While the rancor appears to have softened a bit, General Electric shareholders are still signaling to the audit committee that they want a new auditor.
GE filed a Form 8-K with the Securities and Exchange Commission indicating 721 million shareholder votes, or 11.3 percent of the total votes cast, call on the audit committee to replace KPMG as the company’s independent auditor. More than 5 billion votes, or 88.3 percent, supported retaining KPMG while 23 million, or less than 1 percent, abstained.
Any meaningful number of shareholders voting against the standing audit firm is considered a statement of no confidence in auditors, but the vote against KPMG in 2019 is lower than that in 2018, when 35 percent of shareholder votes indicated KPMG should be ousted.
GE said in 2018 its audit committee opened a tender process to determine whether it should replace KPMG. The firm says in its audit report it has served as the company’s auditor for more than a century, since 1909.
The audit committee said KPMG would serve as the company’s auditor for 2019, so any decision on whether to retain or replace KPMG would take place after that audit cycle is complete. The company said in a statement in 2018 that any decision about whether or when to replace KPMG would be based on “the progress toward completing the company’s previously announced portfolio actions.”
GE revealed in early 2018 that the SEC was investigating the company’s accounting practices after a $6.2 billion charge in late 2017 stemming from its GE Capital insurance portfolio. More recently, GE said the SEC expanded its investigation after the company took a $22 billion impairment charge to goodwill, most of which stems from the 2015 acquisition of the power and grid business of Alstom in France.
GE also disclosed earlier this year it reached “an agreement in principle” with the U.S. Department of Justice to pay a civil penalty of $1.5 billion related to its now-defunct WMC mortgage business. WMC was involved in originating and selling subprime mortgages in the lead up to the 2008-2009 financial crisis and subsequent recession.
Research firm Audit Analytics says GE’s disclosure represents only one of four so far in 2019 among companies with market capitalization above $1 billion that revealed a significant vote against auditor ratification in both 2018 and 2019. Three other companies with two consecutive years or more than 5 percent vote against auditor retention include Actuant Corp., Advanced Drainage Systems, and SalesForce.com.