Case study of General Electric Co

General Electric can trace its roots to the founding of the Edison Electric Light Company in 1878. By 1890, Edison had organized his various businesses into the Edison General Electric Company. The Thomson-Houston Company and the various companies that had merged to form it were led by Charles A. Coffin. In 1892, these two major companies combined to form the General Electric Company. GE is a global manufacturing, technology, and services conglomerate, formed in 1892. Today, GE is made up of six businesses, each of which includes a number of units:

GE Commercial Finance provides loans, operating leases, financing programs, commercial insurance, and an array of other products and services aimed at enabling business worldwide to grow.

GE Healthcare is a leader in the development of a new paradigm of patient care dedicated to detecting disease earlier and helping physicians tailor treatment for individual patients.

GE Industrial provides a broad range of products and services throughout the world, including appliances and lighting; plastics and silicones products; and equipment services.

GE Infrastructure is one of the world’s leading providers of fundamental technologies to developing countries, including aviation, energy, oil and gas, rail and water process technologies.

GE Money, formerly known as GE Consumer Finance, is a leading provider of credit services to consumers, retailers and automotive dealers around the world.

NBC Universal is one of the world’s leading media and entertainment companies in the development, production and marketing of entertainment, news and information to a global audience.

As per their last annual report at the end of 2008,at the end of the year they employed in total globally 323000 employees. $797,769 millions in assets 182,515 millions in revenues.

Stakeholder Relations

GE is a public company listed on the New York Stock Exchange and incorporated in the State of New York. The company is managed by a 16 member Board of Directors, of which 13 of the directors are independent. Directors are chosen annually at the annual meeting of shareholders. Four committees assist the Board: the Audit Committee, Management Development and Compensation Committee, Nominating and Corporate Governance Committee, and the Public Responsibilities Committee. The Public Responsibilities Committee oversees the company’s position on corporate social responsibility. GE also has a team of Corporate and Business Executives who lead GE’s many corporate functions and businesses. GE has very strong equitable shareholder control. Each share of the common stock is entitled to one vote. Shareholders are able to nominate and elect candidates for the Board of Directors through a majority. Also, GE’s code of conduct, The Spirit and The Letter enables shareholders to initiate a process of dismissal of Directors.

Within Organisation

External

Employees

Customers

Senior Management

Shareholders

Board Of Directors

Suppliers

Shareholders

Government Representatives

Audit Committee

Non-Governmental Organizations (NGOs),

Management Development And Compensation Committee

Industry And Financial Analysts

Nominating And Corporate Governance Committee

Environmental Advocacy Groups

Public Responsibilities Committee

Media

Environmental, Health And Safety Committee

Community Leaders

Citizenship Executive Advisory (CEA) Council

Ecomagination Advisory Council

Investors

Investors

Table Key Stakeholders

GE’s Board of Directors and GE’s Risk Committee play vital roles in the oversight and management of the Company. From this senior leadership they are held with great accountability. The primary role of GE’s Board of Directors is to oversee how management serves the interests of shareowners and other stakeholders. To do this, GE’s Directors have adopted corporate governance principles aimed at ensuring that the Board is independent and fully informed on the key risks and strategic issues facing GE. This is dictated by two-thirds of its Board be independent under a strict definition of independence. The GE Board held 13 meetings in 2007 and outside Board members visited at least two GE businesses each in 2007 without senior management present in order to develop their own view of the Company. The Board also meets periodically without management. The Board and its Committees focus on the areas that are important to shareowners strategy, risk management, and people and in 2007 received briefings on a variety of issues, including: controllership and risk management, compliance and litigation trends, U.S. and global tax policy, environmental risk management, social cost trends, acquisitions and dispositions, intellectual property and copyright protection, global trends, the reshaping and broadening of GE’s businesses, and productivity. At the end of the year, the Board and each of its committees conduct a thorough self-evaluation as part of their normal governance cycle.

Table Power v Influence MatrixKeep Satisfied

Employees

CEA

Environmental, Health and Safety Committee

Public Responsibilities Committee

Ecomagination Advisory Council

Manage Closely

Senior Management

Board of Directors

Management Development and Compensation Committee

Audit Committee

Monitor

Media

Government Representatives

Non-Governmental Organizations

Community Leaders

Keep Informed

Investors

Shareholders

Industry and Financial Analysts

Environmental Advocacy Groups

Suppliers

Power

Influence

Low

High

High

Low

Senior GE officers, including the Citizenship Executive Advisory (CEA) council, are regularly involved in reviewing stakeholder feedback. This group meets at least quarterly and reviews summary stakeholder feedback and issues important to the Company’s citizenship efforts to ensure that the appropriate actions and resources are in place. The CEA is comprised of five senior GE executives. GE makes a commitment to transparency in its citizenship reports where the Vice President of Corporate Citizenship and the General Counsel ensure transparency of non-financial information. GE provides training on transparency to all employees as part of induction training as well as e-learning training that deals with compliance to policies and integrity. The citizenship reports are widely disseminated and translated to further encourage participation of its stakeholders. GE makes commitments to engaging with external stakeholders in its citizenship reports, which outline the types of engagements the company undertakes. They started the reports in 2005 and are now into their fourth. GE is currently developing a company-wide approach to stakeholder engagement called, materiality. Stakeholder engagement depends on the functionality of a department, for example, with citizenship-related engagements (i.e. NGOs or public policy groups) the Vice President of Corporate Citizenship over sees external stakeholder engagement. GE provides training to managers and executives on how to interact with stakeholders as part of the business Management and leadership classes.

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They have formalised engagement where they have institutionalized external stakeholders’ involvement in corporate decision making on environmental and social issues. GE has an Ecomagination Advisory Council comprised of a Board of 6 to 8 industry thought leaders with expertise in energy and environment. The Council guides the company on technology research and investments, provides new ideas on its environment strategy, helps generate or review white papers, and participates in GE sponsored events. GE’s Ecomagination business strategy guides the company’s evaluation of its environmental impact. The strategy aims to achieve energy-efficient, less emissive products, and achieves this through the use of the Ecomagination Product Review score card. The score card quantifies a product’s environmental impact relative to other products. Ecomagination product revenues increased from $12 billion in 2006 to $14 billion in 2007, which as a percent of overall company-wide revenue is 23% in 2007. In the current discussion global climate change, the environment is a hot topic now and will for the forseeable future for stakeholders. The main stakeholders that can be linked with this are the ecoimagination, environmental organizations, EHS. They will increasingly expect policies and strategies with real results and commitment to reduce detrimental environment impacts. They will therefore have a great deal of influence currently and will do for some time. They can increasingly apply pressure on the company to materialize its efforts. No doubt he GE is already tackling these issues but with these external stakeholders great power will arise as they influence employees to take responsibility and increased products on the ecomagination scheme. GE already state they have increasing product line in the pipe line.

This is also a media frenzy topic which is reported on daily, environmental issues can see a hole host on stakeholders mainly external influence the the senior management and BOD, these include the media, government representatives, which will influence the community and thus individual shareholders and investors. Not only will they influence the internal operations of the company but in tern the GE will guide its suppliers so no conflict of interest if they are not doing all they can to alleviate environmental issues and are seen to be responsible.

GE also has the Environment, Health and Safety (EHS) Policy, which ensures consistent global standards for evaluation methods. GE provides training to operations leaders on the overview on EHS policy through Plant Manager Training. Of the Ecomagination and EHS policy are both widely circulated, but Only Ecomagination material is translated. However of the mechanisms to facilitate the sharing of lessons learnt from evaluations is not in place and thus contradicts the approach of external stakeholders to lead the environmental issues.

GE has the Statement on Principles of Human Rights, which commits the company to monitoring its suppliers’ adherence to EHS standards in emerging markets, prohibitions against forced and child labor, local wage and hour laws; evaluating human rights issues; and assessing the impact of major infrastructure project financing on local communities. The Vice President of Corporate Citizenship oversees the reporting and evaluation of GE’s social impact while different leaders have varying responsibilities depending on the issue. For example, the General Counsel has the responsibility for compliance, governance, and ombudsperson. GE does not provide training to staff on evaluation of social impacts of their activities. Companies like GE with global supply chains face significant challenges in order to ensure that their suppliers make safe and quality products, and that they are produced on time and at competitive prices. In addition, stakeholders increasingly expect companies and their business partners to respect and implement national and international labour and environmental standards in their workplaces. This challenge becomes even greater when companies source suppliers from countries without adequate government enforcement. While the policing model of the past has made some positive improvements, it has been relatively unsuccessful at identifying the core issues. This has created a duplication of efforts, contributed to a proliferation of codes of conduct that create confusion, and has largely been an ineffective use of resources. Adding to the dilemmas are some unanswered questions, including: How will competing companies in the growing economies of Brazil, Russia, India, and China manage their supply chains in relation to international labour standards? Do consumers see the value of investing in supply chains and, if so, are they willing to potentially pay more? Today’s leading companies and multi-stakeholder initiatives are changing tack and beginning to focus their efforts on five areas:

Improving management systems

Developing effective complaint mechanisms and workplace remediation platforms

Evaluating internal purchasing to determine how their own actions may negatively impact the workplace

Increase supply chain transparency

Creating incentives for their buyers and suppliers based on social and environmental performance criteria

This shift in approach requires collaboration from a broad set of stakeholders because no one sector can effectively achieve this alone. Companies should learn from the hard lessons of the past, avoid the pitfalls that others have experienced, and consider targeting resources on building internal capacity to work in partnership with NGOs, trade unions, multilaterals, peer companies, and industry and trade associations to tackle these complex issues together. Moreover, companies and their stakeholders should collectively engage governments and encourage them to enforce their laws in order to make decent work a reality and to create a level playing field for multinational companies and for those suppliers competing for their business.

GE has the code of conduct called The Spirit and The Letter, which guides the handling of internal complaints. GE also has a Global Ombudsperson system where ombudspersons are placed in every business and country where GE operates to facilitate compliance and the complaints process. The Spirit and The Letter have the commitment to ensure mandatory discipline for anyone found to have retaliated against a whistleblower. The Corporate Ombudsperson has the overall responsibility to oversee compliance with the code. GE provides all ombudspersons with training on receiving concerns, initiating investigations, and monitoring case progress and closure. Employees receive compliance training through the intranet. This also encompasses complaint and response procedure for external complaints. GE’s 2007 proxy statement highlights a mechanism that exists for external stakeholders to lodge complaints directly to the Board of Directors. The Corporate Ombudsman also oversees compliance with commitments made in the proxy statement, and will pass any concerns to the Audit Committee of the Board of Directors. Ombudspersons are trained on receiving and handling concerns from external stakeholders. GE’s code enables any stakeholder to report concerns of corporate policies and strategies directly to the Board of Directors.

With the many commitments and programs and committees in place GE keep their stakeholders mainly employees informed with reports. They have proxy statements, citizen reports, annual reports which are widely disseminated and translated. They also have key policies that are made easier accessible such as human rights statements. Not all endeavours are translated and circulated but the majority are. Environmental and social aspects are reported on and also compensation of the senior management and executive directores, CEOs are all transparent. If this was not the case this could easily alienate lower level employees and other stakeholders. With the information available stakeholder board have also been issued the task of evaluating report writing on annual and citizenship reports. They concluded in the 2008 citezen report that

GE utilized a Stakeholder Review Panel to assess and comment on report quality. Ongoing stakeholder engagements have enabled the Company to determine the impact and influence of its corporate citizenship efforts. The Panel’s commentary is intended to inform and guide report readers, as well as GE. Six people were invited by GE to join the Panel, identified in

discussion with AccountAbility, the latter acting as the Panel

Convener. Panel members were selected for their interests

and concerns, their expertise and their knowledge of GE.

Panel members were asked to participate as individuals, not

as representatives of their organizations, Environment & Social Development

Department at the International Finance Corporation, HSBC Climate Change Centre of Excellence. The Panel provided feedback to GE based on a draft report, and

the commentary based on its view of the final report. The Panel

focused on the quality of the report, although members raised

some performance issues in discussion with GE. The Panel’s

commentary, presented here, is intended to inform and guide

the report readers, as well as GE. Use was made of the AA1000

Assurance Standard, but the Panel’s work is not a formal

assurance exercise.

Background to the 2008 Convenings

This year we sought to reflect on our progress concerning the

implementation of our Statement of Principles on Human Rights

as well as our broader ecomagination and development efforts,

and further explore the links between GE’s operations and

the broader human rights agenda. In particular, we convened

experts and stakeholders in three regions to discuss:

􀃞 How can GE further advance the implementation of the

Company’s global Human Rights Policy, and in particular in

relation to our role as a global Olympics sponsor at the 2008

Beijing Olympic Games; in other words, “What does it mean

to be a good global citizen?” (Geneva)

􀃞 How can GE further embed its environmental stewardship

work within the core of its strategy and practice, expanding

its efforts outside the United States and also connecting its

efforts to the broader development agenda? (Washington, D.C.)

􀃞 How can GE advance an effective approach to serving

communities in the developing world in light of the Company’s

unique position in providing infrastructure solutions to the

private and public sectors? (Delhi)

To learn more about GE and stakeholder participants for these

convenings, please visit www.ge.com/citizenship/processes.

Insights from the 2008 convenings

GE greatly appreciated the honest and open discussions at the

three convenings. Valuing the counsel and advice we received,

we would like to share a summary of the key opportunities and

challenges the convenings helped us identify and explore.

We discuss many of these opportunities and challenges within

this year’s report and are looking forward to further engagement

over the coming year to help us inform and guide our citizenship

approach and efforts. To provide the reader with a flavor of the

discussions at the convenings, this report also features a number

of (unedited) expert perspectives authored by participants of

the convenings. Insights include:

Climate change public policy

Clear and consistent communication, including recommendation

and clarification of effective and credible global policy

frameworks, engaging in national and local debates on trade

policies, and customer engagement on clean technology

(Washington, D.C.).

Company-to-country investment

Leveraging innovation and product adaptation driven by local

culture and context (Delhi).

Customer product-use issues

Clarification of GE’s approach to client responsibility of GE

products, including increased engagement with society

on key concerns such as dual-use technology and post-sale

management (Geneva, Delhi, Washington, D.C.).

Expanding boundaries

Engaging experts as GE continues to operationalize its Statement

of Principles on Human Rights and consider a life-cycle approach

for GE’s products as GE applies its efforts to help reduce CO2

emissions within its supply chain (Geneva, Washington, D.C.).

Human rights

Increased public positioning on business issues associated with

the emerging and ongoing human rights discussions and

proactive engagement as they arise, e.g., 2008 Beijing Olympic

Games (Geneva).

Localizing engagement

Greater understanding of the implications arising from GE’s

unique position as a business-to-business company providing

infrastructure solutions to countries (from technology

development to local implementation) (Delhi, Washington, D.C.).

Strategic collaborations and partnerships

Leveraging of GE’s core competencies and strengths

(commitment to innovation and ability to scale projects and

programs) in strategic collaborations and partnerships to

ensure acceptance and sustainability (Delhi).

The Panel encourages GE to continue innovating in its reporting,

and we challenge it to strive for leadership in promoting meaningful

transparency across the global business community.

ô€ƒž Injecting sustainability into financial reporting: This year’s

Citizenship Report has demonstrated the strategic relevance

of GE’s programs for its long-term business performance.

These material aspects of sustainability management and

innovation should be incorporated into regular investor

disclosure, including quarterly and annual reports as well

as in proxy statements.

􀃞 Embedding citizenship within operations: We would welcome

transparency on how sustainability performance is brought

to life for individual GE employees through performance evaluation

and compensation.

ô€ƒž Matching global reporting with national level data: Utilize GE’s

Web site to provide country-level performance data and information

for global stakeholders, including insights and outcomes from

key stakeholder and business engagements, especially in high

growth regions such as Asia.

􀃞 Discussing public policy engagement: Further strengthening

of disclosure on GE’s public policy activity and lobbying on

key citizenship issues at the global and national level, including

membership organizations that represent GE. Consider making

all submissions to governments available on the Web site.

ô€ƒž Exploring human rights: Shine a brighter spotlight on GE’s

human rights approach and practice, and illustrate its thoughtfulness

in approaching challenging dilemmas. As operationalizing

GE’s human rights policy around the globe is particularly

complex, this area does not lend itself to quantitative goals, but

to case studies and an active discussion of the dilemmas and

nuances central to the human rights challenges the Company

faces. For example, the illegal use of GE’s ultrasound equipment

for sex-selection by practitioners in India or application of GE’s

global labour rights standards within its supply chain in challenging

environments like China. Further information on steps the

Company has taken to align its performance with its human

rights policies would enrich the Report.

ô€ƒž Progressing the “Energy and Climate Change” Agenda:

Deepening of reporting on the Company’s contribution to the U.S.

Climate Action Partnership’s commitment to 60-80% reduction

in U.S. emissions by 2050 – how, on a practical level, GE plans to

help achieve these goals via technology adaptation or expansion

of ecomagination.

􀃞 User-focused reporting: Experiment and explore how best to

reach and communicate with the company’s diverse range

of stakeholders, especially those with particular, set interests

or those who may have limited access to the Web.

ge

Public responsibilities

Companies confront many dilemmas when conducting

business, in rich or poor countries alike, when defining their

role in communities: understanding the proper role of governments

and the “right” level and quality of influence from

companies that are sometimes larger than governments

themselves; the need to respect different cultures but still

make sure that the same values are applied all around the

world; the need to have an educated workforce that fits in the

company’s processes while trying not to change local

cultures; expectations that companies will provide for all; and

disappointment when companies need to close plants or

leave communities.

Much has been written and discussed about the impact of

multinationals on communities. Stakeholders have many

different views and perceptions, and there is little agreement

about how to measure impacts, both positive and negative.

I think, however, that there are two basic questions that

companies need to answer:

1. Are we really listening to the stakeholders who are actually

impacted at every step of the value chain of our business?

2. What are communities going to be like when our company

leaves?

Many stakeholder dialogues are going on around the world,

and it is certainly a remarkable and great step to have

companies like GE – whose sheer size allows them to have

significant positive impacts when defining their course of

work – listening to diverse views and exchanging ideas with

non-business partners. They are, however, mostly focused on

stakeholders who speak English or belong to organized

groups with some international affiliation. Maybe it could be

good to actually exchange ideas with the impacted communities

themselves to form a more complete picture.

Companies should come into communities planning for the

time when they leave, be it two years or 70. Hopefully, that

way one can avoid creating dependency and promote

ownership from day one. It is probably more complex to start

and carry business with this view, but it is surely better to

prevent risks than to manage crises.

Public Policy

GE has increasingly focused on deepening and improving its ability

to work effectively with governments throughout the world. We

firmly believe that a better understanding of GE’s vision and business

activities – and government’s impact on those pursuits – will serve

both parties well. Moreover, we have made a concerted effort to

enhance our working relationships with government officials.

The rules governing governmental transactions and advocacy

activities differ from country to country, and can be varied and

complex. Our total commitment to integrity has led us to

continuously educate GE leaders on changes in the rules and

regulations governing interactions with government officials.

The Public Responsibilities and Audit Committees of the Board

are briefed regularly on our government relations and compliance

activities.

I spend much of my time travelling internationally and

meeting people at every level within and outside GE.

Our strong commitment to corporate citizenship makes

GE a very attractive place for lawyers to work. My ability

to attract the best lawyers and maintain the legal team’s

strong internal sense of community is greatly assisted by

the fact that the Company is committed to promoting the

Rule of Law and is actively working with governments and

communities to promote ethical behaviour. GE lawyers

are inspired and motivated knowing that such a strong

commitment runs through the veins of the Company.

Global Initiative to Combat

Nuclear Terrorism

In 2006, the U.S. and Russian governments launched the

Global Initiative to Combat Nuclear Terrorism. As a global

citizen, GE is deeply concerned that every safeguard be

taken to ensure that legitimate commerce in nuclear

materials is not exploited by terrorist organizations. As a

global producer of nuclear power plants, nuclear fuels,

radioactive isotopes for healthcare applications, and

radiation detection equipment, GE has the experience and

expertise to make a substantial contribution to this goal.

In 2007, GE worked with the U.S. Department of State to

express support for the Global Initiative, and in 2008,

we will participate actively in several projects, including

the development of a model national nuclear detection

architecture document; international cooperation in

developing technical approaches to remotely detect

radiological materials; and minimizing the use of highly

enriched uranium in the production of medical radioisotopes.

Countries of concern

GE devotes significant resources to ensuring that business

activities are in compliance with all applicable laws, that

they are conducted with integrity and achieve value for

our shareholders worldwide. While our policy has always

required that our businesses follow U.S. sanctions and other

applicable laws, in 2008 we adopted a policy that goes

beyond what current laws require. In light of reputational

and business risks associated with doing business with

countries designated as State Sponsors of Terrorism by the

U.S. Department of State (Cuba, Iran, North Korea, Sudan,

and Syria), the Company will not accept business in these

countries except activity that is authorized by the U.S.

Government for humanitarian or public policy purposes.

This approach augments a policy adopted in 2005, when

GE and its board decided it would no longer do business

in Iran because of developing conditions in that country.

The exceptions were to run down existing commitments

and humanitarian activity authorized by U.S. Government

licenses. Since then, GE has done everything it said it would

do in 2005. As of the end of June 2008, the preexisting

commitments with Iran have been completed. At all times

GE’s policy was fully compliant with U.S. and all applicable

laws. In fact, GE’s policies have been more restrictive than

U.S. law.

Recent sales to Syria have been very small, involving

healthcare products as well as non-U.S. origin power,

oil and gas, and lighting. In recent years, GE has had very

little activity in the Sudan, almost all involving the sale of

healthcare products. GE has not had any sales to North

Korea in the past three years. Since 1996, GE has not

accepted business in Myanmar (Burma).

Recommendations

GE is