IT'S GUT CHECK TIME FOR CORPORATE AMERICA

Arianna Online ^ | 11.20.02 | Huff the Magic Dragon

[Registered]

IT'S GUT CHECK TIME FOR CORPORATE AMERICA

By Arianna Huffington

So Jack Welch, the former head honcho of General Electric, has
decided that the company's shareholders should no longer have to
foot the bill for most of the pricey perks bestowed on him as
part of his ultra-cushy retirement package. Welch's gravy train
into the sunset includes an $80,000-a-month Central Park
apartment (I'm guessing at that price that it probably has a park
view), lifetime use of a company jet, maid service at his
multiple homes, membership at an array of country clubs, flowers,
limos, phones, computers, furniture, and prime tickets to
Wimbledon, the opera, the U.S. Open, and every New York Knicks
home game.

Welch says he came to this decision not because such lavish
excess on the company's dime is wrong -- far from it -- but
because, as he put it in a column in the Wall Street Journal,
"perception matters." In other words, he hasn't had a change of
heart, just a change of PR strategy.

Was it just a coincidence that Welch's high profile column
appeared on the same day that the Securities and Exchange
Commission announced it had opened an informal investigation into
Welch's compensation package?

To hear Welch tell it, not only doesn't he think there is
anything "improper" about having shareholders pick up the tab for
his corporate raja lifestyle while keeping them in the dark about
the details of his deal, he actually believes he was doing them a
favor. "I agreed," he wrote, "to take the post-retirement
benefits that are now being questioned instead of cash
compensation -- cash compensation that would have been much more
expensive for the company." Who knew that a $9 million-a-year
pension, charge accounts at New York's finest restaurants, and all
the roses you can deliver to your new lady love could be such a
bargain for GE shareholders?

The only thing Welch sees as "plain wrong" is the bad press he
and his former employer are getting over the revelations. He
seems to think that the public's outrage is just a phase we're
all going through. A post-Enron temper tantrum that needs to be
placated with some concessions and condescending pats on the
head. The light bulb clearly hasn't clicked on over his noggin.
Maybe he should put in a call to his old company to send one
over.

Better yet, he should order up a case of bulbs because Welch is
far from the only corporate chieftain who can't seem to get his
mind around the time-honored concepts of right and wrong. And I'm
not just talking about guys who have merely been the object of
public scorn. No, even when indictments, charges and massive
fines have been dished out, these people seem unable to admit
they've done anything wrong.

The latest example of this is former Sunbeam CEO "Chainsaw" Al
Dunlap, who earlier this month agreed to pay a $500,000 SEC
penalty for cooking the company books and accepted a lifetime ban
from ever holding another top post at a public company. What he
didn't do is admit any wrongdoing. His lawyer called the
admission-free deal "a welcome outcome."

Disgraced $20 million-a-year telecom analyst Jack Grubman was
similarly unrepentant, claiming in his letter of resignation this
summer that although he shamelessly continued to tout pet stocks
like WorldCom and Global Crossing, even as they plummeted into
bankruptcy, he was "nevertheless proud of the work" he and his
Salomon Smith Barney team had done. Imagine how giddy he would
have been if he had left investors with the shirts on their
backs.

And corporate giants AOL, Merrill Lynch, and Xerox also refused
to admit to any bad behavior even though, since 2000, they all
have had to pay hefty fines for deceiving the public. I guess
Merrill forked over that $100 million out of sympathy for the
taxpayers of New York and not because its analysts had regularly
dished out tainted advice to investors.

The question is when are these folks going to start fessing up to
their wrongdoing? That's the only right way to right a wrong.

Some have speculated that the Welch controversy will lead to
fewer perks for future execs -- but don't hold your breath.
Corporate lawyers have made a loophole-riddled mockery of SEC
disclosure rules -- so much so that we never would have learned
the distasteful details of Welch's sweetheart deal if he hadn't
found himself on the receiving end of his spurned wife's wrath.

And it doesn't help that government regulations allow companies
to manipulate and hide the true cost of executive benefits. For
instance, while a CEO's romantic weekend getaway to Europe on the
corporate jet might have an actual price tag of $15,000, his
company is allowed to record the trip as a $500 expense. Try
getting that kind of markdown on Priceline.com.

Welch, who seems to have a proclivity for bellying up to a
midsection metaphor, having titled his self-aggrandizing
autobiography "Jack: Straight From the Gut," says that his
decision to downsize his 24-karat golden parachute while
continuing to defend its fairness and propriety "sure feels right
in my gut." If that's truly the case, he needs to schedule an
emergency appointment with a gastro-intestinal specialist. The
man from GE needs to have his GI examined.

As do his fellow overpaid brethren. It's gut-check time for all
of corporate America.

------  
If you have any questions or  comments, please contact me at
arianna@ariannaonline.com.

[Registered]

I don't care what Jack Welch makes or what perks he's negotiated.

Anyone who feels otherwise is anti-Capitalist or a red-haired Greek immigrant!

[fogarty]

"I don't care what Clinton does in his private bedroom, the economy is good."

"I don't care if Clinton sent off American boys to battle while getting a BJ from Monica, the stock market is doing great."

"I don't care what perks Clinton got in selling out the Lincoln bedroom, he is handling the economy just fine."

And on it goes. I see situational ethics works just as well for "conservatives" as it did for hardcore liberals.

[Mr. Bird]

I tend to agree. You can't blame Welch for accepting/negotiating a boatload of wealth. If you're a shareholder who doesn't like it, complain to the Board.

At least he arguably created wealth, taking GE from an $18 billion company to a $480 billion behemoth. All Arianna did was sleep with a gay millionaire for her bucks.

[Mr. Bird]

How is the Welch situation "situational ethics"? There is nothing inherently wrong with receiving compensation for work, is there? It appears you just have a problem as to what degree of compensation is "tasteful". Sounds un-American to me....

[Tuco-bad]

At least he arguably created wealth, taking GE from an $18 billion company to a $480 billion behemoth

Welch COST GE over $200 billion in market value the last year of his employment.

Welch should have been fired by GE for incompetency.

[gumboyaya]

Ah yes Arianna you should know a gravey train when you see it. You rode on the Huffington express for all it was worth. Now you are a member of the Scott Ritter school of flip/flop, totaly irrelevant.

[Registered]

Negotiating a golden parachute is ethical.

However, had Welch's actions while CEO included abusing an intern, personally profiting from the sale of GE assets or any other Clinton scenario you can dream up would have landed him on the street.

[Made In The USA]

Arianna this is how it works: You can not pay a CEO too much if you're getting fantastic return on your investment. You can not pay a pro athlete too much if he's making plays and filling seats in the stands. You can not pay a salesperson too much if he's cornering your market singlehandedly, etc. You pay people for the value they're adding and the competition for that exists for them. If perks are part of that package so be it. And guess what sweetie, when they don't perform they've got a hell of lot more to loose.

[Mr. Bird]

Global Most Admired Company - Fortune (1998, 1999, 2000, 2001)

World's Most Respected Company - Financial Times (1998, 1999, 2000, 2001)

America's Most Admired Company - Fortune (1998, 1999, 2000, 2001)

America's Greatest Wealth Creator - Fortune (1998, 1999, 2000)

Yeah, he really led GE into the toilet.

[Registered]

Welch COST GE over $200 billion in market value the last year of his employment.

Welch should have been fired by GE for incompetency

__________________________________

Remind me not to listen to your investment advice...

[dfwgator]

CEOs are no different than athletes. It's a free agency market. Plenty of companies would have wanted Jack Welch. GE did what if felt it had to do to keep him there. Just like Tom Hicks felt it was worth $250 million for Alex Rodriguez. It is only up to the shareholders to determine whether or not the compensation is appropriate.

[Tuco-bad]

Global Most Admired Company - Fortune (1998, 1999, 2000, 2001)

Yeah - And K-Mart received the Retailer-of-the-Year award last year.

[Tuco-bad]

Remind me not to listen to your investment advice...

How about legal advice then?

Welch should be doing a "perp" walk for not paying taxes on the personal expenses paid by GE in Welch's behalf (including toilet paper).

[Maceman]

I liked Arianna much better when she starred with Eddie Albert in "Green Acres/"

[fogarty]

I think if you talk to the tens of thousands of employees he shafted with his assinine ranking system you will find GE is less than admired.

Jack Welch was the epitome of the decade of greed - the Clinton decade. The increase in wealth was mostly smoke and mirrors. GE is in debt to its eyeballs. Its stock is now trading at less than half it was at its max.

Jack Welch was not a true leader of man. His adulterous affair is demonstration to me he is not a man of honor, integrity or character.

It is pathetic to see freepers who will jump on Clinton for his sleazebag ways, but will let it pass for businesss leaders and CEOs. I'm sorry, a scumbag is a scumbag - and a CEO of a company who cheats on his wife should NOT be CEO.

BTW it is interesting to see you using sources (Fortune, Financial Times) which were ENDLESSLY praising Clinton during the nineties for his handling of the nation. It's too bad that the 90's economy was just smoke and mirrors - brought to us by Clinton, Greenspan, and the cooperation of CEOs like Welch.

[Dead Dog]

The only problem with this is if his compensation was hidden from "the books", and in that case from the shareholders (read Owners). In that case it is theft, wether on his part, or by the board in his behalf. Like the stock options debacle, if these were not accurately reported as expenses, then that is akin to fraud. And that is a moral issue. The reason he wasn't paid in cash was to hide the transfer of wealth.

They should pay these guys/gals in cash. Loud, Proud, and oftenly with their head in the cloud. They are more often hired and retained for their ability to sell stocks then they are for their ability to produce wealth.

The growth of GE is not so much due to expansion of a business, but the merger of many small businesses. Who knows if there was a net gain or loss of wealth in the process.

[Mr. Bird]

It is pathetic to see freepers who will jump on Clinton for his sleazebag ways, but will let it pass for businesss leaders and CEOs

Last time I checked, decisions made by a GE CEO really didn't affect my life. The POTUS, on the other hand, constantly affects my life, and I do care about what kind of character he has.

If you think Welch is a pig, fine. I really don't have an opinion of him. I DO have an opinion of people who think his compensation is THEIR business. I think they are jerks.

[fogarty]

So if it doesn't affect your life, then it doesn't matter? How naive. By the way, how exactly did Clinton sleeping with Monica affect your life? Did you somehow pay higher taxes, or lose money on the stock market because of it? Did you lose your job because of it?

Probably not. The fact is leaders must be accountable. Whether it is a leader of a country, the leader of a company, or the leader of a boy scout troop, a leader must have integrity. It is not a matter of whether it 'affected my life' it is a matter of our standards of right and wrong.

[Dead Dog]

It's the "Gladiator" premis, leaders without integrity and ethics are dangerous.

[Mr. Bird]

If you re-read my post #17, you will see that I said the POTUS makes decisions that affect my life, and because of that, his character matters. I did not state that his sink activities affected me. But his decision to lie under oath (and the subsequent ramifications to American jurisprudence) certainly did.

Like I said, if you think the guy's a pig, fine. I think you may be reacting a bit harshly, considering divorce is not an altogether rare occurrence in our society. Not saying that's good, but it is condemning an awful lot of decent people. But his compensation was a matter between his employer and him. To rant against it is to reveal yourself as a petty, envious person of remarkable smallness.