When Jack Welch, the former GE CEO dubbed Neutron Jack, died at 84 it may have been the passing of one of the ugliest faces in capitalism but not the end of the ugly form of capitalism he represented.

During his career he was lauded as a business genius and leader but behind the hype was a different story. Debt-fuelled growth; massaged GE’s earnings to hide systemic company weaknesses; a ‘rank and yank’ personnel philosophy which led to the systematic firing of 10% of those deemed to be the company’s weakest performers each year; a key division, GE Capital, a basket case which had to be rescued during the GFC and then be quietly put down after credit card and other scandals; and, the final reward for all this – a severance of payment of $US417 million.

Yet The New York Times obituary said he “led General Electric through two decades of extraordinary corporate prosperity and became the most influential business manager of his generation.”. Fortune magazine named him manager of the century. It seemed to have forgotten about Henry Ford or Alfred P. Sloan.

GE was founded, of course by Thomas Edison, who was no stranger to sharp practices. The electricity wars against the electrical system of the genius, Nikola Tesla, whose alternating current system we use today despite Edison’s attempts to denigrate and destroy it. By the 1950s it was a model for much of US big business and when Welch took over in 1981 it had a proud history, good labour relations, strong manufacturing and a history of innovation.

Welch introduced a new form of innovation – financial management epitomising the belief that corporations existed solely to maximise shareholder value. His nickname was ‘Neutron Jack’ after the neutron bomb which was, allegedly, a low yield thermonuclear weapon designed to maximize lethal neutron radiation in the immediate vicinity of the blast while minimizing the physical power of the blast itself.

In Welch’s case it was business units and staff which got both radiated and subjected to a physical blast. In his first four years as CEO more than 110,000 employees were sacked. Meanwhile, his compensation package triggered a trend throughout US business. In 1980 the average US CEO made 34 times the average worker by 2000 the gap was more than ten times larger.

The Economist (7 March 2020) pointed out that GE revenues under Welch quintupled while “total shareholder returns, including dividends, rose 70-fold, more than three times as fast as those for the S&P index of big corporations.”

When he took over GE its market value was $US15 billion When he retired 20 years later it was $US402 billion. As a former US business journalist, Jon Talton, wrote recently: “GE’s stunning share price growth was driven not only by good timing, but by financial chicanery and huge risk taking — in particular with GE Capital. GE’s share price, which hit $58 in 2000, fell as low at US$7.51 this year, a drop of almost 90 percent. The two decade decline was precipitated by Welch’s debt binge, from which GE hasn’t yet, and may never, recover.”

Yet what was his legacy beyond a best-selling book, Winning, about how he was all about ‘winning’? It may have inspired the philosophy of Donald Trump who inherited a fortune from his father and has managed to go bankrupt five times. In Trump’s case the fight against releasing his tax returns is as much about preserving his self-belief of billionaire status and hiding bail outs from dodgy Russian money funnelled through Deutsche Bank.

But if winning in corporate terms includes handing on a going business to your successors then Welch was a loser – handing a hospital pass to his successor Jeffrey Immelt – and by the financial crisis of 2008 GE Capital had been put into oversight by the Federal Reserve as a systemic threat to the financial system and GE was struggling.

If it involved training up a series of managers who go on to be effective leaders in the company or in other places Welch also failed.

As Jon Talton writes: “Welch also left behind disciples who would go on to wreck other companies. Most prominent was James McNerney, who led Boeing from 2005 to 2015. McNerney joined GE in 1982 and lost the competition to follow Welch as CEO there. At Boeing, he brought the bullying, anti-worker techniques he had learned from his former boss.

“The fiasco of the much-delayed and over-budget Dreamliner left him untouched. Every year his compensation was in the tens of millions. In an unguarded moment, he said he wouldn’t retire because ‘the employees will still be cowering.’ (He later apologized). It’s not hard to trace the beating down of Boeing’s once-legendary engineering culture to the corner-cutting and regulator-capturing that led to the 737 MAX catastrophe.”

Welch was also not alone. While GE actually produced some great products and services some of its less savoury practices were magnified in companies such as Enron where McKinsey drove similar ‘rank and yank’ policies while garnering fees of $US10 million a year; employees were encouraged to buy Enron shares which turned out to be worthless; earnings and debt were massaged; and, then the accounts were signed off by Arthur Andersen with fatal consequences for the accounting firm.

The Arthur Andersen failure had one positive impact for its competitors though – they were rated too big to fail despite regular failings with audits of companies which fell into bankruptcy soon after a regular audit.

But while it is easy to highlight the bad behaviour of big business it is also apposite to consider the problems some different types of organisations – universities – are experiencing. Over-reliance on overseas students and casualised staff, who have been described as the adjunct serfs of academe, are just some of the problems. A recent New York Review of Books investigation (12 March 2020) exposes the problems this is creating in the US.