Saturday, May 04, 2002
5/3 Day energized by Welch speech
By Jeff McKinney firstname.lastname@example.org
The Cincinnati Enquirer
Former GE chairman Jack Welch visited Cincinnati Friday, to enlighten and inspire some of the Tristate's top business leaders with his views on everything from the Enron scandal to the keys to running a great company.
Mr. Welch, often viewed as one the world's most admired, powerful and dynamic chief executives, spoke to about 1,500 local business leaders as part of Fifth Third Bank's Business & Market Series. The speech, at Music Hall, was part of its annual 5/3 Day held each year on or around May 3.
The Cincinnati-based banking company brought in Mr. Welch to drum up some new business with some of the Tristate's most powerful and visible corporate leaders.
Mr. Welch, who helped build General Electric's market value from $12 billion to more than $36 billion during his 20-year reign, fielded questions from the audience as relayed to him by the bank's top executives, including chief executive George A. Schaefer Jr.
If there is anybody here from GE Aircraft Engines tell them their pension plan might be in trouble. I've worked at GE for 20 years and nobody ever told me
about this bank's (Fifth Third) stock, Mr. Welch joked. Fifth Third has one of the banking industry's best-performing stocks.
Mr. Welch peppering his comments with jokes, nifty quips and anecdotes then got serious and spoke on numerous topics.
On his greatest innovation, great challenge at GE:
Mr. Welch: I'd say, can I have two. One was stomping out NIH not invented here. Everybody at GE knows they're not the smartest person in town. And, to help make them be open to the idea of getting their hands on finding the better idea. Second, we made the company informal. I don't mean people wearing ties or not to work, but making us people-conscious. We made sure everyone counted and made them know we care about them.
On media reports that the economy is still weak and that were facing difficulties:
Mr. Welch: In 1980, when I took over GE, the nation had nine consecutive quarters of negative GDP (gross domestic product), the inflation rate was 14 percent and prime rate to borrow was 21 percent and unemployment was 10 percent and many thought the Japanese were going to take over America.
Now, we have one quarter of negative GDP, unemployment is below 6 percent and you can buy a home for (a mortgage rate of) less than 7 percent. These are not the toughest of times. We have the best economic platform we've seen in decades.
On retaining top-performing employees, motivating them more and running a good company:
Mr. Welch: The job of any good leader is to create an atmosphere where work is fun. Where people can reach their dream, and get the resources they need to do things. You must have a system that tells them if they're performing well or not point blank. At all times, let them know where they stand. Also have a system in place that rewards good performance, including stock options. Shame on companies that don't let people know where they stand.
On the Enron scandal and board leadership:
Mr. Welch: I remember Enron when it started out as a small pipeline utility company that was steadily growing. (Over the years), they diversified and began trading everything, including water, weather, Blockbuster videos and electrons. The media bought it, Wall Street bought it. But then a couple of things may have happened that should never happen: Someone approached their board and decided to suspend the company's code of ethics. It's like they put in a system where the CFO (chief financial officer) starts a business on his own, readopt the code of ethics later. Yeah, we can make reforms and fixing up things like 401(k) pensions. But to legislate behavior around bad actors is nuts.
We should not overreact to Enron, but do the right thing. Instead, we should put a bigger and heavier onus on boards to know the characters they're directing. I don't think Enron is systemic. Good people run good companies, and should not feel bad about it.
On globalization in the past five years:
Mr. Welch: It's the greatest thing we've had to make the have-nots get closer to the haves. Sept. 11 has put some stickiness to the situation, but it's still great. Look at Ireland, a subject I know about. In the last 14 years, the GDP is growing very rapidly, personal incomes are up four-fold and they have a great education system. All of that is a result of expansion in that country by the United States and Europe. Go to India, where we (GE) have 33,000 employees.
Globalization has not cured everything, including things like cancer. But there is not another government institution that's done more for moving the have-nots closer to the haves.
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