As I contemplate General Electric Company (NYSE: GE) CEO Jeff Immelt's decision to go without his $12 million bonus, I wonder about what his predecessor, Jack Welch, would do if he had to decide the fate of his protege. With respect, I think the answer is Welch would fire Immelt.
Jack Welch was popular with investors because GE always seemed to post double-digit earnings growth that beat analysts' estimates by a penny. These steady results caused GE's stock price to beat the market averages every year. For Immelt, things have been different. Since taking over in September 2001, GE's stock has lost 73% of its value -- falling from $40 to $10.81.
Immelt is showing good taste by declining his bonus. But the core problem that underlies the collapse in GE's stock is its reliance on financial services which used to account for 40% of its pretax profit. GE has already benefited from two government programs to help ease its financial services problems, but they still cast a dark shadow on GE's outlook.
After eight years at the helm and a track record that neutron Jack would not be proud of, WWJWD? He'd show Immelt the door.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He owns GE shares..
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Reader Comments (Page 1 of 1)
2-28-2009 @ 1:34PM
ddemania said...
Unfortunately, it was Jack Welch who built the growth of GE with its Commercial and Consumer Finance arms... through the 80's and early 90's. He is as much to blame for the declining GE stock prices as Immelt.
3-18-2009 @ 4:06PM
zkelley said...
Jack Welch was a leader with discipline.
That's a concept.