[0zymandias]

Jack Welch retired in 2001 after twenty years as CEO. "Upon his retirement from GE, Welch had stated that his effectiveness as its CEO for two decades would be measured by the company's performance for a comparable period under his successors"

If we use the long-term yardstick that Jack Welch suggested we use, he does not come out looking good. We are now at roughly the two-decade mark and GE is trading at the same price that it did in 1992 and 80% below where it was when he retired.

[erichurkman]

To read that quote differently:

1981 • Jack Welch becomes CEO • $1.29 2001 • Jack Welch retires • $37.20 (down from its peak of near $60.00 in mid 2000) 2020 • Nearly 20 years post Jack Welch • $6.28.

20 years of Jack Welch - +2,800% increase 20 years after Jack Welch - -83% decrease

[0zymandias]

2800% is a much bigger number than 83%. But if you do the math using your numbers, you see that GE substantially underperformed the S&P since 1981:

GE = (1+2800%)*(1-83%) = 4.93 = 393% appreciation since 1981.

S&P = S&P has appreciated 2000% since 1981.

GE << S&P

[ivalm]

To be fair, most companies underperform s&p 500. S&p is driven by giant winners, and every generation has different winners. In the 90s GE was the winner and other companies in s&p trailed them. This is what makes survivors like Microsoft so amazing, they managed to remain on top by reinventing themselves many times under different leaderships.

[erichurkman]

Maybe that's why Welch said to measure against GE's future leaders if they are destined to forever underperform the S&P. :)

[ping_pong]

Meh, that's a completely arbitrary measure and flippant at best. He has no control over what his successors do, or their strategy. I, and many many others, prefer to judge him by how he handled the company when he actually had control over it.

[Ididntdothis]

When you read his book he portrays himself as a teacher and mentor to the next generation of managers. GE was supposed to crank out high quality managers. He maybe did a good job himself (or was lucky with this timing) but he totally failed at preparing the company for a time after him.

[0zymandias]

I didn't come up with it. It is the yardstick that he suggested we use to measure his performance :)

And it's a well-known issue with executive compensation that CEOs will juice numbers in the short-term to get their payouts which is likely why he proposed this as a measure of his performance.

[ping_pong]

Yes, I know. But it's a nonsensical way to measure it. Is sounds like something he said flippantly without thinking about what that meant, because it's meaningless.

[javajosh]

An interesting comment because it's a good example of what you see more and more of from people with a positive emotional disposition toward someone who won't let them fail or look bad even if its quite obvious that they failed, and it looks bad (and even if they themselves would admit it).

As a factual matter, the measurement isn't meaningless at all. Give Jack some credit.

[ping_pong]

So are you saying that the new successors to GE have no agency at all, and they are just following a script? That's ridiculous. The CEOs of GE have not been great or successful but that's on them, not Welch.

[javajosh]

Presumably Welch believed in the hiring system he put in place. It was also an audacious claim, which comes with its own rewards. But folks like you let Welch have his cake and eat it too: he gets the praise for making an audacious claim, and then when it turns out false, folks like you make excuses for him.

It's good to be the king, I guess.