Jack Welch

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Jack Welch
BornJohn Francis Welch, Jr.
(1935-11-19) November 19, 1935 (age 76)
Peabody, Massachusetts, U.S.
ResidenceBoston, Massachusetts, U.S.
OccupationFormer CEO of General Electric
Author
Net worthIncrease $720 million (2006)[1]
Spouse(s)Carolyn Welch (1959-1987)
Jane Beasley Welch (1989-2003)
Suzy Wetlaufer Welch (2004-present)
 
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Jack Welch
BornJohn Francis Welch, Jr.
(1935-11-19) November 19, 1935 (age 76)
Peabody, Massachusetts, U.S.
ResidenceBoston, Massachusetts, U.S.
OccupationFormer CEO of General Electric
Author
Net worthIncrease $720 million (2006)[1]
Spouse(s)Carolyn Welch (1959-1987)
Jane Beasley Welch (1989-2003)
Suzy Wetlaufer Welch (2004-present)

John Francis "Jack" Welch, Jr. (born (1935-11-19)November 19, 1935) is an American chemical engineer, business executive, and author. He was Chairman and CEO of General Electric between 1981 and 2001. During his tenure at GE, the company's value rose 4000%.[2] In 2006 Welch's net worth was estimated at $720 million.[1]

Contents

Early life and education

Jack Welch was born in Peabody, Massachusetts to John, a Boston & Maine Railroad conductor, and Grace, a homemaker.

Welch attended Salem High School and then University of Massachusetts Amherst, graduating in 1957 with a Bachelor of Science degree in chemical engineering. He is a member of the Phi Sigma Kappa fraternity.

He received a M.S. and Ph.D at the University of Illinois at Urbana-Champaign in 1960.[3]

General Electric

Welch joined General Electric in 1960. He worked as a junior chemical engineer in Pittsfield, Massachusetts, at a salary of $10,500. While at GE, an explosion at the factory under his management blew off the roof of the facilities, and he was almost fired for that episode.[4] In 1961, Welch planned to quit his job as junior engineer because he was dissatisfied with the raise offered to him and was unhappy with the bureaucracy he observed at GE. Welch was persuaded to remain at GE by Reuben Gutoff, an executive at the company, who promised him that he would help create the small company atmosphere Welch desired.[5]

Welch was named a vice president of GE in 1972. He became senior vice president in 1977 and vice chairman in 1979. Welch became GE's youngest chairman and CEO in 1981, succeeding Reginald H. Jones. By 1982, Welch had dismantled much of the earlier management put together by Jones and led an aggressive simplification and consolidation initiative. One of his primary leadership directives was that GE had to be #1 or #2 in the industries it participated in.

CEO

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".[6] 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 old-line units.[7] Welch's public philosophy was that a company should be either #1 or #2 in a particular industry, or else leave it completely. Welch's strategy was later adopted by other CEOs across corporate America.

Each year, Welch would fire the bottom 10% of his managers. He earned a reputation for brutal candor in his meetings with executives. He rewarded those in the top 20% with bonuses and stock options. He also expanded the broadness of the stock options program at GE from just top executives to nearly one third of all employees. Welch is also known for destroying the nine-layer management hierarchy and bringing a sense of informality to the company.[citation needed]..

During the early 1980s he was dubbed "Neutron Jack" (in reference to the neutron bomb) for eliminating employees while leaving buildings intact. In Jack: Straight From The Gut, Welch states that 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 that GE sold, and 81,000 were reduced in continuing businesses. In return, GE had increased its market capital tremendously. Welch reduced basic research, and closed or sold off businesses that were under-performing.

In 1986, GE acquired RCA. RCA's corporate headquarters were located in Rockefeller Center; Welch subsequently took up an office in the now GE Building at 30 Rockefeller Plaza. 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 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. By 1999 he was named "Manager of the Century" by Fortune magazine.[8] In 2000, the year before he left, the revenues increased to nearly $130 billion. The company had gone from a market value of $14 billion to one of more than $410 billion at the end of 2004, making it the most valuable company in the world.

There was a lengthy and well-publicized succession planning saga prior to his retirement between James McNerney, Robert Nardelli, and Jeffrey Immelt, with Immelt eventually selected to succeed him as Chairman and CEO. Nardelli became the CEO of Home Depot until his resignation in early 2007, and until recently, was the CEO of Chrysler, while McNerney became CEO of 3M until he left that post to serve in the same capacity at Boeing.

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.[9]

Criticism

According to Businessweek, critics of Welch have questioned whether the pressure he places on employees may have led them to "cut corners", which may have contributed to controversies over defense-contracting, or the Kidder, Peabody & Co. bond-trading scheme in the early 1990s.[5]

Welch has received criticism for a lack of compassion for the middle class and working class. By his actions during acquisitions and wholesale shutdowns of GE business units Welch proved that his technique of only keeping the units your company is "good" at you can maximize ROI for the short term.[citation needed] Welch has stated that he is not concerned with the discrepancy between the salaries of top-paid CEOs and those of average workers. When asked about the issue of excessive CEO pay, Welch has said that such allegations are "outrageous" and has vehemently opposed proposed SEC regulations affecting executive compensation. Countering the public uproar over excessive executive pay (including backdating stock options, golden parachutes for nonperformance, and extravagant retirement packages), Welch stated that CEO compensation should continue to be dictated by the free market, without interference from government or other outside agencies.[10]

Welch's income and assets came under scrutiny during his divorce from his second wife Jane in 2001, after she included details in divorce papers of what she said he received as benefits from GE. Welch's contracts with GE were subsequently investigated by the U.S. Securities and Exchange Commission (SEC).[11][12] The retention package, worth $2.5 million, agreed upon by Welch and GE in 1996 promised him continued access after his retirement to benefits he received as CEO including an apartment in New York, baseball tickets and use of a private jet and chauffeured car.[11][13] These benefits were agreed upon in lieu of a more traditional stock package because, according to Welch, he did not want more money, preferring instead to retain the lifestyle he had enjoyed as CEO once he retired. According to an interview with Welch in 2009 this agreement was filed with the SEC. As a result of the media attention his divorce proceedings brought to his retention package, particularly claims that such a package made him look "greedy", Welch chose to renounce the benefits.[13]

After GE

Following Welch's retirement from General Electric, he became an adviser to private equity firm Clayton, Dubilier & Rice and to the chief executive of IAC, Barry Diller.[14][15] In addition to his consulting and advisory roles, Welch has been active on the public speaking circuit, and co-wrote a popular column for BusinessWeek with his wife, Suzy, for four years until November 2009. The column was syndicated by The New York Times.[15][16] In 2005, he published Winning, a book about management co-written with Suzy Welch, which reached #1 on The Wall Street Journal bestseller list,[17] and appeared on New York Times' Best Seller list.[14][15] Since January 2012, Welch and Suzy Welch have written a biweekly column for Reuters and Fortune.[18][19]

On January 25, 2006, Welch gave his name to Sacred Heart University's College of Business, which will be known as the "John F. Welch College of Business".[20] Since September 2006, Welch has been teaching a class at the MIT Sloan School of Management to a hand-picked group of 30 MBA students with a demonstrated career interest in leadership.[21]

In 2009, Welch founded the Jack Welch Management Institute, a program at Chancellor University that offered an online executive MBA degree. The institute was acquired by Strayer University in 2011.[22] Welch has been actively involved with the curriculum, faculty and students at the online business school since its launch.[23][24][25]

Personal life

He had four children with his first wife, Carolyn. They divorced amicably in April 1987 after 28 years of marriage. His second wife, Jane Beasley, was a former mergers-and-acquisitions lawyer. She married Welch in April 1989, and they divorced in 2003. While Welch had crafted a prenuptial agreement, Beasley insisted on a ten-year time limit to its applicability, and thus she was able to leave the marriage with an amount believed to be around $180 million.[26]

Welch's third wife, Suzy Wetlaufer, co-authored his 2005 book Winning as Suzy Welch. Wetlaufer served briefly as the editor-in-chief of the Harvard Business Review. Welch's wife at the time, Jane Beasley, found out about an affair between Wetlaufer and Welch. Beasley informed the review and Wetlaufer was forced to resign[27] in early 2002 after admitting to having been involved in an affair with Welch while preparing an interview with him for the magazine.

On March 11, 2010, Welch appeared as himself in the fourteenth episode of the fourth season of the hit NBC sitcom 30 Rock. In the episode, he governed the sale of NBC Universal to a fictional Philadelphia-based cable company, Kabletown, a parody of the actual acquisition of NBC Universal from General Electric by Comcast in November 2009.

Opinions

Jack Welch identifies as a Republican.[28] He is also a global warming skeptic.[29] Yet he has said that every business must embrace green products and green ways of doing business, "whether you believe in global warming or not...because the world wants these products."[30]

In an interview with the Financial Times on the Global financial crisis of 2008–2009, Welch said, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy... your main constituencies are your employees, your customers and your products.”[31]

In Fall of 2012 the U.S. unemployment rate was announced to have dropped from 8.1% to 7.8% with many hundreds of thousands of people re-entering the workforce. In a response posted on Twitter immediately after the new statistics were released Welch wrote, "Unbelievable jobs numbers...these Chicago guys will do anything...can't debate so change numbers."[32] In response to this comment Keith Hall, former BLS commissioner, said "to think that these numbers could be manipulated. ... It's impossible to do it and get away with it."[33]

See also

References

  1. ^ a b Storrs, Francis (March 2006). "The 50 Wealthiest Bostonians". Boston Magazine. http://www.bostonmagazine.com/articles/the_50_wealthiest_bostonians. Retrieved 2008-10-03. 
  2. ^ "Jack Welch: 'I Fell In Love'". CBS News. http://www.cbsnews.com/stories/2005/03/24/60II/main682830.shtml. 
  3. ^ John F. Welch, "Microscopic Study of Dropwise Condensation", Ph.D. Thesis, University of Illinois, 1961
  4. ^ "Failure 101: A class students could use". New York City: MSNBC. November 5, 2009. http://www.msnbc.msn.com/id/33673507/ns/us_news-education/. Retrieved 2009-11-09. 
  5. ^ a b "How Jack Welch Runs GE". Businessweek.com. 1998-05-28. http://www.businessweek.com/1998/23/b3581001.htm. Retrieved 2010-07-12. 
  6. ^ Betsy Morris, 'Tearing up the Jack Welch playbook' (11.7.2006) Fortune at CNNmoney.com
  7. ^ "Jack Welch's Encore". Businessweek.com. 1997-06-14. http://www.businessweek.com/1996/44/b34991.htm. Retrieved 2010-07-12. 
  8. ^ "FORTUNE - GE's Jack Welch Named Manager of the Century - November 01, 1999". Timewarner.com. 1999-04-26. http://www.timewarner.com/corp/newsroom/pr/0,20812,667526,00.html. Retrieved 2010-07-12. 
  9. ^ Twenty-One U.S. CEOs with Golden Parachutes of More Than $100 Million| GMI| January 2012 |By Paul Hodgson, Senior Research Associate, and Greg Ruel, Research Associate
  10. ^ "'Hardball with Chris Matthews' for July 12, 2006". MSNBC. 2006-07-13. http://www.msnbc.msn.com/id/13840941/. Retrieved 2010-07-12. 
  11. ^ a b Gow, David (2002-09-17). "SEC inquiry as Jack Welch gives up freebies". The Guardian (London). http://www.guardian.co.uk/business/2002/sep/17/5. 
  12. ^ Mark Lewis (16 September 2002). "Welch Walks Away From Perks". Forbes. http://www.forbes.com/2002/09/16/0917welch.html. Retrieved 23 July 2012. 
  13. ^ a b Rebecca Leung. "Jack Welch: 'I Fell In Love'". 11 February 2009. http://www.cbsnews.com/2100-500164_162-682830.html?tag=contentMain%3BcontentBody. Retrieved 3 April 2012. 
  14. ^ a b Rachel Layne; John Lauerman (4 August 2009). "Former GE Chief Jack Welch Expects Full Recovery From Discitis". Bloomberg. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ap3ENxAYX0Ng. Retrieved 23 May 2012. 
  15. ^ a b c Landon Thomas Jr. (2 November 2006). "On the Road With Jack and Suzy". New York Times. http://www.nytimes.com/2006/11/02/business/02welch.html?n=Top/Reference/Times%20Topics/People/W/Welch,%20John%20F.%20Jr.?ref=johnfjrwelch&pagewanted=print. Retrieved 23 May 2012. 
  16. ^ Keith J. Kelly (13 November 2009). "Jack Welch ends BusinessWeek column". New York Post. http://www.nypost.com/p/news/business/jack_welch_ends_businessweek_column_1HKIsyFQwEOAa2GSYI9GJK. Retrieved 23 May 2012. 
  17. ^ "Jack Welch". WSJ.com. http://topics.wsj.com/person/W/jack-welch/697#. Retrieved 25 May 2012. 
  18. ^ Jon Bershad (27 January 2012). "Jack Welch: The GOP Needs To Be Nice To Ron Paul When He Drops Out Because They Need His Followers". Mediaite. http://www.mediaite.com/online/jack-welch-the-gop-needs-to-be-nice-to-ron-paul-when-he-drops-out-because-they-need-his-followers/. Retrieved 23 May 2012. 
  19. ^ "John F. Welch". Women in the Economy: An Executive Task Force. The Wall Street Journal. April 30-May 2, 2012. http://www.womeninecon.wsj.com/index.php/speakers/jack-welch. Retrieved 25 May 2012. 
  20. ^ "Sacred Heart University Names College of Business for Legendary GE Chairman Jack Welch". Sacredheart.edu. http://www.sacredheart.edu/pages/12142_sacred_heart_university_names_college_of_business_for_legendary_ge_chairman_jack_welch.cfm. Retrieved 2010-07-12. 
  21. ^ "Corporate icon Jack Welch to teach at MIT Sloan". Mitsloan.mit.edu. 2006-03-09. http://mitsloan.mit.edu/newsroom/2006-welchclass.php. Retrieved 2010-07-12. 
  22. ^ Melissa Korn (11 November 2011). "Welch to Move School Out of Chancellor University". Wall Street Journal. http://online.wsj.com/article/SB10001424052970204358004577030363898873138.html. Retrieved 15 March 2012. 
  23. ^ Geoff Gloeckler (22 June 2009). "Jack Welch Launches Online MBA". Bloomberg Businessweek. http://www.businessweek.com/bschools/content/jun2009/bs20090622_962094.htm. Retrieved 15 March 2012. 
  24. ^ Paul Glader (9 November 2011). "Exclusive: Management Guru Jack Welch Talks About Digital Education, Online MBAs & Modern CEOs With WA.". Wired Academic. http://www.wiredacademic.com/2011/11/exclusive-management-guru-jack-welch-talks-about-digital-education-online-mbas-modern-ceos-with-wa/. Retrieved 19 March 2012. 
  25. ^ "Executive MBA – Jack's involvement". Jack Welch Management Institute. 
  26. ^ Bertaccini, Donna (2004-11-08). "Lovers seek lawyers as divorce booms". BBC News. http://news.bbc.co.uk/2/hi/business/3992381.stm. Retrieved 2010-07-12. 
  27. ^ http://www.observer.com/2004/04/suzy-wetlaufer-preparing-to-be-neutron-jackie/
  28. ^ http://www.minnpost.com/minnpotus/2011/06/09/29011/former_ge_chairman_jack_welch_on_cnn_says_he_likes_pawlenty
  29. ^ Sasso, Peter. "Peter Sasso reports on MSNBC's Morning Joe: global warming skepticism". Newsbusters.org. http://newsbusters.org/blogs/peter-sasso/2008/07/03/former-general-electric-ceo-jack-welsh-global-warming-skeptic. Retrieved 2010-07-12. 
  30. ^ "Fresh Dialogues Interview with Alison van Diggelen, May 2009". Freshdialogues.com. 2009-05-12. http://www.freshdialogues.com/2009/05/12/jack-welch-why-companies-must-go-green/. Retrieved 2010-07-12. 
  31. ^ Guerrera, Francesco (2009-03-12). "Welch rues short-term profit ‘obsession’". Financial Times. http://www.ft.com/cms/s/0/294ff1f2-0f27-11de-ba10-0000779fd2ac.html. Retrieved 2009-03-12. 
  32. ^ Malone, Scott. "Jack Welch sets Twitter ablaze with Obama job jab". Chicago Tribune. http://www.chicagotribune.com/news/politics/sns-rt-us-usa-economy-jackwelchbre8941cr-20121005,0,7390466.story. Retrieved 6 October 2012. 
  33. ^ CHRISTOPHER, RUGABER. "Officials reject conspiraces on unemployment rate". AP Business Writers. http://www.chicagotribune.com/news/politics/sns-rt-us-usa-economy-jackwelchbre8941cr-20121005,0,7390466.story. Retrieved 6 October 2012. 

Further reading

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Business positions
Preceded by
Reginald H. Jones
Chairman & CEO of General Electric
1981–2001
Succeeded by
Jeffrey Immelt