It’s a problem that Jeffrey Immelt largely ignored as he tried to appease General Electric Co.’s most vocal shareholders.

But it might end up being one of the costliest for John Flannery, GE’s newly anointed CEO, to fix.

At $31 billion, GE’s pension shortfall is the biggest among S&P 500 companies and 50% greater than any other corporation in the U.S. It’s a deficit that has swelled in recent years as Immelt spent more than $45 billion on share buybacks to win over Wall Street and pacify activists like Nelson Peltz.

Part of it has to do with the paltry returns that have plagued pensions across corporate America as ultra-low interest rates prevailed in the aftermath of the financial crisis. But perhaps more importantly, GE’s dilemma underscores deeper concerns about modern capitalism’s all-consuming focus on immediate results, which some suggest is short-sighted and could ultimately leave everyone -- including shareholders themselves -- worse off.

“It’s a clear tension,” said Olivia Mitchell, a professor at the University of Pennsylvania’s Wharton School and executive director of the Pension Research Council. “Buybacks clearly use assets available not to fund the pension promise but to make shareholders happy.”

In GE’s case, lavish shareholder rewards failed to deliver outsize returns and leave Flannery with less room to maneuver. Not only must he boost profits, shore up its cash flow and contend with its flagging oil services and transportation businesses, but the 30-year GE veteran also needs to pay close to $50 billion in pension obligations that come due in the next decade.

 'Significant Decline'

“Given the significant decline in interest rates and volatile financial markets that resulted in lower asset returns from 2008 to 2009, the company has been actively managing the pension liability,” said GE spokeswoman Jennifer Erickson. She added that in 2017 and 2018, the Boston-based company plans to contribute a total of $3 billion to its pension. GE’s primary plan covers about 467,000 people and is one of the biggest in the U.S.

Nobody is suggesting that GE (IW 500/6) is in imminent danger of defaulting on its pension obligations and many analysts say the company still has years to address the bulk of its shortfall. What’s more, a rising rate environment helps GE winnow its pension deficit by boosting its expected return.

But if nothing else, balancing the competing interests of its shareholders and employees has proven to be especially hard for GE. Immelt began ramping up GE’s buybacks in 2015, shortly after Peltz’s Trian Fund Management took a stake in the industrial giant and recommended the company step up the repurchases to boost its stock price. GE bought back about $23 billion that year and then $22 billion in 2016. Last year’s total was more than double the amount GE spent in 2013, data compiled by Bloomberg show.