Editorial

You Don't Know Jack

You don’t know Jack. But how could you?

In the last two decades, General Electric CEO Jack Welch has practically been beatified by the U.S. and especially the business press.
Interrupted by a likely decision by the European Commission to deny authorization to the proposed GE-Honeywell merger, the lavish praise is sure to continue over the next year. In the fall, Welch will be releasing one of the most heavily promoted books in history. Already the Today Show, which airs on NBC, the GE-owned television network, has booked Welch for a two-day promotional visit. When the “legendary” Welch retires at the end of this year, the cheerleading will begin anew.

This issue of Multinational Monitor shows a different side of the Welch era, the immense costs of GE’s relentless focus on short-term earnings and share price. GE under Welch indeed has been a leader; it has set the tone for the hard-edged, stock price-obsessed, anational, ruthless and cutthroat orientation that is now accepted as the norm, or at least a shared aspiration, for corporations.

GE’s business model can be considered a global system of management by stress, with the company viewing stress as the magic bullet for efficiency.

GE believes stressing its workers with fear of job loss improves their productivity.

It believes that stressing its global production system, by constantly looking to cut costs through layoffs, subcontracting, outsourcing or moving production to lower-wage and non-union environments, enhances company performance.

It believes in stressing suppliers, going so far as to order U.S. suppliers to “migrate” to Mexico to service GE’s already migrated production facilities.

It believes in stressing communities, using the threat of plant closings to extract tax breaks from communities that can ill afford to subsidize GE, but believe they can even less afford to lose GE’s jobs.

It believes in stressing the regulatory system, pushing to the edge — and too frequently beyond — of legal proscriptions on environmental pollution, tax avoidance, defense contractor fraud and anti-competitive actions; and it seeks to use its political muscle to stretch the bounds of what is permissible.

The human results have been disastrous. Welch has left behind communities across the United States suffering from mass layoffs and disinvestment. While it is hard to get a fix on the number of GE layoffs over the last two decades because of the constant churning of its businesses, GE has dismissed well over 100,000 well-paid workers in the United States. It has undermined union power in the United States by shifting operations to non-union subcontractors. It has practically abandoned its once-strong research-and-development infrastructure. It has compiled a shoddy record of repeat violations of workplace safety rules, defense contractor safeguards, and other public interest regulations, with workers’ lives put at risk and taxpayers bilked as result.

One particularly instructive example of the consequences of Welch’s hard-driving style involves upstate New York’s Hudson River, which is polluted by 1.3 million pounds of PCBs (polychlorinated biphenyls) dumped by General Electric. PCBs are probable human carcinogens, and linked to endocrine system disruption and other severe health consequences.

After a decade and a half of study, the U.S. Environmental Protection Agency (EPA) in December 2000 announced it was ready to order a cleanup of contaminated hotspots along a 40-mile stretch of the Hudson. Under the Superfund law, GE would be liable for the costs of cleanup.

In typical Jack Welch style, GE has responded with a full-blown campaign to block the EPA order. (EPA is scheduled to make a final decision in the case in August.) Among many other tactics, GE has assembled a lobbying dream team, which includes former Senate Majority Leader George Mitchell and former House Appropriations Committee Chair Robert Livingston. The company has even deployed NBC President and GE Vice Chair Robert Wright to lobby New York City council members to oppose a bill endorsing dredging of the Hudson.

What the Hudson River dispute reveals so clearly is Jack Welch’s strident opposition to any societal rules that impose costs on GE; and his company’s willingness and ability to leverage its economic power into political influence … and to use that political influence to enhance its economic power.

As Jack Welch’s reign comes to an end, it is time for society to affirmatively reject Welch’s business model of comprehensive and global management by stress. The first way is for EPA to authorize the go-ahead of the Hudson dredging, without delay. Not only will such an order commence the desperately needed cleanup of the Hudson, it will demonstrate that countervailing institutions can succeed in disciplining even the most aggressive of corporate titans.