Wednesday, September 7, 2011

A Lesser Yet Important Decennium

It was a tough week to start one's tenure at the helm of America's flagship corporation.  But, Jeffrey Immelt took charge on September 7, 2001 of GE, General Electric, the Dow Jones 30 behemoth that purports to "bring good things to life."  He succeeded legendary CEO Jack Welch just days before the twin towers fell.

In the heyday of the imperial CEO, none wielded more clout, cast a bigger shadow, threw a larger wake or garnered more accolades than Jack Welch.  Dubbed "Neutron Jack" for his propensity to eliminate people while leaving the buildings in tact, Welch forcibly pushed GE and led corporate America out of the low-growth era of organizational loyalty and trust into the ever-plasticizing hyper-growth mutations of the technological revolution.  He is celebrated for engineering a cultural shift that enabled America's giant corporations to play nimbly on the international field of commerce in a period of great flux.

Famous for dismissing considerations extraneous to financial ones (e.g., cash, ROI), and for his vitality index (annually eliminating the bottom-ranked 10% of employees), Welch made his stockholders and employees rich and they loved him for it.  It was said of GE employees that the bullet was fired the day they were hired; it was just a matter of when it would catch up to them.  Yet, they stayed to be slain, to die wealthy and to have played for the Yankees of business.

Ironically, Welch was a long-time GE employee who slit the gizzard of the paternalistic institution that nurtured him, in a way impossible to fathom in a Richard Hackborn or Lew Platt at HP.  (They reached outside the company for their torpedo, Carly Fiorina.)  When he tired of his wife of 30 years, he dumped her with only slightly less ceremony than he did GE lifers.  His second wife, an M&A lawyer lasted 14 years.  His third, Suzy Wetlaufer, began an affair with him while serving as Editor-in-Chief of the Harvard Business Review and writing a piece about him for the magazine.  They co-wrote his book "Winning" in 2005.  

It's a fitting title, as Welch's tenure in the limelight of corporate America marked a decided shift to a Philistine view of governance and management that financial victory by any means necessary was the only strategic goal worth pursuing.   Welch's legacy is complex, and he must be given his due for reforming entitlement expectations in big corporations.  On the other hand, his machinations legitimized the bonus mentality among executives who felt entitled to fete at the trough of redundancy savings.  At the end of the day, he stood for nothing more so than the proposition that people were expendable, profitably eliminable; it was numbers and things you could count and touch that really mattered in business.  The subjective dimension of work might take precedence over its objective dimension in Papal encyclicals.  But, at Jack Welch's GE and on Wall Street, they knew better.

Which brings us to Jeffrey Immelt, a disciple of Jack's even if not his equal at the je ne sais quoi of being a CEO, or guru.  GE's stock price is down 60% since he took over, even though GE has been one of the most profitable companies in America over that period of time.  It's been a tough decade.  But, one can't help suspect that it's Immelt's business model that is the problem.  Welch was ferocious in his determination to "fix it, close it, or sell it," anything to be #1 or #2 in whatever business was at issue, and to dispel the curse of mediocrity.  Immelt's business model seems to be to hook GE's lips up to the udders of government and to suck the taxpayers dry while jockeying in his capacity as a crony capitalist to lobby for tax breaks.  It's very profitable; it's just not very forward-looking, or growth-oriented.  That is, unless, one considers the government to be the primary driver of growth in the future.  Immelt's proximity to President Obama, and his bully pulpit as jobs czar, make it appear that he has placed his shareholder's chips on that assumption.  Noman's guess, and the market's apparently, is that he is wrong.  Personally, Noman considers Immelt's big government, big corporation fixed-at-the-hip posture to be corporatist abomination, a betrayal of the American spirit and a threat to the middle class.

GE Capital jumped into the mortgage market with both feet, and was forced in 2008 to pose as a bank in order to get Treasury Secretary Hank Paulson to throw the company a lifeline.  GE suffered a near-death experience during Immelt's watch--it's stock price plummeted into the $5/share range--when liquidity froze and his essentially industrial company suffered the same plight as the big banks.  Immelt's hat is back on, but his hand is still out.

In July, he lectured the Chamber of Commerce on behalf of the Administration that is picking its pocket and shackling its members. "The people who are part of the business sector, the people in this room, have got to stop complaining about government and get some action underway," he told the group. "There's no excuse today for lack of leadership. The truth is we all need to be part of the solution." Such words coming from a man with cozy political relations scream "I've figured out how to get mine; now shut up, get in line, and figure out how to get yours." Presumably, that's his idea of leadership.  His exhortations reduce the stature of corporate chieftains rather than lift the President's credibility, or establish his pro-business bona fides.  Whether Jeffrey Immelt is Barcak Obama's useful idiot, or vice-versa, Noman isn't sure.  But, he doesn't expect this to turn out well for business given the admonition widely attributed to Thomas Jefferson that a government big enough to give you everything you want is big enough to take away everything you have.

In Noman's opinion, neither Jack Welch nor Jeff Immelt have brought good things to life.  It must have been hard for Immelt to become an executive in Jack Welch's laboratory, a place with no fixed moorings or limits save the imperative to conquer at the expense of any and every principle or scruple.  Jeff's just got a different way of going about it than Jack did.  As for economic inspiration and a jobs agenda, Noman prefers looking to GE's former corporate spokesman, Ronald Reagan.  It is said that President Reagan's years working on behalf of GE converted him from a Hollywood liberal into a free market advocate of limited government.  Jeff Immelt would do well to review the Gipper's experience rather than exploit his past association with the company in order to divert attention from what GE has become during his decade-long reign.  A proud legacy is a sad thing to waste.  

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