Ask the investors and employees, past and present, at GE that question. Jeffery Immelt replaced Jack Welch as CEO. Immelt was Obama’s chief economic advisor from the private sector. I could probably stop right here. But, I won’t because the story is worth telling. We all know how often Liberals like to cite CEO pay vs. hourly personnel. And, the unions. Here’s a story that needs to be told. This is by Adam Hartung of Leadership.
“When Mr. Immelt took the CEO job GE shares traded for about $40/share. Last week GE was trading for about $25/share. A decline of 37.5%. During that same time period the Dow Jones Industrial Average, of which GE is the oldest component, rose from 9,600 to 17,900. An increase of 86.5%. This has been a very, very long period of quite unsatisfactory investor performance for Mr. Immelt.
Prior to Mr. Immelt GE was headed by Jack Welch. During his tenure at the top of GE the company created more wealth for its investors than any company ever in the recorded history of U.S. publicly traded companies. GE’s value increased 40-fold (4000%) from 1981 to 2001. He expanded GE into new businesses, often far removed from its industrial manufacturing roots, as market shifts created new opportunities for growing revenues and profits. From what was mostly a diversified manufacturing company Mr. Welch led GE into real estate as those assets increased in value, then media as advertising revenues skyrocketed and finally financial services as deregulation opened the market for the greatest returns in banking history.
Jack Welch was the Steve Jobs of his era. Because he had the foresight to push GE into new markets, create new products and grow the company. Growth that was so substantial it kept GE constantly in the news, and investors thrilled.
But Mr. Immelt – not so much. During his tenure GE has not developed any new markets. He has not led the company into any major growth areas. As the world of portable technology has exploded, making a fortune for Apple AAPL -1.16%
and Google GOOGL -1.16%
investors, GE missed the entire movement into the Internet of Things. Rather than develop new products building on new technologies in wifi, portability, mobility and social Mr. Immelt’s GE sold the appliance division to Electrolux and spent the $3.3B proceeds on stock buybacks.
Mr. Immelt’s tenure has been noteworthy for its complete lack of vision . Rather than looking ahead and preparing for market shifts, Immelt’s GE has reacted to market changes – usually for the poorer. Unprepared for things going off-kilter in financial services, the company was rocked by the financial meltdown and was only saved by an infusion from Berkshire Hathaway. Now it is exiting the business which generates nearly half its profits, claiming it doesn’t want to deal with regulations, rather than figuring out how to make it a more successful enterprise. After accumulating massive real estate holdings, instead of selling them at the peak in the mid-2000s it is now exiting as fast as possible in a recovering economy – to let the fund managers capture gains from improving real estate.”
From me.
What did Immelt do in quantifiable damage? GE’s market cap has fallen $460 billion since 2000. More than Enron lost and more than the combined losses by Lehman Brothers and General Motors.
There are 600,000 people who have pensions with GE, mostly hourly workers. GE’s pension obligations are underfunded by $30 billion on $100 billion in obligations. In 2015 GE stopped supplemental health care for many retirees. GE encouraged employees to buy GE stock with a 50% matching program. According to the Wall Street Journal, this is a typical retiree: “Ben Marruffo worked at a GE plan for 42 years until his retirement in 2008. He participated in the Savings and Security Plan and his stock has now lost 50% of the value when he retired.”
So, a CEO made a company arguably the best run company in the world and his replacement destroyed the same company. The destruction wreaked the most damage on the loyal employees who worked with Welch to make it great and retired. Plus the current hourly employees.
No wonder Obama took this country in the tank with Immelt’s help.
