SEC Probing Former GE CEO Welch
HARTFORD, Conn. – The Securities and Exchange Commission has opened an informal investigation into former General Electric Co. (GE) chief Jack Welch's retirement perks. which became public in divorce papers filed by his wife.
GE said Monday it learned of the informal inquiry last week, after its board agreed to take back many of the benefits at Welch's request.
Welch, who helped build GE into a powerhouse conglomerate, is one of the most admired businessmen in the country and his management techniques are widely studied. He retired a year ago.
But the details of his retirement benefits were not spelled out until this month, when his wife, Jane, filed legal papers in which she argued that the $35,000 she receives in support each month is not enough.
GE paid all expenses at Welch's Manhattan apartment, including food, wine, cooking and serving staff, laundry and furnishings, according to the divorce papers. The company also paid for his travel expenses, entertainment, private car and driver, and computer equipment.
The SEC also did not return a call seeking comment. Analysts said they believe regulators want to make sure Welch's compensation was properly disclosed to shareholders.
A 1997 proxy statement about Welch's impending retirement said only that he would receive "continued lifetime access to company facilities and services comparable to those which are currently made available to him by the company."
On Monday, The Wall Street Journal published a column by Welch in which he said the perks had been "grossly misrepresented" in the divorce case.
"For the record, I've always paid for my personal meals, don't have a cook, have no personal tickets to cultural and sporting events, and rarely use GE or NBC seats for such events," Welch wrote. "In fact, my favorite team, the Red Sox, has played 162 home games over the past two years, and I've attended just one."
But Welch said that in an era of alleged abuses by senior managers at such companies as Tyco International, Adelphia Communications and ImClone, he was giving up the perks because "perception matters."
"In this environment, I don't want a great company with the highest integrity dragged into a public fight because of my divorce proceedings," he wrote. "I care too much for GE and its people."
Analyst Nicholas Heymann of Prudential Securities said Welch is caught in a backlash against corporate wrongdoing. Heymann argued that if any chief executive deserved retirement rewards, Welch might be the one.
"Nobody created as much shareholder value on his watch, not even Bill Gates," Heymann said. He said the value of the perks was minuscule compared with GE's profits and should have no financial effect on the company.
During Welch's two decades as GE's leader, the company expanded from a $13 billion maker of appliances and light bulbs into a $480 billion industrial and media giant that owns NBC.
In Monday's column, Welch wrote that he agreed in 1996 to extend his tenure at GE through 2000 and chose to take a package of benefits extending into his retirement instead of accepting a one-time payment of tens of millions of dollars.
But he said he had since asked the GE board to eliminate everything "except the traditional office and administrative support given for decades to all retired GE chairmen and vice chairmen."
GE spokesman Gary Sheffer also said Welch would reimburse the company for the value of any services and facilities he has used since his retirement -- an amount Welch estimated at $2 million to $2.5 million.
The Welches disclosed their plans to divorce in March, shortly after Harvard Business Review editor Suzy Wetlaufer disclosed she had become romantically involved with Welch while working on a story about him.
Welch could not be reached for additional comment Monday. He did not return messages left at his GE office and with his divorce attorney.