screw you welch

[wilt the stilt]

Welch rues short-term profit 'obsession'
why anyone ever thought this guy was good beats me. I always thought he was a complete asshole
Financial Times
12-Mar-2009
By Francesco Guerrera in New York
Jack Welch, who is regarded as father of the "shareholder value" movement, has said the obsession with short-term profits and share price gains that has dominated the corporate world for over 20 years was "a dumb idea".

In an interview for the Financial Times' series on the future of capitalism, the former General Electric (NYSE: GE - News) chief said the emphasis by executives and investors on shareholder value since he spelt it out in a speech in 1981 was misplaced.

Mr Welch, whose stellar record in his two decades at GE helped make shareholder value popular, said that it was wrong for managers and investors to set consistent earnings growth and steady share price increases as their overarching goal.

"On the face of it, shareholder value is the dumbest idea in the world," he said. "Shareholder value is a result, not a strategy...your main constituencies are your employees, your customers and your products."

Mr Welch spoke at the weekend, before Thursday's news that GE, which he left in 2001, had been downgraded by Standard & Poor's, losing the pristine triple A rating it had held since 1956.

http://us.ft.com/ftgateway/superpage.ft?news_id=fto031220091430053057

[av8rdave]

1. Actually, I agree with what he said here, although I'm not convinced he ever practiced that

Good share prices should be the RESULT of running a profitable business that's good for the customers and the employees.

Too many managers/CEOs over the years focused all of their decision making on "shareholder value," which means they cared more about stock price (because they were at least partially compensated with stock options) rather than the company's quality and profitability.

Focusing on stock price is like pushing string over the long term.

"On the face of it, shareholder value is the dumbest idea in the world," he said. "Shareholder value is a RESULT (emphasis mine), not a strategy...your main constituencies are your employees, your customers and your products."

Those words I have to agree with.

[amandabeech]

2. He favored firing 20% of the workforce every year, whether they deserved it or not.

His theory was that the corp always had to get the best people. What really happened is that you didn't find many employees at GE with more than 5 years of experience there.

Jack Welch explained this to Sue Herrera on CNBC one day, and she just nodded along.

Welch needs to go back on CNBC and tell her that he was wrong, wrong, wrong.

And take Alan Greenspan along with him.

[av8rdave]

3. Obviously, I DON'T agree with that philosophy!

Don't take my post wrong. I am no fan of Jack Welch. My only point was that I agree with the sentiment that "shareholder value" is a bu!!sh#$ goal for a business.

His theory of firing 20% belongs in the same dumpster with the one espoused by James Broadhead, former CEO of Florida Power & Light. His theory was that workers are most productive when you keep them in constant fear of losing their job.

While there might be some truth to that in the short term, he never recognized the impact that kind of atmosphere has on quality and customer service.

Most of those guys are wrong. Nowadays, they are there to make a pile of money for themselves - not run a good business.

[amandabeech]

4. I agree that most of these folks are quick buck artists.

I hope to see quite a few of them doing the perp walk on CNBC.