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Tuesday, March 18, 2008
GEWatcher 7- A Two Sided Sword- Taking Public Stands
Throughout GE's history its CEO's have been willing to take public stands on major issues and influence public policy. Gerard Swope, the GE CEO from 1923 to 1939, was a major advisor to the Roosevelt administration and was the architect of the National Recovery Act and Social Security. Ralph Cordiner was a strong proponent of legislation that was viewed as anti- Big Government and anti- Big Labor. Cordiner hired Ronald Reagan to espouse these views.
Jeff Immelt in 2004 conceived the idea of building on the need to "green" the world and at the same time sell GE products. He called this "ecomagination" and has created specific measures on helping the company improve its own energy savings, but also to demonstrate how it is has impacted the company revenue and earnings growth.
All of the GE's CEO have tried to blend their efforts to INFLUENCE public policy and support the company's ability to compete and be profitable. Swope's NRA program would have created cartels and permitted leading company's in each industry sector to increase their leadership position. The NRA only lasted three years and was declared unconstitutional. Cordiner recognized that if BIG government and BIG labor controlled the economy GE would not be able to compete. Immelt recognizes that GE will significantly benefit by helping the country and the world become more ecologically friendly.
Unfortunately, when a major company and its CEO takes a stand there will always be advocates of the opposite point of view that will challenge you, especially if you represent a major company.
Jeff Immelt experienced this reality at the Eco:nomics conference at which he was invited to speak. He said: " I came because I was invited"..and "I don't need to be lectured by anyone in this room on how to compete". "Immelt's outburst came toward the end of a Q &A session that saw him repeatedly assailed by ideological conservatives angry over his involvement in the US Climate Action Partnership, a coalition of large businesses lobbying for a carbon cap and trade system, and his leadership role in pushing the business world to embrace clean energy and sustainability."
Immelt obviously was angry and it is apparent that he didn't expect to be criticized. Unfortunately, he must recognize that he must always be ready to defend his position both from a external, value to the world and customers, and internally, making money. Jeff seems to been unprepared for being criticized and reacted.
Jeff made another good point in his talk: " There is no completely free markets. The government has its hand in every industry: housing has mortgage tax credits' GE got into commercial aviation because of DOD helped fund it; etc.... " It is true that GE entered and has been supported by government money. It developed the jet engine during WWII because the US needed a jet engine... its nuclear technology was a by-product of the US nuclear program... and many other businesses were supported by the US government. This is only fair since all of its foreign competitors have been financed and supported by their governments. Nothing is pure...
Overall, I applaud Immelt's focus on helping solve the environmental and pollution problems since it has the abilities to do so...but it must always be remembered that his primary mission it to enhance the wealth and well being of his key stakeholders...employees, investors etc. He must never be SURPRISED or upset when others challenge his strategies and mission. This is just part of the game!
GE Update... June 28,2007- "Doing Right Voluntarily" was the slogan used by Cordiner and Boulware in dealing with union negotiations. The company asserted it did its homework and developed a union agreement that would balance the interests of all the key stakeholders. This is discussed in Chapter 8 of the book.
GE appears to be still adhering to this basic and successful labor relations approach. The just signed union contract provides improved wages, health care, vacations and strengthens pensions, while reducing the contributions required.
Most significantly GE intends to improve the pensions of the existing pensioners, starting with those who have been retired the longest will get the largest increases. This is fair since many of these retirees are having trouble living on the pensions they receive since their salaries were low and the cost of living is significantly higher.
I described in the book that GE has gained significant monetary rewards from the GE Pension Trust and had not made significant improvements in the pensions.
This has changed and it appears that Immelt and his team are willing to "do right volunartarily toward its pensioners, as well as employees"...
I hope this is recognized by other leaders and they get the message that all of the key stakeholders must benefit and not just a few at the top. Good job...Jeff and his team.. who recognize the need to be "fair and balanced".
June, 2007 Boulwarism is ALIVE AND WELL.. One of the keys to GE's historical success was its ability to control the union. In the 1950's Ralph Cordiner appointed Lem Boulware to stop the union and big government's power over the company's ability to control its own destiny... it worked! GE is not burdened by the huge pensions and benefits that have caused the auto industry to become a second tier group in its own market.
Bill Conaty is retired, but kept on board to lead the union negotiations with a weaken Union. He appears to successfully continued the tradition of doing right voluntarily ( the motto of the Cordiner era). The contract provides for improved wages, health care, vacations and retirement benefits and did not force employees to significantly increase their contribution to health care... THIS IS REMARKABLE... in this era, when almost every company is reducing benefits and increasing cost of health care.
Immelt deserves to be congratulated for this...but even more important he is going to improve the "pensions of those who have already retired". The details are not clear, but it is clear that those who retired the longest will get the most increase.
In my book, I point out that GE has been reaping the rewards of the PENSION TRUST and using the excess returns to pad their bottom line. It appears that JEFF IMMELT is going to share some of these returns... of course, you must remember that one of the proponents of helping retirees, is his own father, who retired from GE....again congratulations for keeping the tradition of DOING RIGHT VOLUNTARILY...
GE Update- May, 2007
"GE pushed to disclose donations" ... this was the headline of the AP on April 25, 2007. It raised the issues as to whether GE had been contributing to the Jess Jackson programs...GE denied it...but it is interesting that GE held its annual meeting in Greenville, S.C., Jackson's home town.
"The Power of Green" (New York Times Magazine, April 15,2007) highlighted both the challenge and desire of GE to use " ecomagination" as a means to both help reduce the carbon dioxide issues and make money". It is clear that the author was very positive about GE's commitment and desire to help solve this major issue.
Firing Immus. MSNBS a GE cable network was one of the first to take a stand and fire Immus for his remarks about the Rutgers' women's team.Steve Capus, president of NBC News stated Immus's views were racist and this was not the first time. He believed that this type of behavior didn't belong on the NBC networks. (NY Times April 12, 2007.
GE's Union negotiations have just begun. The key issues are job security, health care and pensions, all of which GE are forcing the employees to pay a great share. The unions only have 17,000 members.. a far cry for the past days. It appears that Boulwarism really did the job and enabled GE to maintain a competitive position, while others like GM, Ford and Chrysler, who gave away the company in the 1960's, are in a survival mode and their future doesn't look very promising.
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