Retirement deal, affair pulled back curtain

Jack Welch had stayed behind the scenes at GE

Jack Welch, 69, may have been a superstar CEO, but few outside the business world had ever heard of him until a couple of years ago. Wider fame followed his retirement from a 20-yearstint as chief executive of General Electric Co., when two things caught the attention of the public.

The first was Mr. Welch’s GE retirement package, which included a US$11-million apartment in New York, a private aircraft and a leased Mercedes. In 2004, the U.S. Securities and Exchange Commission settled a case in which it said GE should have disclosed such pricey perks to shareholders. Mr. Welch gave up some of his retirement benefits, including free use of the apartment.

The second was a divorce from his second wife, Jane Beasley Welch, in 2002. Divorce proceedings followed reports that Mr. Welch became romantically involved with Suzy Wetlaufer, editor of the Harvard Business Review, after she had interviewed him for a story. The former Ms. Wetlaufer has since left the Review and has become the third Mrs. Welch. She collaborated with Mr. Welch in the writing of his most recent book, Winning.

Such private details tend to overshadow general interest in Mr. Welch’s views on running a business. Which is too bad, given that Mr. Welch’s business decisions have had an impact on literally hundreds of thousands of people. This isn’t mere hyperbole. GE employed more than 400,000 people when Mr. Welch was named CEO in 1981. Within five years, 118,000 of those people were removed from the payroll, either through layoffs or the sale of company units.

Ma n a g e r s across North America study Mr. Welch’s views on “differentiation,” his system of a w a r d i n g bonuses to the top 20% of company employees, and of firing the bottom 10% who fail to perform. He has coined the term “boundaryless” to describe how managers can search for the best ways to do things without limiting themselves to traditional constraints like hierarchy or geography. And some marvel at his track record for leadership development. The CEOs of four of the 30 companies that currently make up the benchmark Dow Jones Industrial are led by people who once worked for Mr. Welch at GE.

Mr. Welch was born to an IrishAmerican family in Peabody, Mass., on Nov. 19, 1935. A good student with a love of sports, he studied chemical engineering at the University of Massachusetts, then moved to the University of Illinois for graduate work. He joined GE in 1960, just after he received his PhD.

His first job was helping GE develop a new plastic called polyphenylene oxide or PPO. He made his share of mistakes in the early days, at one point accidentally blowing up a factory. No one was injured.

Despite a bluntness and ambition that could eventually rub staid General Electric managers the wrong way, Mr. Welch developed a reputation for solving business problems and getting results. He rose through the ranks. By the early 1970s, when he was still in his early 30s, he started to think about some day running the whole company.

His chance came in 1981, when then CEO and chairman Reg Jones decided to retire. GE’s board picked Mr. Welch after a lengthy round of interviews and assessments. “I was like the dog who caught the bus. I finally had the job,” Mr. Welch recalls in his autobiography, Jack: Straight from the Gut.

Mr. Welch caused a bit of a fuss in the 1980s, when he became known as “Neutron Jack” for his willingness to lay off employees

and sell or close underperforming divisions.

This was the direct

impact of his business strategy, which

was to make GE either the

largest or

s e c o n d -

l a r g e s t

player in

each of

t h e

compan y ’ s

markets.

Investors

liked the story.

GE’s market

value grew

from US$13-

billion when

he took the job

to US$500-billion when he

retired.