Fascinating piece in the New York Times by columnist David Gelles, based on his book “The Man Who Broke Capitalism," which looks to re-evaluate the influence of Jack Welch, the influential former CEO of GE.
"During Mr. Welch’s two decades in power — from 1981 to 2001 — he turned G.E. into the most valuable company in the world, groomed a flock of protégés who went on to run major companies of their own, and set the standard by which other C.E.O.s were measured.
"Yet a closer examination of the Welch legacy reveals that he was not simply the 'Manager of the Century,' as Fortune magazine crowned him upon his retirement.
"Rather, he exerted a powerful and lasting influence on American business, informing how workers are treated, how shareholders are rewarded and how C.E.O.s comport themselves in an increasingly divisive age. When Donald J. Trump is elected president, when Jeff Bezos argues about inflation with the White House, when Elon Musk negotiates his $44 billion deal to buy Twitter by using the poop emoji — this is the world that Jack Welch helped create."
Gelles goes on:
"Almost immediately after Mr. Welch retired in September 2001 with a $417 million severance package, G.E. went into a tailspin from which it would never recover.
His pupils, though, went on to run dozens of other major companies, including Home Depot, Albertson’s, Chrysler and Boeing. Most of them failed.
"And in the decades since Mr. Welch assumed power, the economy at large has come to resemble his skewed priorities. Wages stagnated and jobs moved overseas. C.E.O. pay went stratospheric and buybacks and dividends boomed. Factories closed and companies found ways to pay fewer taxes.
"Beyond his enduring influence on the economy, Mr. Welch also redefined what it meant to be a boss, personifying an aggressive, materialistic style of management that endures to this day."
"G.E. was worth $14 billion when Mr. Welch became C.E.O., just months after Ronald Reagan took office. Not long before Mr. Welch retired, just days before Sept. 11, 2001, the company was worth $600 billion, the most valuable company on Earth.
"But the ways in which Mr. Welch created so much shareholder value often did more harm than good.
"He was a compulsive dealmaker, fueling G.E.’s growth with a relentless series of mergers and acquisitions that took G.E. far from its industrial roots and set in motion a wave of corporate consolidation that would reduce competition in industries as diverse as airlines and media.
"He closed factories and fired employees by the tens of thousands, unleashing a series of mass layoffs that destabilized the American working class. He devised systems like 'stack ranking,' which mandated that the bottom 10 percent of workers be fired each year, and took root at other companies. And he embraced offshoring and outsourcing, sending labor overseas and turning to other companies to provide back-office functions like accounting and printing."
You can read the article here.
- KC's View:
Anyone who covers retail is aware of the former GE executives who proved themselves to be clueless when it came to running retail businesses - specifically Larry Johnston who when he didn't get the GE top job went off to screw up Albertsons, and Robert Nardelli, who did his best to screw up Home Depot.
Admittedly, I have a bias - I like CEOs who understand that retailing is part art, part science, and part math. I like CEOs who have a sense that in a business that so much depends on people, especially on the front lines, a nurturing leadership is critically important. I like CEOs who focus not just on shareholders, but on stakeholders.
I'm looking forward to reading Gelles' book.