Boeing's shakeup and GE's fall: 2 more black eyes for Jack Welch's legacy
Boeing's departing CEO and the end of GE as we know it underscore legendary GE CEO Jack Welch's legacy
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You have to love the irony of it.
This week, Dave Calhoun, an acolyte of the late Jack Welch, the legendary longtime chief executive of General Electric, said he was quitting as chief executive of Boeing, joining the list of unsuccessful Welch disciple CEOs.
And Welch’s legacy will disappear when General Electric’s name vanishes from the list of publicly traded US stocks on Tuesday. That’s when GE, which spun off GE HealthCare last year, will split itself into GE Vernova and GE Aerospace.
The combination of Calhoun quitting, the end of the conglomerate, and General Electric’s name disappearing tells us a lot about how the world has changed since Welch was worshiped by the likes of Fortune Magazine (which named him the Manager of the Century in 1999) and the Financial Times (which named GE “The World’s Most Respected Company” for the third straight year in 2000, the year before Welch stepped down as CEO).
I wrote about the end of Welch’s legacy last year after Larry Culp, who became GE’s CEO in 2018, announced plans to split the company into three pieces, none of which would be named General Electric. As the Welch hagiography died down, the mess left behind showed that his genius was as much in playing accounting games as anything else.
Culp, the first GE chief executive who hadn’t been a company employee, succeeded two Welch acolytes in the position: John Flannery, who lasted 14 disastrous months, and Jeff Immelt, Welch’s chosen successor, who had lasted for 16 less-than-mediocre years before that.
After I finished laughing at the irony of Dave Calhoun stepping down the week before the name General Electric vanishes from the markets, I decided this would be a good time to compile a list of unsuccessful CEOs who were Jack Welch mentees.
I had no idea that the list would be so long.
I combined my knowledge from decades of writing about business with additional research, then read a 2022 book about Welch written by David Gelles, a New York Times journalist. The title says it all: "The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America — and How to Undo His Legacy."
Between my work and Gelles’s book, I ended up with a list of 13 unsuccessful CEOs who had been Welch followers. To show that the world isn’t totally black and white, I also included four successful Welch acolyte CEOs.
What surprised me about the list is that no fewer than four of the 13 had been CEOs of the same company: Boeing. I have no idea why that is. I was also surprised to see that three of the 13 got two shots at being CEOs and all three went 0 for 2.
In fairness, you can see why so many boards of so many companies were eager to hire Welchies as CEOs. Jack Welch was a megasuccessful CEO — or, at least, he seemed to be. GE’s stock rose 5,600% during his 20-year tenure, which was eight times the S&P 500’s 700% rise. (I’m not including dividends in either of those numbers).
Welch was also enormously respected by wide swaths of the business community and society at large, and for a while, GE was the US’s most valuable company, with its stock worth $600 billion.
After Welch retired from GE, it became clear that the company had been playing earnings and accounting games that were made possible by the dozens of acquisitions that Welch made and by the fact that he’d built GE’s finance subsidiary into a gigantic operation. Financial assets allow far more flexibility than manufacturing does when it comes to reporting gains and losses.
There’s lots that we can learn from the Terrible 13 Welch followers who were unsuccessful CEOs. The biggest thing is that what seemed to work for Welch — “ranking and yanking” by firing the bottom 10% of employees every year, playing endless accounting games to make quarterly earnings goals, not thinking long-term — is no way to run a company.
Disclosures: I have a medium-size GE holding that I’ve bought in several stages since Larry Culp became its CEO. I began buying GE because I’ve got sizable gains on my investment in Danaher Corp., which prospered under Culp’s leadership. I have a modest investment in GE HealthCare, and I’ve given each of my grandchildren 16 shares of GE.
Correction: A previous version of this article included an incorrect spelling of Jack Welch's name. We regret the error.
Allan Sloan is an award-winning financial journalist and contributor to Yahoo Finance.
