders relative to their total compensation. Our company states that according to the 2012 Spencer Stuart Board Index report, 77% of the S&P 500 do not have an independent chair. Saying everyone else is doing it does not make it right. The Spencer Stuart surveys clearly indicate an increasing trend toward independent board leadership in the U.S.
The same 2012 report found that 43% of S&P 500 companies split the chair and CEO roles, up from 35% in 2007. It also shows 21% of boards now have a truly independent chair, which is more than double the 10% found in 2006. Our board argues that splitting the roles of chair and CEO would have the consequence of making our management and governance processes less effective than they are today through undesirable duplication of work and, in the worst case, lead to a blurring of the clear lines of accountability and responsibility. We strongly disagree. Combining the positions clearly blurs the lines of accountability and responsibility. It's the board's job to provide oversight of the CEO, and the chair's job to run the board.
When the CEO is also the chair, as is the case here, then he is effectively in charge of the oversight of his own performance, which is an obvious conflict. An independent board chair presents a culture shift to the U.S. imperial CEO model, this goes to the heart of corporate governance. Who runs the board and what's the board's role? Is it to work on behalf of shareholders or work on behalf of the CEO? We maintain it should be to work on behalf of the shareholders. Proxy advisor Glass Lewis supports this proposal, stating that an independent chairman is better able to oversee the executives of a company and set a pro-shareholder agenda without the management conflicts that a CEO or other executive insiders often face, leading to a more proactive and effective board of directors.
We believe that independent board leadership would be in shareholders' best interests and urge shareholders to vote for this proposal. Thank you.
Thank you. Will you do number four and number five as well? Thank you.
We also do number five.
Great.
On behalf of the proponent of share owner proposal four, I hereby move share owner proposal four, asking our company to provide the right to act by written consent. Thank you. On to five. On behalf of the proponent, I hereby move share owner proposal five, asking our company to implement a stock retention policy to require executives to retain 25% of shares gained through equity programs through retirement. The idea here is that by requiring our executives to hold their shares, this will better align executive interests with those of the shareholders. Thank you.
Thank you very much. I understand that on proposal number six will be presented by Martin Harangozo. Martin? Good morning.
Good morning. My name is Martin Harangozo. I am grateful to be a shareholder. I love this company, people, and products. I own more voting shares than more than half of your directors and directors' nominees. Equal Imagination is a proposal on proxy without spending one penny for postage. General Electric, a $100 billion-plus net asset company, 12 digits, growing to a historical market average, will gain an additional seven digits in 200 years, making 19 digits. A one-time 1% donation, 17 digits, would give each person today much more than $1 million. Two centuries of intelligent monetary growth can forever change the world financially, permanently eliminating millenniums of persistent poverty and illiteracy. No more biblical poor Lazarus. As Lazarus becomes a millionaire, the $1,000-dollar shareholder becomes a deca-billionaire. The pensioner is whole. We can give the public this much.
Today, we use more steel and build larger ships than ever. Yet one time largest shipbuilder, Bethlehem Steel, led by charming CEOs, guided by rigorously directed cozy directors with impressive credentials, went bankrupt as Warren Buffett did not bail them out. Bethlehem Steel did not see its underperformance to market as an opportunity to harness the market until it could once again lead the market. It simply went bust. Millenniums of commerce and centuries of equity growth teach us that debt-free indexing should enable General Electric to perpetually grow, exceeding three digits each century. All of history shows that any plan short of this will likely not achieve such growth. Something always goes wrong. Somebody will borrow too much. Financial saviors as Buffett are rare. A U.S. housing crisis occurs when 99.2% of average Americans make good on their 30-year mortgages.
Our board, likely all multimillionaires, did not protect a dividend six months after doing so, promising to do so. Dividend cuts and share depreciation hurt the poor elderly widow much more than a wealthy director. If the oak does not grow to the sky, growth can be earned in the saplings. The dividend debacle should be met with the words never again. Debt-free companies paying half of earnings in dividends will not default on dividends. We can lend to many nations but borrow from none. Alice Schroeder writes regarding Buffett's Berkshire Hathaway, "The board members may as well be Barbie dolls." Buffett has criticized his ineffectiveness as a board member. Presidential elections, on the other hand, teach spirited competition. This creates the world's greatest economies. Single candidate director elections should be improved.
My dear fellow shareholders, I bring a plan with a date to add seven digits to the company's performance while reducing risk. If you like such a plan, you should vote for those directors that present a plan meeting such investment objectives in our report. This is recommended by Buffett's mentor, late Benjamin Graham, in Security Analysis. This requires a choice in director elections. Please vote for multiple candidate elections, proposal number six.
Thanks, Martin. Let's move on to agenda item number four, balloting. Remember, we'll provide an opportunity for discussion on 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, and I'll ask the ushers to collect it. Wait, see if there's We'll make sure to get you a There we go. While that's happening, let's move on to the next agenda item. I believe the Inspectors of Election are ready to announce the outcome of the voting. Let's go to the inspectors' report. Mr. Michael Barbera of IVS Associates will be presenting the report on the inspectors. Mr. Barbera, do you have a report for us?
Mr. Chairman, the Inspectors of Election have completed an initial tally of the votes cast at this meeting in person or by proxy. Proxies representing approximately 8 billion, 27 million shares, or 77.4% 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 announce the following results. On the election of directors, each director received at least 5.2 billion favorable votes, and all nominees have been elected. On the management proposals, the advisory approval of our named executives' compensation for 94.5% of shares voted against 5.5%. On the ratification of selection of independent registered public accounting firm for 97.4% of shares voted against 2.6%. On the share owner proposals, number 1, the cessation of all stock options and bonuses for 4.4% of shares voted against 95.6%.
Director term limits for 5.9% of shares voted against 94.1%. On the independent chairman for 24.7% of shares voted against 75.3%. The right to act by written consent for 21.7% of shares voted against 78.3%. Executives to retain significant stock for 29.3% of shares voted against 70.7%. On the multiple candidate elections for 3.9% of shares voted against 96.1%. Mr. Chairman, this initial tally is subject to verification, and the final tabulation may reflect small changes in the vote I've 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. This concludes the formal business of our annual meeting, but we now turn to questions and discussion on other business matters, which is agenda number 6. We've already heard comments on the issues raised in this year's proposal. We'll try to give other shareholders who have not spoken a chance to discuss the other matters which might be on their minds. If you wish to speak, please come to one of the two aisle microphones and wait to be recognized. Please remember to give your name when you're recognized. Is there anyone that would like to discuss an issue? Go to microphone number 2. Yes, sir.
Yes. Mr. Immelt, stockholders. I'm Ron Flowers. I'm President of the Retirees Association in Erie, Pennsylvania. We talked about some history today about how the company's making it pretty well. They're painting a fairly rosy picture. According to the information that the company gave the union in 2006, the retirees, 81,000 retirees, hourly employees averaged $625 a month in a pension, while a surviving spouse is getting about $300 a month. These retirees received a structural increase in 2007 and a 13th check in 2011. Didn't do a whole lot for that $625 a month, but it was well accepted. Even with these, you can see they don't have a lot to live on. The retirees groups across the country used to bring in proxies. We used to bring, as a retirees group, collect proxies and bring them in to be voted at the meeting.
In 2006, I brought in almost a half a million shares to be voted from 248 people. At the stock price at that time, $40, they were worth over $19 million. This sounds like a lot of money. Wrong. This was an average per retiree of 1,997 shares, or $79,880 per person at $40 a share. For many, this was a total life savings. This also gave them a quarterly income from their dividends of over $600 a quarter, $2,400 a year. This could pay property taxes and many other things. This was money that they could count on. What happened? Suddenly, the stock was under $7, and their total savings went from $79,000 down to under $14,000. These are all averages, but these are the averages that the company reported to the union. The dividend went from $0.31 to $0.10.
When you're on a fixed income, a loss like this is devastating. The $2,400 they had counted on was suddenly under $800. How do they make up a 30% reduction in this income? Over $600 they have no more. What do they do? They sell their stock at $7 a share, cut out essentials, get a job. The average age at one of my meetings is approximately 72 years old, so that option is out. I have been told that many of them sold the stock. On top of that, they went for years without Social Security increase, the cost of food, utilities, and many other things still went up. Here we are, five years after the crash, and the company is almost back to normal, except for the stock, of course. Everything is great. Everything's looking up.
You have even said in recent press releases that you have up to $12 billion, that's with a B, in cash, and you're looking for investments. I have a suggestion. Why don't you invest in the people who built your company, your retirees? I can remember in the Erie plant in the mid-'70s, the management, Rick Richardson, was in charge of the plant back then. He came to us and he says, "We have this modular locomotive that we want to put into production and see if we can take some of the share away from EMD." At that time, we had 15%. By the mid-'80s, we had 85% of the business like we do today, and EMD had 15%.
I got all around the plant in my job, I can never remember Reggie Jones or Jack Welch or any of the board of directors in that shop making locomotives. We made the locomotives. We turned it around. It was our sweat, it was our labor that turned it around and made this company what there is today. Yeah, we did that for you. Your retirees have not recovered. The devastation that happened in the crash is still affecting them. Your retirees were hit hard. They need to be bolstered by a substantial structural raise in their pensions, pointed towards the people with the smallest pensions. Help them out because they are the people that turned your company around.
Thanks, Ron.
Thank you.
Thank you, Ron. Microphone number 1. Yes, sir.
Good morning. My name is Justin Danhof. I'm representing the National Center for Public Policy Research. We're a free market think tank and a company shareholder. I appreciate the opportunity to speak with you today. Mr. Immelt, last September, the Milwaukee Business Journal reported that ObamaCare's 2.3% excise tax on revenues of medical device companies could cost GE Healthcare Services between $100 million and $150 million per year. GE is one of the largest lobbyists in the medical device arena, and surely you recognize the market evils of this tax. Currently, lawmakers from both sides of the political aisle support revoking it. They just differ on the means to do so. I want to present you with a financially responsible proposal to accomplish repeal of the Medical Device Excise Tax, and I hope you will support it.
GE is the market leader in wind turbine production, a market that relies heavily on federal subsidies. The Joint Committee on Taxation estimates that the production tax credit for wind will cost the American taxpayers $7.8 billion between 2013 and 2017. However, some believe, even some within the alternative energy industry, that these subsidies are providing perverse incentives that hamper wind energy's true potential. Writing in "The Wall Street Journal," Patrick Jenevein, CEO of the Dallas-based Tang Energy Group, explained that, quote, "As long as these subsidies and tax credits exist, clean energy executives will likely spend most of their time pursuing advanced legal and accounting methods rather than investing in studies, innovation, new transmission technology, and turbine development." End quote. Would you support a financially responsible proposal that would repeal the Medical Device Tax while simultaneously putting an end to federal wind subsidies?
Doing so could save this company $ hundreds of millions in the coming years from the Medical Device Tax and would help move wind energy towards true marketplace competitiveness. I'd like to hear what you have to think about that.
Really, it's the first I've heard of it. It's interesting. I'm not going to commit one way or the other today, but I will tell you we'll continue to invest in R&D around wind turbines, and we want to have the most efficient wind turbines that are available anywhere in the world. Thank you. Kevin.
My name is Kevin Maher. I spoke before, 19 years at the annual meeting. I'd just like to say a moment of silence in honor of those people that were maimed in the Boston Marathon. The shirt I have on was worn by a marathoner and of course, asked a question and asked us to say, "Hey, GE, we need a cost of living in our pension plan," which is what Ron was talking about. That was a tragedy in Boston. I just want to have a moment of silence. Just as the board of directors were brought up and they were introduced on what they have done for the company, I would ask for every GE retiree here to stand up because just as Ron said, we're the people that have made this company the company that it is. A round of applause.
I want to thank you, Jeff, for attending that meeting we had in Fairfield, Connecticut. We've been having annual meetings with your team, John Lynch, Mike DeSantis, you yourself attended the last time out. In that process of talking about retiree problems, we actually have solved a number of GE problems that by talking, we can get something done. I'm looking forward to that kind of problem meeting again this year, and I hope you can make it. If you can, you can. If you can't, you can't. Just like the Hoyts at the Boston Marathon, our retirees have the determination to increase benefits and pensions for GE retirees. Thank you.
Thanks, Kevin. Do we have mic 1?
Yes.
Yes, sir.
My name is Joe Madeo, I'd just like your comments on the risks involved with attacks on your proprietary property in countries like China and what you're doing to mitigate those risks. How does that compare with domestic operations? Thank you.
We believe in the right protection for intellectual property rights. We're very careful when we invest around the world in China and every other country. We believe our patent portfolio is critical to the future of the company. Dennis, let me turn to you on mic two.
Thank you, Jeff. I'm Dennis Rocheleau of Fairfield, Connecticut. According to Bill Freeda, one of the privileged few, according to the recent proxy vote, Mr. 5.9%. As much as I want to improve corporate governance, the character of GE, as demonstrated by its treatment of its employees and retirees, is of even greater importance to me. As I wrote to you personally, Jeff, the company's September announcement that it was breaking certain retirement healthcare benefit promises was deeply disturbing to me. I asked you for a seat at the table before I was put on the menu. Being afforded none, I have crashed this venue. The lawyer in me acknowledges that Section 5.4 of the 2012 Benefits Handbook for GE pensioner healthcare options at age 65 gives the company the right to amend the retiree healthcare plans for any reason.
The changes set forth in John Lynch's September 2012 letter are so dramatic and utterly surprising to some GE retirees and long-service employees that I feel compelled to repeat the words of Edmund Burke that I quoted in a different context five years ago in Erie. It is not what a lawyer tells me I may do. It is, but what humanity, reason, and justice tell me I ought to do. The proposal at issue constitutes a sea change in company behavior contrary to all reasonable expectations and experience. It gives little consideration to recent retirees now left with no GE post-retirement, post-65 healthcare, who made irreversible retirement and financial decisions based on the GE benefits described in their retirement papers. Papers which made no reference to the possibility that this coverage could be terminated for any reason.
That company executives would propose such actions and the board would approve them is astonishing to me, given the absence of financial imperatives such as impending bankruptcy or several years of unprofitable performance. Even wildly escalating healthcare expenses for the company. When the initial notice of this evisceration did not even attempt to quantify the financial impact on the average salary employee or retiree and the concomitant enrichment of the company, I knew the news had to be very bad for current and future retirees. That lack of courage, candor, and transparency on the company's part was frankly insulting. A passion for cutting excessive costs is an admirable quality if honestly expressed and intelligently administered.
Branding commitments to long-service employees' legacy costs does not give a company license to fleece retirees while countenancing the use of chartered or company aircraft to shadow the global express on certain international trips. Where's the competitiveness in that? I am fortunate enough to enjoy a substantial pension, for which I worked for 36 years, and I value every penny. Being asked to shoulder an unanticipated $50,000 bill and additional future costs is something of considerable consequence to even me. For many other near and current retirees, the financial impact of losing coverage they counted on is much, much greater. In the case of some married future retirees who will lose eligibility for retiree life insurance, the value is $125,000 or more. If anyone here today would like a more vivid description of this pernicious nature of this change, see me after the meeting.
Suffice it to say that the change, which reduced the company's post-retirement health and life benefit liability by $832 million, comes with a high personal price tag for each of thousands of current and future retirees. I believe I had earned my benefits. What I did not appreciate is how fragile a purchase I really had on them. Naively, I believed the mantra I mouthed on behalf of GE at the bargaining table over three decades to representatives of tens of thousands of employees and retirees, promises made by GE are promises kept. In retrospect, I did not perform as well as I thought I had. I failed to live up to my standard of being candid and forthright with union representatives, whom I always respected, even when I often disagreed with them.
Several efforts to establish a reasonable dialogue with the company about this decision, to understand the context and justification for it, and to explore acceptable alternatives to it, have been rejected. The protocols of fair treatment for loyal, long-term salaried employees that I believe should exist have been unceremoniously abandoned. In the eyes of many retirees to whom I have spoken, most of whom are shareholders, the company defaulted on its obligations, turned its back on its traditions, and renounced its oft-stated integrity values. Accordingly, I would like very much to have answers to three questions, which in the interest of giving others the time to talk about issues of importance to them, I will submit to you in writing with the expectation of a reply.
For now, I ask only this: where in your view does the process of benefits reduction logically end other than at the trust fund-protected portion of our pensions? Thank you.
Great, Dennis. Thank you. Microphone number 1.
Good morning. Greg Ronhord, shareholder, I think 3,800 shares. Question for Mr. Sherin. Mr. Sherin, you're the one made a lot of statement regarding the dividend. Okay, will you acknowledge that that dividend is not even close to what was paid in the fourth quarter of 2008?
That's correct.
Okay. There's a lot of questions there, okay? You've gone on about that the dividend's this, we're doing this, we're doing that. Something is wrong if there's a cut and we've still not even been restored to what the original dividend was.
Yeah, we're still working on improving the performance of the company and growing the dividend as we grow those earnings.
Okay, and it does bring another question of what were you doing with the business at the time that you would put it in that kind of a situation that the dividend gets whacked that hard and it still hasn't been restored?
We did have a significant financial services business, and we ended up with a lot of stress in the financial crisis, as did many others. I think we've come out of it stronger than almost anybody else, and we've got a great business going forward.
We put $23 billion into the financial service business, as I mentioned.
Right. I'd asked you
out in the lobby.
Right.
That's really the answer.
Well, there's another question, though, regarding all that is the idea that, okay, as a capital allocator, which I am, I make different investments in different companies. I did not deal with this with Johnson & Johnson or Procter & Gamble or Coca-Cola or McDonald's or Walmart. They all raised their dividend. The question comes, what was going on and what were you all doing that you could not continue the dividend? There's a lot of questions there.
We understand.
Okay
financial crisis, money went into GE Capital. We very much look forward to continuing to increase the dividend.
Okay.
Thank you very much.
Okay, Ron, one more.
Just a quickie. I would be remiss if I didn't say something. The Erie plant of General Electric Company makes the best locomotives in the world. We have for a lot of years and about a year and a half ago, the company gave the Erie plant an award for being one of those most profitable, long-time contributors to the company. That same time that they gave this award, they said, "Oh, yeah. By the way, we've started building this plant in Texas to build locomotives. You don't have to worry because the only thing we're going to use this plant for is overflow if there's too much work for this Erie plant that does such a good job and makes us so much money." Well, about three weeks ago, they announced that, "Oh, yeah.
By the way, we're going to move the number one brand-new line for locomotives out of Erie to Texas." That kind of sounds like you're speaking with a forked tongue. I'm speaking for the membership in Erie when I'm saying it's wrong. This is our company. The people in Erie that work for our company, we had two to 3,000 people that rallied at the gate the other day. You are taking a known quantity, a known entity, moving it to Texas, and who knows what's going to happen after that. I believe it's wrong. I think it should stay right where it is. We need the-
Thanks, Ron.
1,000 jobs that you say you're eliminating in Erie.
Thanks. Thanks, Ron. Thank you. Again, thank you this morning. New Orleans has been a great host to this shareholders meeting. We thank everybody for their time and attention this morning. Again, we feel very good about how the company's positioned. Thanks for all of your great support. The meeting is adjourned. Thank you.