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Jack Welch
Jack Welch
Born
John Francis Welch, Jr. (1935-11-19) November 19, 1935 Peabody, Massachusetts,
U.S.
Residence Boston, Massachusetts,
U.S.
Occupation Former CEO of General Electric
Spouse
Carolyn Welch, Jane Welch, Suzy Welch
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%. In 2006 Welch's net worth was estimated at $720
million.
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.
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. 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.
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".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. 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.
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. 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.
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.
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.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.
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).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.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.
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.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. In 2005, he published Winning, a book
about management co-written with Suzy Welch, which reached #1 on The Wall Street
Journal bestseller list,and appeared on New York Times' Best Seller list. Since
January 2012, Welch and Suzy Welch have written a biweekly column for Reuters
and Fortune.
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".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.
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. Welch has been actively involved
with the curriculum, faculty and students at the online business school since
its launch.
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.
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 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. He is also a global warming skeptic. 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."
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.”
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