General Electric Co. has agreed to pay its new chief executive, Larry Culp, as much as $21 million a year for four years—with the potential for hundreds of millions of dollars more if he oversees a big enough boost in GE’s share price.
Mr. Culp, a company board member who succeeded John Flannery in GE’s top job, signed an agreement with the company that pays him $2.5 million a year in salary and an annual bonus with a target of $3.75 million, the company said in a securities filing after the market closed on Thursday.
He will also receive annual equity awards valued at $15 million starting next year, the company said. Those awards will consist of “performance share units,” which typically vary in number based on corporate financial and operational measures over time.
The big payoff, however, will come if GE’s shares rise at least 50% and stay there, on average, for 30 trading days between now and autumn 2022. A 50% increase from his Oct. 1 start date would push GE’s stock to just over $18 a share.
Reaching that threshold would bring Mr. Culp 2.5 million shares, which—at those prices—would be worth just over $45 million. If the share price rises at least 150% for 30 trading days—to about $30 a share—Mr. Culp would receive 7.5 million shares, or $227 million at that price.
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GE shares closed Thursday at $12.66, up 18 cents on the day, or 1.4%, and were up another 0.2% in after-hours trading.
GE didn’t specify how shares would be awarded between those thresholds or the performance measures for Mr. Culp’s annual equity awards, and it didn’t include Mr. Culp’s employment agreement with the Thursday disclosure. The filing said Mr. Culp’s equity awards would be adjusted as appropriate to reflect spinoffs or capital restructuring, and his employment agreement would include unspecified terms that would apply in the event of a change in control.
In a statement, the company stressed that nearly 90% of Mr. Culp’s annual pay is made up of bonus and equity pay that “strongly ties his compensation to producing results for investors,” and that he will receive the one-time equity grant only with significant share-price improvement.
“Larry is a proven executive with a long track record of superior execution, and the Board’s package to attract Larry is overwhelmingly tied to performance,” the company said.
If Mr. Culp is fired without cause—or leaves with “good reason,” a term that typically includes such developments as demotion—he stands to receive $12.5 million in severance.
In its securities filing, the company suggested it had yet to settle the terms of Mr. Flannery’s departure. “The material terms of Mr. Flannery’s separation agreement will be disclosed once they have been finalized,” according to GE.
Mr. Flannery, who was promoted to CEO midway through 2017, made $9 million last year. On promotion, his salary was set at $2 million and his bonus target at $3 million. GE said Mr. Culp’s base pay is higher because he is coming into the job as a more seasoned executive.
From his start as CEO at Danaher in the early 2000s until his departure was announced in 2014, Mr. Culp was known for big but not outsize pay packages, compensation analysts say. From 2006 through 2013, he made between $17 million and $22 million a year, except in 2009, amid the worst of the financial crisis, when he made $11 million.
His pay tended to run about 25% to 35% above the norm for CEOs running peer companies, such as 3M Co. , Baxter International Inc., Honeywell International Inc. and Medtronic PLC, said John Roe, head of ISS Analytics, the data intelligence arm of Institutional Shareholder Services. He received substantial stock-option grants well after many companies had shifted more emphasis to restricted and performance-based stock grants, Mr. Roe said.
Write to Theo Francis at theo.francis@wsj.com