It's Gut Check Time For Corporate America
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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 (at that price I'm guessing 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.