The mixed legacy of the late GE czar Jack Welch

Jack Welch in 2012

From Robert Whitcomb’s “Digital Diary,’’ in GoLocal24.com

Jack Welch, a brilliant son of Salem, Mass., who never let anything get between him and a camera, has died at 84. He helped amplify the myth of the superman, imperialist CEO as he built up the vast conglomerate through acquisitions and divestitures (including of throngs of employees). His focus on “shareholder value’’ above all else, and enriching himself beyond all the dreams of avarice, was impressive, as was his charismatic showmanship. He made a lot of money for shareholders during his reign and they naturally loved him for it.=

But some of his big bets, especially in making GE more of a finance company than anything else, turned out very bad for the company in the long run, after he retired, in 2001. Indeed, more than a few of his decisions look in retrospect to have been dangerously unsustainable. But while he reigned, he reveled in a cult of personality, which gave him a monarchial lifestyle, including in retirement – paid for, of course, by his beloved shareholders, many of whom were unaware of his extreme compensation and privileges.

Some of the things he did were financially necessary, such as closing some not very profitable Rust Belt factories and moving the operations to cheap-labor countries. More problematic was that he cut funding for research and development in order to maximize short-term profits – bad for GE’s very long-term health and so bad for America. He also pushed back against public pressures to make the company clean up some of the horrific industrial pollution it caused.

“Neutron Jack” (so named because of his enthusiasm for firing people) could be amusingly hypocritical. For instance, in 2009, long after his retirement, he called “shareholder value” (above all else) a “dumb idea’’ and said that corporate executives’ “main constituencies are your employees, your customers and your product.’’ But during his 20-year reign at GE, its stock price took precedence above all else.

Still, I’ll miss his TV and other performances.=

A sentence in a New York Times editorial in 2001 summed up Welch’s work well:

“His legacy is not only a changed G.E., but a changed American corporate ethos, one that prizes nimbleness, speed and regeneration over older ideals like stability, loyalty and permanence.”

Jeff Spross, a writer for The Week, opined: “Focusing on shareholder value and stock market capitalization ultimately turns a company into an abstraction, its life sustained by financial flows that are less and less connected to the underlying fundamentals of the company — its workers, its resources, its infrastructure, the real needs it provides to the people it serves. When the good times end and the money dries up, what's left of the company may not be able to stand on its own.’’

Maybe, but in any case, now-Boston-based General Electric seems back on the road to long-term prosperity again.

Under new management, now-Boston-based GE is trying to recharge its finances.

Photo by Raysonho @ Open Grid Scheduler / Grid Engine