Jack Welch: CEOs' Silence Isn't Golden
Most of the nation's CEOs have been conspicuously mum about charges of crooked accounting, tax evasion, and the other inglorious activities that have brought down a dozen or so of their peers. And Jack Welch, for one, is starting to get a little peeved. "Everyone is in a bunker," said the straight-talking former chief exec of General Electric (GE ) at a New York City conference on June 20.
"We have to just go back and do our jobs and do them right," Welch told a roomful of corporate bigwigs, including eBay (EBAY ) President and CEO Meg Whitman and Todd Thomson, chief financial officer of Citigroup (C ).
CEOs owe it to investors and employees -- both of whom have seen large amounts of paper wealth vanish -- to speak out, Welch said. Employees "are worried about whether their companies are right on," declared Welch at a business-strategy conference sponsored by global consultancy Bain & Co. at New York City's St. Regis Hotel. To lead, CEOs must have good judgment and the trust of their stakeholders, said Welch, who added: "Does the [CEO's] team know what their company stands for?"
The man who earned the nickname "Neutron Jack" -- for aggressive cost-cutting that eliminated employees but left buildings standing -- also defended his former company, which has been criticized for its accounting methods. In particular, GE has been chided by some mutual-fund managers and others for relying too heavily on acquisitions to boost earnings. Acquisitions are "one of the elements of growth," Welch said, adding: "Now they treat acquisitions like a four-letter word."
Welch also said corporate-governance reforms proposed by the New York Stock Exchange "aren't that bad." Among its proposals are that a majority of the directors of NYSE-listed firms should be nonemployees and that CEOs should have to personally certify the accuracy and completeness of information provided to shareholders.
Companies need directors who have "the guts to speak out," Welch said, while admitting that most managements don't want boards that will try to either dictate policy or ignore the company's execs. Conceded Welch: "It's a fine line."
"The only thing that will get us out of" the economic slump, Welch said, is for companies to deliver financial performance that investors and employees can trust. That's predicated, of course, on having CEOs who do the right thing.
By Eric Wahlgren in New York