On March 13th of this year, the Financial Times reported that Jack Welch had reversed course on the principle he had held most dear and that had, on the back of his success in the 80s and 90s, been adopted by many if not most of America's biggest enterprises: "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."
The reaction by many, myself included, was nothing short of amazement. "Revising" your dogma is one thing, which most all of us have done and which is a sign of flexibility, but calling your principal claim-to-fame "the dumbest idea in the world," well that's ...
Jack's successor, Jeff Immelt, in the top slot since 2001, is a different cup of tea. He is, first and foremost, juicing up R&D and placing big bets on new products and new businesses. (He's been slowed down by putrid results at GE Capital, Welch's centerpiece and the source, in its heyday, of about half of GE's earnings—reducing dependence on GE Capital is another of Immelt's strategic goals.) The fact is that long before the Great Recession, Immelt was questioning rather directly some of GE's and indeed U.S. big business's emphasis in the prior 15 or so years. Consider this, from Mr. Immelt in 2005: "Almost every personal friend I have in the world works on Wall Street. You can buy and sell the same company six times and everybody makes money, but I'm not sure we're actually innovating. ... Our challenge is to take nanotechnology into the future, to do personalized medicine ..."
Which brings us all the way to this past Wednesday and Mr. Immelt's remarks, as reported by the FT, in an address at West Point: "We are at the end of a difficult generation of business leadership [TP query: defined by you know who, Jeff?] ... Tough-mindedness, a good trait, was replaced by meanness and greed, both terrible traits. ... Rewards became perverted. The richest people made the most mistakes with the least accountability." (To be fair, accountability has long been a GE trademark.) And if that stunner was not enough, Mr. Immelt, almost alone among high-visibility CEOs, deigned to address the struggling part of our population: "The bottom 25 percent of the American population is poorer than they were 25 years ago. That is just wrong. Ethically, leaders do share a common responsibility to narrow the gap between the weak and the strong." I'd chide Mr. I on the choice of the word "weak," but all in all, it is perhaps the most stunning-amazing-incredible reversal of course I've observed since I've began watching big business about 35 years ago—though Greenspan's acknowledgment that everything he believed most dearly, such as automatic self-regulation in the financial industry, had taken a shot below the water line, comes close to Immelt's 180-degree course change. (NB: I can't help but wonder if the strength of Immelt's remarks was tied to the setting at the USMA. It's hard to sling bullshit when you are addressing several thousand kids—and they are kids—who will be off to Afghanistan in pretty short order.)
"That is just wrong."
And: Hooray for Jeff!
(And, about bloody time!)
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