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GE is removing half its board.
Reuters/Stephane Mahe
Dark days at GE.
BOARD GAMES

GE is firing half its board as a new CEO cleans house

By Oliver Staley

In June, General Electric’s board of directors ousted longtime CEO Jeff Immelt, replacing him with John Flannery.

Now, it looks like Flannery may do the same to half the company’s board.

Flannery, a 30-year company insider who is also GE’s chairman, plans on eliminating nine of the board’s 18 members, the company announced last week at a presentation to investors (pdf, page 5). He will add three new members, for a total of 12 directors, in an effort to introduce new perspectives while making the board less unwieldy.

Companies continually refresh board seats, but removing nine at once is virtually unheard of, particularly for a company as established as GE. The purge—along with last week’s announcement that it will cut the dividend and slash less profitable business lines—speaks to GE’s desperation in the face of pressure from investors. Immelt was pushed out in part because activist investor Nelson Peltz, who runs the Trian Fund Management, was displeased with his performance.

Trian executive Edward Garden was named to the GE board in October, and it’s clear he isn’t going to be axed. It’s less obvious which other board members will survive, and what effect Flannery’s plan will have on gender diversity on the GE board. The company’s three most senior directors are women: Andrea Jung, the former CEO of Avon; Susan Hockfield, the former president of MIT; and Rochelle Lazarus, the former chair of the Oglivy & Mather ad agency. Combined they have almost 48 years of experience on GE’s board.

Jung’s retirement from the board was already announced; if all three leave in the name of introducing fresh ideas, the board would be left with just two women. It’s been documented that activist investors are making corporate boards less diverse. Given GE’s much-publicized push to reach gender parity in its new hires for technical roles by 2020, the company should be thinking through the implications for boardroom diversity as it jettisons directors and chooses some new ones.

Update: This post has been updated to include a link to GE’s investors presentation.