GE Adds Trian Co-Founder to Board, Stock Price Tumbles Anyway

Industrials

Published: October 9, 2017 11:05 am

Last Updated: January 12, 2020 7:23 am

CEO John Flannery continues to make waves at General Electric Co. (NYSE: GE). After replacing three top executives last Friday, the company announced Monday morning that the co-founder of activist investment firm Trian Fund Management has been added to GE’s 18-member board of directors.

Trian’s chief investment officer, Ed Garden, has been named to the board to replace Robert Lane, who is retiring after 12 years according to GE’s announcement. Trian invested $2.5 billion in GE two years ago and has been agitating for changes ever since.

Trian is also just a day away from a vote in its proxy fight with another Dow Jones Industrial Average member. Procter & Gamble Co. (NYSE: PG) shareholders vote Tuesday on a proposal by Trian that would add activist investor Nelson Peltz to it board. Peltz recently called the proxy battle on which P&G has spent $100 million to keep him off the board “probably the dumbest thing I ever did.” Trian owns about $3.5 billion in P&G shares.

In GE’s announcement of his election to the board, Garden said:

Like other GE shareholders, I am disappointed by the recent performance of GE’s stock. But I continue to believe that GE represents an attractive long-term investment opportunity with significant upside. We will remain focused on enhancing long-term value for GE shareholders. I have been impressed by John Flannery and I am excited to work with John and the rest of the Board in the same way that I’ve worked at other companies where I’ve been invited to join the board — collaboratively and with the common goal of driving long-term value for all shareholders.

On Friday, GE announced that Chief Financial Officer Jeff Bornstein would leave GE on December 31 and that new CFO Jamie Miller will take over on November 1. Chief Marketing Officer Beth Comstock will retire effective December 31 and no successor has been named. Finally, Vice Chairman John Rise will also retire effective December 31.

JPMorgan analyst Stephen Tusa was not impressed by the executive changes, calling them a “clear negative,” according to a report at MarketWatch. Tusa rates GE as Underweight.

None of this flurry has done anything to lift GE’s share price. The stock traded $23.61 early Monday, barely above the bottom of the 52-week range of $23.58 to $32.38. The 12-month consensus price target is $28.07.

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