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Karen Gibbs and Geoff Colvin Karen Gibbs Geoff Colvin Geoff Colvin Karen Gibbs
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Jack Welch interview, Sept. 13, 2002
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» Welch profile
» Welch's perks
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GEOFF COLVIN: The most celebrated and successful CEO of the 20th century is Jack Welch, who ran General Electric from 1980 to 2001. During his tenure, GE's market value increased by about $400 billion, a record no other CEO has ever approached. For the past seven days, he has been in the headlines for another reason, as a filing in his divorce case has revealed details of his retirement perks that have upset and even outraged a lot of people.

Jack, welcome. The news of the past week has sparked some remarkable responses. A couple: Nell Minow at the Corporate Library says, "It is appalling that one of the wealthiest men in America cannot write a check for his own Knicks tickets." The Wall Street Journal in an editorial said, "His contribution will be tarnished by the public airing of a retirement package that makes him seem greedy." At this program we've received a lot of e-mail from viewers, much of it angry.

What do you say in response to these people?

JACK WELCH: Well, Geoff, when I agreed to come on this show in August from the beach in Nantucket, I didn't know I'd be on at the end of a week that I got more publicity than I got anytime I was ever CEO of GE during 21 years. And so it's rather alarming, and of course disturbing, that private divorce filings, a private life and divorce filings can be filed by one side that, you know it put things in a certain light representing a part of the case.

The facts are I've never not paid for a personal meal. I don't ever cook. I, as far as tickets are concerned -- Geoff, NBC and GE have had boxes before Jack Welch became chairman. I rarely if ever use them. And the anecdote I'd like to tell is that the Red Sox are my favorite team. They've had 162 home games in the last two years. I've been to one in the GE box. Other than that, they've been GE employees and customers for 161 others, along with the day I was there.

So I mean these things do get, they are sensational, and it's unfortunate.

COLVIN: Well, just to get to the specifics, in case anybody doesn't know, the GE proxy statement has said for years that in retirement you would get certain things. You would get the use of a plane, chauffeured car, the apartment in New York, financial planning. Now in this filing there were all these other revelations, asserting that you would get all these boxes at the Knicks and Wimbledon and so forth, flowers, food, wine. That's largely untrue?

WELCH: Largely untrue. I mean do I have access to a seat, Geoff? Yeah. Do I use it? I have access like many employees do. I mean I don't have a -- there's no personal ticket for Jack Welch.

COLVIN: In other words, these are GE company things and NBC company things.

WELCH: GE company things and NBC company things. But I think the more important thing that I'd like to put in perspective about this thing is I didn't get a retirement package. I didn't have the party. I didn't walk to the podium. They didn't give me a watch and an envelope and say, "Nice job, Jack. Here's your retirement package."

In 1996, GE was doing well. I was 61 years old. I just came off quintriple bypass. Every GE chairman before me had retired at 62 and 63, my two predecessors in particular. The GE board liked the succession plan we had put in place. I was in the media for being offered this and being offered that. Of course my heart was with GE and most people knew I'd go there. The only alternative was early retirement. And the board came to me and offered me tens of millions of dollars in a package, a retention package, in a contract, contracts like you have, contracts like baseball players have, contracts like stars at NBC the network used to have, a four-year contract, and a signing bonus, to stay with GE, non-compete, and stay with them in retirement.

COLVIN: And the signing bonus part was the tens of millions of dollars?

WELCH: Yes. And instead I said I didn't need that. What I wanted was to continue to use the plane, have use of GE's plane, and have use of GE's apartment, pay imputed income as the rules say, but use it on that basis. Now, you know, these things, I've never made a decision in my life that wasn't in the best interest of the GE employees and the shareholders.

In this particular deal, I sacrificed millions of dollars. Not that I am some generous sacrifice -- I'd prefer to have what I had. But it was an employment contract. I fulfilled my obligations. GE did fantastically. Increased market cap $250 billion over the time frame, became number one market cap in the world, most admired global company for five years in a row. I gave it all I had, created a lot of CEOs: a 3M CEO; a Home Depot CEO; a Honeywell CEO, Dave Cote; and GE got a CEO in Jeff Immelt that we're so proud of we could burst. So I did my job, and in the end I got the in-kind benefits, rather than the cash, of these things.

COLVIN: And you're saying that those benefits actually cost GE less than what the board was offering.

WELCH: A fraction, Geoff. Not a little bit, a fraction.

COLVIN: And so here we are in this situation where it seems to be coming back to the company, hurting it. How do you feel?

WELCH: I hate it. Geoff, I hate it. I've never in my life got up and gone to work without the employees and the shareholders uppermost in my mind. And I get a divorce, you know, my wife and I used to sit around and say, how do people get in these skirmishes publicly? I'd like to ask the question, how do you get out of them? That's the real question. I mean in the end this is about a divorce that has highlighted something in times that have changed, Geoff.

COLVIN: Exactly. Times have changed. I mean this is obviously a painful situation for you. Do you think about doing anything about it?

WELCH: Geoff, I literally, as I said before, there isn't a decision I make that isn't in the best interest of the shareholders and the employees. But you've got to understand, I had an employment contract. This was an employment contract, not a retirement contract. It gets lumped into this gold watch, going out the door thing. And I gave it my all, and all these things happened with the team I had. We had a team that delivered, as you outlined in the opening of the show, fantastic results. So this is a complex discussion and one that I'm giving everything I've got to the company and in return I fulfilled my obligations and the company fulfilled theirs.

COLVIN: Right. So you're thinking about sticking with it.

WELCH: Geoff, I think that's not -- when I came (to agree to be) on this show in August, I didn't intend to talk about this. My basic position is we did a hell of a job as a team, and we never one day did anything that would hurt the employees or the shareholders. And I will continue in the next ten years, if I'm alive, to do the exact same thing.

COLVIN: Let me ask you about some of the larger issues in corporate America. We're in this extraordinary time now. There was a speech given just the day before yesterday, September 11th as it happened, by William McDonough, CEO of the New York Fed, about pay. He said the policy of vastly increasing executive compensation was terribly bad social policy and perhaps even bad morals, I can find nothing in economic theory that justifies this development. Do you agree?

WELCH: Bill McDonough is a terrific fellow. He's done a great job running the New York Fed. We're also in a capitalistic society. Do shortstops over here deserve that much? Do anchors on television deserve that much? Free markets aren't perfect. Capitalism isn't perfect. But it's the best system we have. Supply and demand is critical. Today, for example, in spite of all these things, as companies get in trouble, they need good leadership. And they have to take somebody from company X and move them to company Y to get that.

COLVIN: And it costs money.

WELCH: It costs money. Now I'm not, no one can justify on an absolute basis a number for anybody. Is a star worth that much for a movie or worth this much? The capitalistic system has its flaws, but it's the best system I know.

COLVIN: Let's talk about another aspect, which is corporate governance. Lots of talk about reform, independent chairmen. What do you think's a good idea and what's bad?

WELCH: Geoff, I think the major issue here is let's watch out for unintended consequences.

COLVIN: Meaning?

WELCH: Meaning that we put a million dollar cap in on salaries, so people went to options, markets took off, people made a lot of money. We wanted to align the interests of both at that time, okay? The independent director issue worries me to death, because what do you want out of a director? You want intelligence, common sense, independence, the willingness to speak out. If you get people that the compensation of the board, their compensation on the board is critical, I think they're less likely to. No offense to faculty members or foundation heads, but the income from a board is more significant to them than a wealthy person who might have a 1 percent conflict.

COLVIN: We're going to have to close it up, Jack. I would love to talk more about this. The fact is, our time is up.

WELCH: Thanks for having me here.

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