Ethics Legendary Leaders

7/29/2019 Ethics Legendary Leaders

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Professor Jaana Myllyluoma, Ph.D.

Team 4: Randall Casper and Vincent ZhangAssignment 1: Leadership Ethics Proseminar

March 5, 2011

Legendary LeadersJohn Francis Welch, Jr.


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Legendary Leaders: Jack Welsh

I. Who is Jack Welch?

II. What is the Moral Challenge?

III. Discover the Facts

IV.Evaluate Stakeholders Claim

V. Discern the Options


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Legendary Leaders: John Francis Welch, Jr.

Who is Jack Welch? born in 1935 in Peabody, Massachusetts.

BS chemical engineering from University ofMassachusetts at Amherst, 1957

PhD from University of Illinois Urbana Champaign,1960.

In 1960, joined General Electric, at a plant inMassachusetts.

became a vice president of General Electric in 1972

moved to GE's consumer goods and services division in 1977.

vice chairman of E Credit Corporation in 1979

CEO and chairman of GE in 1981 (age 46)
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Legendary Leaders: Moral Challenge ofShareholder Value Movement

Jack Welch gave a speech in 1981 at NewYorks Pierre hotel, shortly after taking the helmat GE.

This speech was the birth of the ShareholderValue Movement.

In the speech, entitled Growing Fast in aSlow-Growth Economy, he outlined hisbeliefs in selling underperforming businessesand aggressively cutting costs in order todeliver consistent profit rises that wouldoutstrip global economic growth.
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History of the Issue

Before the era of Reagan, it was generallyunderstood that business operated on a stake-holdermodel.

Companies were privately held but public in nature

given that they were accountable to smallshareholders and unions as well as large investors

Jack realized from the start that he needed to makesome changes in order to stay competitive.

He decided to reorganize GE by focusing only onthose businesses that were strongest, manufacturing,

services, and technology.

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Shareholder value is a result, not a strategy

your main constituencies are your employees,

your customers and your products.

On the face of it, shareholder value is thedumbest idea in the world.
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Legendary Leaders: Jack Welsh, Neutron Jack

135,000 GE employees paid off this is 25

percent of the company's workforce.

73 plants closed and 232 offices sold infive years.

GE's various companies were organizedinto three umbrella groups:manufacturing, services, and technology.

Neutron Jack.
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Legendary Leaders: Jack Welsh, WINNING

GEs success under Jack Welch

conglomerates market capitalization rosefrom $13 B to $400 B

profits grew tenfold to almost $14 billion

prompted many executives to placegreater emphasis on shareholder value.

Many fund managers also backed conceptbecause they are judged on a quarterly

basis.


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The Stakeholder CSR Model

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Tertiary

Secondary

Primary

THE FIRM

Intermediaries

Influence/support

COMMUNITIES

CUSTOMERS

EMPLOYEES

FINANCIERS

SUPPLIERS

GOVERNMENT

MEDIA

SPECIAL

INTEREST

GROUPS

CONSUMER

ADVOCATE

GROUPS

POLITICAL

ACTORS

COMPETITORS


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Jack Welch, whose stellar record in his two decades at GE helped

make shareholder value popular, said that it was wrong for managersand investors to set consistent earnings growth and steady share priceincreases as their overarching goal.

shareholder value come as the credit crisis and the global economic

slowdown have caused a radical rethinking of many of the corporateand financial beliefs that held sway over the past few decades.

others who tried to perpetuate the stakeholder power model and theywere generally eaten up by the market place.

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C f


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Legendary Leaders: Moral Challenge ofShareholder Value Movement

Shareholder Value in the Current Credit Crisis and Global

Economic Slowdown?

We have to look critically at his success in light of the strengths andweaknesses of the shareholder value movement.

We had to really assess who were the winners and the losers.

Jack Welsh was succeeding at the expense of others in a globalcapitalist market where we do not yet have new and sufficient standardsfor doing business.

Context influence behavior and influences strategic decisions aroundbehavior.


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