advertisement
advertisement
advertisement

Sorry, Mr. Welch.

Like all of us, I rely heavily on the media’s representation of the facts. In a number of articles I have penned recently, I ascribed the birthing of the “shareholder value” movement to comments made by Jack Welch. I was wrong in assuming this was accurate.

Sorry

Like all of us, I rely heavily on the media’s representation
of the facts. In a number of articles I
have penned recently, I ascribed the birthing of the “shareholder value”
movement to comments made by Jack Welch at his 1981 annual shareholders meeting.

advertisement

I assumed this was accurate–as I have heard
this from many CEOs and directors over the years, as well as reading it in a
number of well-respected business journals.

In fact, the Financial Times whom I quote in my previous
articles states “The birth of the
shareholder value movement is commonly traced to a speech Mr. Welch gave at New
York’s Pierre hotel in 1981, shortly after taking the helm at GE.”

I recently had the opportunity to speak directly with Mr.
Welch and I come to find out this is absolutely not true. He contends that there was nothing in his
presentation to shareholders that in anyway says that maximizing shareholder
value is the number one goal of GE.

In fact, Mr. Welch said, he may be known for many things–Neutron Jack, be number 1 or 2 in your market, and whatever else people might
think of his management style, but he never put shareholder value above serving
customers and building an organization of talented people to better serve those
customers.

He commented that he never saw GE as merely a brick and
mortar building rather it was the blood and sweat, the passion of the people
that made GE, and resents being ascribed as the father of the shareholder value
movement. He commended us on our efforts
to further this philosophy with new model, The Living Organization®.

I was embarrassed that I fell prey to the media. I took the time to read Jack’s 1981 presentation
to shareholders and I have to admit cannot find one statement in there that
says GE is committing to maximizing shareholder value as their number one goal.

advertisement

So I, for one, intend to set the record straight. It was not Jack Welch that set off this
torrent that shifted the focus from serving customers to maximizing shareholder
value. Perhaps it was the investment community
themselves that decided what Jack said meant he was going to maximize
shareholder value because that is what served their purpose the best. Or perhaps it was just the time and mood of
our society that the investor, who by that point in time became you and me and
everyone who had 401k and mutual funds wanted to see our returns grow no matter
what.

Whatever the real cause, I am glad to see that our society
is beginning to wake up to returns are but the by-products, the result of
serving customers. I am glad to see that
Jack had a chance in that same Financial Times article to state his real
position is quotes, “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.”

Jack, I apologize for misrepresenting you and thank you for
taking the time to share your thoughts with me.

Norman Wolfe
President/CEO
Quantum Leaders, Inc.
Executing Strategy
http://www.QuantumLeaders.com

http://www.QuantumLeadersBlog.com
http://QuantumTwitter.com
http://QuantumYouTube.com
http://QuantumFacebook.com

About the author

Throughout his professional career as a Chief Executive Officer, Corporate Director, and Advisor to CEOs, Norman Wolfe has successfully guided corporations through major transitions leading to substantial growth, market expansion and enhanced financial performance. Currently, he is the Chairman and CEO of Quantum Leaders, a leading edge consulting company guiding boards and CEOs to improve strategy execution.

More