FacebookTwitterGoogle+RedditEmail

Companies Can Either Make Things or Make CEOs Rich

Jeff Immelt, the CEO of General Electric since 2001, is retiring. The 61-year-old will be making a well-compensated exit.

Fortune magazine estimates that Immelt will walk off with nearly $211 million, on top of his regular annual pay. Immelt’s annual pay hasn’t been too shabby either. He pulled down $21.3 million last year, after $37.25 million in 2014.

But Immelt’s millions don’t come close to matching the haul that his predecessor Jack Welch collected. Welch’s annual compensation topped $144 million in 2000. He stepped down the next year with a retirement package valued at $417 million.

What did Immelt and Welch actually do to merit their super-sized rewards? What did they add to a GE hall of fame that already included breakthroughs like the first high-altitude jet engine (1949) and the first laser lights (1962)?

In simple truth, not much at all.

“We bring good things to life,” the GE ad slogan used to proudly pronounce. Not lately.

And not surprisingly either. Mature business enterprises, we’ve learned over recent decades, either make breakthroughs for consumers or grand fortunes for their top execs. They don’t do both.

Why not? Making breakthroughs, for starters, takes time. Enterprises have to invest in research, training, and nurturing high-performance teams.

Years can go by before any of these investments bear fruit. By that time, the executives who made the original investments might not even be around.

Grand fortunes, by contrast, can come quick. CEOs can downsize here, cut a merger there, then sit back and watch short-term quarterly earnings — and the value of their stock options — soar.

If those don’t do the trick, CEOs can always just slash worker pensions or R&D and put the resulting “savings” into dividends and “buybacks,” two slick corporate maneuvers that jack up company share prices and inflate executive paychecks.

On any CEO slickness scale, Jack Welch would have to rank right near the top. In 1981, his first year as the GE chief, Welch quickly realized he was never going to get fabulously rich making toasters and irons.

So Welch started selling off GE’s manufacturing assets. In his first two years, analyst Jeff Madrick notes, Welch “gutted or sold” businesses that employed 20 percent of GE’s workforce.

By 2000, Welch himself was making about 3,500 times the income of a typical American family.

By contrast, in 1975, Welch’s predecessor took home merely 36 times that year’s typical American family.

As Welch’s successor, Jeffrey Immelt would give an apology of sorts in a 2009 address at West Point. Corporate America, he told the corps of cadets, had wrongfully “tilted toward the quicker profits of financial services” at the expense of manufacturing and R&D, leaving America’s poorest 25 percent “poorer than they were 25 years ago.”

“Rewards became perverted,” Immelt went on. “The richest people made the most mistakes with the least accountability.”

Unfortunately, and sadly, Immelt never took his own analysis to heart. As a rich CEO in his own right, he continued to make mistakes and suffer no particular consequences.

One example: After the Great Recession, Immelt froze the GE worker pension system and offered workers a riskier, less generous 401(k). Within five years, notes the Institute for Policy Studies, the GE pension deficit widened from $18 billion to $23 billion — even as Immelt’s personal GE retirement assets were nearly doubling to $92 million.

“If we want to slow — or better yet, reverse — accelerating income inequality,” the Harvard business historian Nancy Koehn noted a few years ago, “the most powerful lever we have to pull is that of outrageous executive compensation.”

How many more outrageously compensated executives will retire off into lush sunsets, the Jeff Immelt story virtually begs us to ask, before we start yanking that lever?

Distributed by OtherWords.

More articles by:

Sam Pizzigati writes on inequality for the Institute for Policy Studies. His latest book is The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970 (Seven Stories Press). 

Weekend Edition
February 22, 2019
Friday - Sunday
Timothy M. Gill
Why is the Venezuelan Government Rejecting U.S. Food Supplies?
John Pilger
The War on Venezuela is Built on Lies
Andrew Levine
Ilhan Omar Owes No Apologies, Apologies Are Owed Her
Jeffrey St. Clair
That Magic Feeling: the Strange Mystique of Bernie Sanders
David Rosen
Will Venezuela Crisis Split Democrats?
Jeffrey St. Clair - Joshua Frank
Curtain Call: A Response to Edward Curtin
Nick Pemberton
Donald Trump’s National Emergency Is The Exact Same As Barack Obama’s National Emergency
Paul Street
Buried Alive: The Story of Chicago Police State Racism
Rob Seimetz
Imagined Communities and Omitting Carbon Emissions: Shifting the Discussion On Climate Change
Ramzy Baroud
Russian Mediation: The Critical Messages of the Hamas-Fatah Talks in Moscow
Michael Welton
Dreaming Their Sweet Dreams: a Peace to End Peace
Robert Hunziker
Global Warming’s Monster Awakens
Huma Yasin
Chris Christie Spins a Story, Once Again
Ron Jacobs
Twenty-First Century Indian Wars
Robert Fantina
The U.S. and Venezuela: a Long History of Hostility
Lance Olsen
Climate and Money: a Tale of Two Accounts
Louis Proyect
El Chapo and the Path Taken
Fred Gardner
The Rise of Kamala Harris
John W. Whitehead
Rule by Fiat: National Crises, Fake Emergencies and Other Dangerous Presidential Powers
Kollibri terre Sonnenblume
Biomass is Not “Green”: an Interview With Josh Schlossberg
John Feffer
Answering Attacks on the Green New Deal
W. T. Whitney
US Racism and Imperialism Fuel Turbulence in Haiti
Kim Ives
How Trump’s Attacks on Venezuela Sparked a Revolution in Haiti
Mike Ferner
What War Films Never Show You
Lawrence Wittner
Should the U.S. Government Abide by the International Law It Has Created and Claims to Uphold?
James Graham
A Slow Motion Striptease in France
Dave Lindorff
Could Sanders 2.0 Win It All, Getting the Democratic Nomination and Defeating Trump?
Jill Richardson
Take It From Me, Addiction Doesn’t Start at the Border
Yves Engler
Canada and the Venezuela Coup Attempt
Tracey L. Rogers
We Need a New Standard for When Politicians Should Step Down
Gary Leupp
The Sounds of Silence
Dan Bacher
Appeals Court Rejects Big Oil’s Lawsuit Against L.A. Youth Groups, City of Los Angeles
Robert Koehler
Are You White, Black or Human?
Ralph Nader
What are Torts? They’re Everywhere!
Sarah Schulz
Immigrants Aren’t the Emergency, Naked Capitalism Is
James Campbell
In the Arctic Refuge, a Life Force Hangs in the Balance
Matthew Stevenson
Pacific Odyssey: Corregidor’s Iconography of Empire
Jonah Raskin
The Muckraking Novelist Dashiell Hammett: A Red Literary Harvest
Kim C. Domenico
Revolutionary Art and the Redemption of the Local
Paul Buhle
Life and Crime in Blue Collar Rhode Island
Eugene Schulman
J’Accuse!
Nicky Reid
Zionists are the Most Precious Snowflakes
Jim Goodman
The Green New Deal Outlines the Change Society Needs
David Yearsley
The Political Lyre
Cesar Chelala
The Blue Angel and JFK: One Night in Camelot
FacebookTwitterGoogle+RedditEmail