This is what drives companies to the ground. Jack Welsh compensation package:
The blemish to the reputation of former General Electric CEO Jack Welch, Jr. began with a divorce paper filed by his estranged wife Jane Welch. She complained that a $35,000 monthly settlement Welch offered her was nowhere near the amount she needed to maintain her living standards. In her affidavit, she estimated that the couple spent more than $126,000 a month. This money didn't even draw from the perks provided by GE in accordance with Welch's compensation package when he officially stepped down from GE in September 2001. It was the size and extent of these perks that created an uproar on Wall Street and with the public, which eventually forced Jack Welch to give up most of the free benefits he had enjoyed during the past year.
In the final full year with the company, Welch earned more than $16 million. The retirement agreement provides him with an annual pension of more than $9 million a year and a health and life insurances. As a consultant to the company, he is paid $86,535 for his first 30 days of work each year, plus $17,307 for each additional day. GE provides him with financial planning services to manage his fortune, which is estimated at nearly $1 billion.
Much of the controversy surrounding Welch's compensation is related to the company perks he can still access. These include access to the company-owned luxury apartment at the Trump International Hotel and Towers in New York City, unlimited use of a corporate jet (estimated at $291,869 a month), a grand tier box at the Metropolitan Opera, membership at country clubs, court-side tickets to New York Knicks games, box seats at Yankee Stadium, prime tickets to the French and U.S. Open and Wimbledon tennis tournaments, and VIP tickets to all Olympic events.
GE picks up additional tabs that a billionaire should have no trouble paying, leading many to accuse Welch of greed. Welch's wife claims that the company had paid nearly $7.5 million to furnish, finance security, and install high-tech equipment for their four homes.
In the face of numerous revelations about the greed of corporate executives, investors and analysts have been highly critical of Welch. Following Welch's compensation, GE's board was blasted for irresponsibility and recklessness by the company shareholders, whose stock has lost more than 45 percent of its value since Welch's departure. In response to the onslaught of criticism, Welch announced on Sept. 16 that he had renegotiated his retirement package with the board of GE and given up all of the controversial perks, even as he defended the original retirement compensation.
In an op-ed piece that appeared in The Wall Street Journal, he claimed that his wife had "grossly misrepresented" his contract with GE. He said that "the world has changed during the past year" and that in today's reality, his package may be "misportrayed as an excessive retirement package." Welch wrote, "One thing I learned during my years as CEO is that perception matters. And in times when public confidence and trust have been shaken, I've learned the hard way that perception matters more than ever."
He also noted that the compensation package was arranged in 1996 so he would stay with the company with the unanimous approval of the board. Although he was offered "a special one-time payment of tens of millions of dollars to remain as CEO until December 2000" he instead agreed to a contract that "spelled out [his] obligations to GE, including [his] post-retirement obligations and the benefits [he] would receive in return."
In the end, Welch said he approached the GE board to restructure his retirement package because an "unwelcome and inaccurate attention to the company" was brought about by his compensation. The new agreement excludes all free benefits from GE except for funding for an office and administrative support, which has been provided to retiring GE heads for decades. Welch will also pay the company about $2 million for other services that he had been receiving for free, although his pension was unaffected by the renegotiated contract.
The responses to Welch's concessions have been mixed. While many praised his continuing leadership to shield the company from further negative attention, others noted that the SEC had launched an informal investigation into Welch's compensation package to see if it had been appropriately released in GE's 1997 annual report. Others noted that the board had provided excessive compensation in the first place, and shareholders rightfully deserved to have their money back.
