Monday, March 2, 2020

RIP Jack Welch

The Supreme Being decided today that former General Electric CEO Jack Welch had fallen into the bottom 10% of humanity by performance and terminated his life. Commentators said this was only fitting, since it was how Welch always treated his own employees:
Known for his focus on efficiency and streamlining management, he would regularly cull the lowest-performing 10% of staff each year. "The underperformers generally had to go," he wrote in one of his books.
To me Jack Welch and his General Electric always epitomized everything that was wrong with American business in the 1980s and 1990s. He had a maniacal focus on the bottom line that made stockholders rich while discarding employees like empty soda cans. Here are two evaluations:
Under him, GE’s market value grew from $12 billion to $410 billion, making Welch one of the most iconic corporate leaders of his era. . . .

The U.S. industrial belt is dotted with communities devastated by the downsizing of GE, which began under Welch and has continued in the years after. At its peak, for instance, GE employed 30,000 at a sprawling integrated industrial plant in Schenectady, New York, that now employs fewer than 3,000.
One of Welch's bizarre pronouncements was that every GE division had to be among the top two in the world for its sector; otherwise it would be closed or sold. This led to the company shedding profitable divisions because they didn't conform to his rigid mandate, a perfect case of arbitrary corporate policy harming actual human lives.

Not that Jack Welch ever showed any concern for actual human lives.

The most spectacular thing Welch did was to make GE a finance company, expanding its GE Capital arm until it became nearly half the company. Financially that made sense at the time, because in the 1980s and 1990s finance was where the money was. GE's manufacturing arms were being battered by Japanese and then Korean competition, but on Wall Street it was raking in the cash.

Not that it lasted; GE Capital crashed badly in 2008, requiring a Federal bailout and dragging the company down with it. The value of the corporation fell from $410 billion to $75 billion, and it is now valued at about $105 billion.

Jack Welch's GE is a perfect case study of what went wrong with America in the neoliberal era, and of why so many people on both the right and the left are angry about our direction.


Shadow said...

After he retired, Welch was often on CNBC where he would pontificate on all things business, and everyone would listen because he was Jack. One thing I remember is his accusing the Obama administration of cooking the books because the unemployment numbers went down just prior to re-election. To me he appeared to be severe and myopic and not anything like what you would think he would be if you had listened to the folklore that had developed around him. Which brings me back to one of my personal themes about business. You can be successful because you are bright, hard working, and nimble on your feet. But that isn't the only way you can succeed at business. You can be severe and narrow-minded and even stupid and still be successful if you are vicious and uncaring enough. Power and money are truncheons in their hands.

G. Verloren said...

Our economic and political systems simply aren't built to incentivize moral behavior - they're built to incentivize profitable behavior.

Figures like Welch and the damage they cause are the predictable natural outcomes of a society that rewards the pursuit of wealth at the expense of justice. This will never stop happening so long as we rely on a system whose foundational principle is greed and the incessenant accumulation of ever greater wealth.