Jack Welch

Through the 1980s, Welch sought to streamline GE. In 1981, he made a speech in New York City called "Growing fast in a slow-growth economy".[12] Under Welch's leadership, GE increased market value from $12 billion in 1981 to $410 billion when he retired,[13] making 600 acquisitions while shifting into emerging markets. Welch pioneered a policy of informality at the work place, allowing all employees to have a small-business experience at a large corporation.[8] Welch worked to eradicate perceived inefficiency by trimming inventories and dismantling the bureaucracy that had almost led him to leave GE in the past. He closed factories, reduced payrolls and cut lackluster units.[14]

Welch valued surprise and made unexpected visits to GE's plants and offices.[8] Welch popularized so-called "rank and yank" policies used now by other corporate entities. Each year, Welch would fire the bottom 10% of his managers, regardless of absolute performance.[15] He earned a reputation for brutal candor. He rewarded those in the top 20% with bonuses and employee stock options. He also broadened the stock options program at GE, extending availability from top executives to nearly one third of all employees. Welch is also known for abolishing the nine-layer management hierarchy and bringing a sense of informality to the company.[16]

During the early 1980s he was dubbed "Neutron Jack" (in reference to the neutron bomb) for eliminating employees while leaving buildings intact.[17] In Jack: Straight from the Gut, Welch stated GE had 411,000 employees at the end of 1980, and 299,000 at the end of 1985. Of the 112,000 who left the payroll, 37,000 were in businesses which GE sold off, and 81,000 were reduced in continuing businesses. In return, GE had tremendously increased its market capitalization. Welch reduced basic research, and closed or sold off under-performing businesses.

In 1986, GE acquired RCA.[18] RCA's corporate headquarters were located in Rockefeller Center; Welch subsequently took up an office in the then–GE Building at 30 Rockefeller Plaza (now called the Comcast Building). The RCA acquisition resulted in GE selling off RCA properties to other companies and keeping NBC as part of the GE portfolio of businesses. During the 1990s, Welch shifted GE's business from manufacturing to financial services through numerous acquisitions.

Welch adopted Motorola's Six Sigma quality program in late 1995. In 1980, the year before Welch became CEO, GE recorded revenues of roughly $26.8 billion and in 2000, the year before he left, they were nearly $130 billion.[13] By 1999 he was named "Manager of the Century" by Fortune magazine.[19]

Welch was passionate in making people GE's core competency.[20] There was a lengthy and publicized succession planning saga prior to his retirement among James McNerney, Robert Nardelli, and Jeff Immelt, with Immelt eventually selected to succeed Welch as chairman and CEO. His successor plan had always been a priority, as noted in his 1991 speech "From now on, [choosing my successor] is the most important decision I'll make. It occupies a considerable amount of thought almost every day."[21]

Welch's "walk-away" package from GE was not valued at the time of his retirement, but GMI Ratings estimates its worth at $420 million.[22]

He served as Chairman of The Business Council in 1991 and 1992.[23]

Upon his retirement from GE, Welch had stated that his effectiveness as its CEO for two decades would be measured by the company's performance for a comparable period under his successors. Welch had grown GE to over $450 billion in market capitalization, of which about 40% was in financial services.

Twenty years later, the company's market capitalization was only $200 billion, and Welch refused to discuss its decline, other than noting much of the decline had resulted from investments in real estate, and that his immediate, handpicked successor Jeff Immelt had to deal with the after effects of the September 11, 2001, terrorist attack.[24] The New York Times published a critical article in 2017, noting GE's stock price as overvalued under Welch because of the growth of the financial services sector, as well as describing the amalgamated corporation's decline in 16 years under Immelt, who likewise was one of the country's highest-paid managers and eventually sold off two of Welch's largest acquisitions, NBCUniversal and GE Capital.[25]

Under Welch's leadership, GE waged a twenty-year battle with the Environmental Protection Agency and New York State over polychlorinated biphenyls (PCBs) that the company dumped into the Hudson River at its capacitor products division plant in Hudson Falls, New York.

Welch disputed scientists who classified PCBs as forever chemicals that can cause negative health consequences.[26] The chemicals contaminated the aquifer beneath the plant to the point that the water was unusable for human consumption without treatment. New York State's Department of Environmental Consumption also advised people against eating fish from the river near the site.[27] He went on to call the Obama administration's prioritization of addressing climate change "radical behavior".[28]

According to BusinessWeek in 1998, Welch's critics questioned whether the short-term performance pressure he placed on employees may have led them to "cut corners", thus contributing to subsequent scandals over defense-contracting, and/or the Kidder, Peabody & Co. bond-trading scheme in the early 1990s.[8]

The following year, CEO Welch took issue with reclassification of GE in the Fortune 500 as a "diversified financial services company" rather than an "electrical equipment company", and by 2005 many had noted that the price-earnings ratios of the financial services sector were lower than that for GE.[29] In 2014, GE Capital (the company's major financial services branch organized during Welch's tenure) agreed to the largest credit card discrimination settlement in history, concerning many years of deceptive marketing as well as discriminatory credit practices.[30] After Welch's tenure, GE Capital had been labeled as "too big to fail" and had become regulated by the Federal Reserve. The retired Welch publicly praised his former firm's "slim-down" and return to being an industrial company.[29] In 2018, Welch discussed the different financial culture in Kidder, Peabody & Co., whose acquisition he arranged during his tenure at GE, and whose ethos was based on short-term bonus calculations.[24] Shortly before the settlement was announced, GE Capital renamed itself as Synchrony Bank; the spin-off took two years.

Welch also often received criticism for a lack of compassion for the middle class and working class. When asked about excessive CEO pay compared to ordinary workers (including backdating stock options, golden parachutes for nonperformance, and extravagant retirement packages), Welch labeled such allegations "outrageous" and vehemently opposed proposed SEC regulations affecting executive compensation. Countering the public uproar, Welch declared that CEO compensation should continue to be dictated by the "free market", without interference from government or other outside parties.[31]

Welch's income and assets came under particular scrutiny during his divorce from his second wife, Jane Welch, in 2001, for adultery with the woman who became his third wife. Court filings during the divorce described Welch's GE compensation, which led to a Securities and Exchange Commission investigation of the then-retired Welch's employment contracts with GE.[32][33]

In 1996, Welch and GE had agreed to a "retention package" worth $2.5 million, and which promised continued access after Welch's retirement to benefits he had received as CEO—including an apartment in New York, baseball tickets and the use of a private jet and chauffeured car.[32][34] Welch stated that he did not want more money, nor a more traditional stock package, but instead preferred to retain the lifestyle he had enjoyed as GE's CEO. According to a 2008 interview with Welch, he had filed the agreement with the SEC, and addressed the media attention and accusations of being "greedy" by renouncing those benefits.[34]

In 2012, Welch and his third wife, Suzy Welch, quit their business associations with Fortune magazine and Reuters news service after Fortune published an article which criticized Welch's tweet, shortly before the 2012 election, which alleged that the Obama administration manipulated certain economic statistics, as well as another article which elucidated the 100,000 jobs GE lost during his tenure as CEO.[35]

In 2009, Welch founded the Jack Welch Management Institute (JWMI), a program at Chancellor University that offered an online executive Master of Business Administration. The institute was acquired by Strayer University in 2011.[44] Welch had been very actively involved with the curriculum, faculty and students since the beginning of the institution.[45][46] JWMI's MBA program was recently named the number one most influential education brand on LinkedIn[47] and one of the top business schools to watch in 2016.[48] The program has also been named one of the Top 25 Online MBA Programs four years in a row (2017, 2018, 2019, 2020) by The Princeton Review.[49] Its goal is not to make money, but to build over time focusing on the quality of the program and increasing the number of students enrolled year after year.[50]

At GE, Welch became known for his teaching and growing leaders. He had taught at MIT Sloan School of Management and taught seminars to CEOs all over the globe. "More than 35 CEOs at today's top companies [were] trained under Jack Welch".[51] JWMI students had direct access to Welch and he hosted quarterly video conferences with his students.[51]

It is known that along with his video conferences, Welch created many video responses to messages on bulletin boards and answered individual emails. His investment in the university was also reflected in his interest in the institute's Net Promoter score (NPS). He administered surveys on satisfaction regularly and scrutinized the results to find scores that needed improvement. In an interview with Wired Academic, Welch explained the overall status of his MBA program, stating that the persistence rate of students continuing on to a second year had grown from 90% to 95%, and that JWMI turns away very few students in the admissions process. He also said that he would like better leadership training for MBA students.[52]

In his 2022 book The Man Who Broke Capitalism, journalist David Gelles argues that Welch's practices, including financialization, downsizing and mergers and acquisitions, have caused widespread damage to GE and many other large corporations and have contributed to the massive increase in income inequality in the United States since the 1980s.[83][84]