How Jack Welch’s Success Wrecked the Idea of the American Company

The recently deceased business icon pioneered mergers and acquisitions, stock buybacks, and offshoring

Matt Stoller
Marker
Published in
4 min readMar 5, 2020

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General Electric Chairman and CEO John F. Welch speaks during a news conference November 27, 2000, in New York City.
Photo: Chris Hondros/Hulton Archive/Getty Images

InIn early February of 1981, President Ronald Reagan picked his antitrust chief, William Baxter, whose arrival signified the reconstitution of monopoly power in America. Baxter restructured antitrust and merger law to prioritize economic efficiency and supercharged a merger trend already underway.

Low stock prices and high inflation meant that the new rule in corporate America was not to build products or services — it was to buy or be bought. Business goliaths restructured in the 1980s to take advantage of this new merger wave. The leader was a young and aggressive new CEO at one of the oldest and biggest conglomerates in America, General Electric.

Under Welch, the company began a policy of firing 10% of its employees every year, as well as spending billions of dollars to buy back stock.

Jack Welch — who died on Sunday at age 84 — was trained as an engineer and had made it to the top at GE by selling a new type of plastic. Citibank chief executive Walter Wriston was on the board of GE and had helped Welch become CEO. Welch made his mark as CEO not by engineering products, but by financial engineering. Welch understood earlier than almost any other business leader what the new pro-merger legal environment meant and announced at his first meeting with security analysts in 1981 that under his leadership, GE’s strategy would be to stop competing in markets where the company wasn’t number one or two. In any business in which GE wasn’t or couldn’t become the market leader, he would either have the manager find a way to get to number one, sell the division, or shut it down.

Within four years, Welch shut down a dozen of the company’s 217 factories and cut 18% of total employment at the company. Welch sold all mass market manufacturing lines, except big appliances and light bulbs. GE ditched its consumer electronics business. Under Welch, the company began a policy of firing 10% of its employees every year, as well as spending billions of dollars to buy back

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