GE cuts to Welch's deal may trigger reviews across US
General Electric (GE) has cut back Mr Jack Welch's controversial retirement package in a move that could trigger a wholesale review by other US companies of how they reward their senior executives.
GE also announced that the Securities and Exchange Commission had launched an "informal investigation" into its former chief executive's contract, signed in 1996.
The decision to amend the multi-million dollar package, at Mr Welch's request, followed an uproar at the details of the retirement benefits after they were disclosed in a divorce filing by his estranged wife 10 days ago.
The scaling back of the package comes as shareholders and unions step up their campaign for pay restraint from corporate managers in the US.
Today in New York, a high-level panel organised by the Conference Board, the business research organisation, will make recommendations to curb bloated executive pay and benefits.
Mr Warren Buffett, the influential investor and long-time critic of excessive executive pay, is understood to have been one of the people Mr Welch consulted about the changes.
In an article in the Wall Street Journal, Mr Welch gave the reasons for his decision to renounce all but the office and administrative support offered by GE.
Mr Jeffrey Immelt, his successor at GE, expressed his admiration for the decision in a memorandum to employees and shareholders yesterday and said it was "typical of Jack's commitment for 40 years to GE, its reputation and its people".
Mr Immelt has subtly changed the tone of GE's disclosure and corporate governance since taking over from Mr Welch a year ago. The recent media attention paid to the details of Mr Welch's retirement package looked like a setback to the campaign to make GE a model of good practice.
But Mr Welch said yesterday that to "avoid the company being dragged into a public fight because of my divorce proceedings" he would pay the cost of using most facilities and services, including jets and apartments. He estimated the cost at $2 million (€2.06 million) to $2.5 million a year.
Mr Welch's announcement is significant because of his status as one of the iconic US businessmen of the bull market and because it comes at a time when excessive executive compensation is at the top of the agenda for reform of corporate America. - (Financial Times Service)