A close examination of the Welch legacy reveals that he was not simply the “Manager of the Century,” as Fortune magazine crowned him upon his retirement. Rather, he exerted a powerful and lasting influence on American business, informing how workers are treated, how shareholders are rewarded and how C.E.O.s comport themselves in an increasingly divisive age. When Donald J. Trump is elected president, when Jeff Bezos argues about inflation with the White House, when Elon Musk negotiates his $44 billion deal to buy Twitter by using the poop emoji — this is the world that Jack Welch helped create.
G.E. was worth $14 billion when Mr. Welch became C.E.O., just months after Ronald Reagan took office. Not long before Mr. Welch retired, just days before Sept. 11, 2001, the company was worth $600 billion, the most valuable company on Earth.
But the ways in which Mr. Welch created so much shareholder value often did more harm than good.
1ne: He was a compulsive dealmaker, fueling G.E.’s growth with a relentless series of mergers and acquisitions that took G.E. far from its industrial roots and set in motion a wave of corporate consolidation that would reduce competition in industries as diverse as airlines and media.
2wo: He closed factories and fired employees by the tens of thousands, unleashing a series of mass layoffs that destabilized the American working class.
3hree: He devised systems like “stack ranking,” which mandated that the bottom 10 percent of workers be fired each year, and took root at other companies.
4our: He embraced offshoring and outsourcing, sending labor overseas, and turning to other companies to provide back-office functions like accounting and printing.
It was enough to earn him the nickname he hated but could never shake: “Neutron Jack,” a reference to the neutron bomb, which purportedly kills people while leaving buildings intact. G.E. was an industrial company when he took over — making most of its money selling appliances, light bulbs, power turbines, and jet engines. By the time he retired, the company derived much of its profit from GE Capital, which was essentially a giant unregulated bank. Mr. Welch called it “the blob” — it was an amorphous, ever-changing collection of financial assets, capable of delivering whatever adjustments were most advantageous to the parent company at a moment’s notice.
Mr. Welch was never called to account for this questionable financial engineering while he was C.E.O. But in 2009, G.E. announced that it had settled sweeping accounting fraud charges with the Securities and Exchange Commission that pointed to decades of impropriety.
G.E. had been overstating profits in a bid to jack up its share price in the years after Mr. Welch retired, using myriad well-honed tactics to fudge the numbers, the S.E.C. said. “G.E. bent the accounting rules beyond the breaking point,” remarked Robert Khuzami, director of the S.E.C.’s enforcement division at the time.
Over the past 25 years, a succession of men who worked for Mr. Welch refashioned the airplane maker’s culture to resemble G.E.’s, transforming a company that once made a priority of aeronautical engineering into one that thrived on financial engineering.
The first was Harry Stonecipher, who joined Boeing in a 1997 merger. He moved the company headquarters to Chicago from Seattle to chase tax breaks, took a tough line with the labor unions and pushed the company to cut costs.
“When people say I changed the culture of Boeing, that was the intent, so it’s run like a business rather than a great engineering firm,” Mr. Stonecipher said in 2004. “It is a great engineering firm, but people invest in a company because they want to make money.”
Next came Jim McNerney, a Welch lieutenant who was named C.E.O. of Boeing after Mr. Stonecipher was fired for having an affair with a subordinate.
Mr. McNerney moved operations to states with weak labor laws, embraced outsourcing, and in 2011 made the fateful decision to redesign the 737 — a plane introduced in the 1960s — once more, rather than lose out on a crucial order with American Airlines. That decision set in motion the flawed development of the 737 Max, which crashed twice in five months, killing 346 people. And while a number of factors contributed to those tragedies, they were ultimately the product of a corporate culture that cut corners in pursuit of short-term financial gains.
By glossing over this reality, his allies helped perpetuate the myth of his sainthood, adding their own spin on one of the most enduring bits of disinformation of all: the notion that Jack Welch was the greatest C.E.O. of all time.
