The Bureau of Labor Statistics was created in 1884 by Chester Alan Arthur — and now Jack Welch wants to see its birth certificate. President Arthur was a rock-ribbed Republican, a product of New York’s Conkling political machine, but he was clearly a shifty liberal.You can tell by the eyes.
Welch thinks somebody’s “cooking the numbers” on unemployment — and if anyone should know about “cooking the numbers” it’s Jack Welch. Manipulating information to influence an election? He should know about that too. There were well documented stories that he pressured staffers in NBC’s newsroom — who were also his employees — to declare his friend George W. Bush the winner of on the night of the disputed 2000 election.
These crazy new charges making the right-wing rounds cry out for a new definition of the word “conservative”: Someone who thinks the unemployment situation is even worse than anyone else does — but wants to do less about it. And Welch’s absurd, cackling, over-the-top comments may finally have stripped the veneer off the most carefully polished media image in corporate America.
It’s more than a little ironic that Jack Welch, who agrees with Mitt Romney that “corporations are people,” is pontificating about electoral matters. With its record of felony convictions, Welch’s GE wouldn’t even be allowed to vote.
With a management record like that, why did so many journalists give Welch a free pass?
It couldn’t have hurt that he ran a television network.
Welch’s now-infamous tweet said “Unbelievable jobs numbers..these Chicago guys will do anything. Can’t debate so change numbers.”
The target of Welch’s accusation is a bureau staffed by career civil servants who, as Chris Matthews pointed out in today’s epic confrontation with Welch, have always been impervious to presidential pressure — even from Richard Nixon.
To believe Welch’s charges, you’d have to believe that dozens of them would risk their careers now, that they’d all been bought off successfully without a single one of them running to the press or the authorities. You’d also have to believe that the Obama campaign was smart enough to pull this off, but not smart enough to figure out that being battered over jobs month after month was worse than waiting until the end of the election cycle to make an attention-grabbing fix.
Besides, if you could fix the numbers, wouldn’t you really fix them?
There’s something else Jack Welch should know: There’s another jobs report coming out right before the election. If anyone was going to rig the numbers, that’s when they’d do it.
People who aren’t wearing tinfoil hats know that jobs numbers are often revised like this. Welch kept raving on Matthews’ show as if gargantuan job gains had materialized all at once. They’re actually the result of a long-term adjustment, and are only a tiny percentage of the actual figures for that period. This month’s jobs numbers were right in line with expectations.
Now Welch is clearly worried that he’s damaged his well-cultivated reputation with this remark. He has. He seems concerned that he appears foolish, conspiratorial, reckless, and cynical. He does. So he tried to walk the charge back today, saying that he was only “raising questions” and wasn’t “accusing anybody of anything.”
That won’t wash. “Do anything.” “Can’t debate so change numbers.” The tweet speaks for itself.
I’m not saying Welch isn’t smart or talented. Sure he is — at some things, not all of which are negative. I had some interactions with some of GE’s operating units in the 1990s and they were among the best-run groups of their kind I’ve ever seen. That’s the upside of a management style like Welch’s. (We’ll get to the downside in a moment.)
Like any executive at a publicly traded company, Welch had a fiduciary responsibility to maximize profits. So I don’t fault him for being tough on his executives, or even for firing lots of people. His behavior reflected a system of incentives and obligations which our society tolerates and even encourages in its business leaders. That system is a topic for national debate, not personal censure.
But I do fault him for glorifying the act of firing people, which became a key part of his lavishly promoted self-image. (I wouldn’t be surprised if his own publicists came up with the nickname “Neutron Jack.”) And I blame the media, especially the business press, for becoming his flacks rather than reporting on his methods.
Welch was a prime example of the kind of CEO who forces as many gains as possible into each quarter, maximizing short-term profits (and his own income) without much regard for the company’s long-term health or stability. We’ve written before about the ways that mind-set places enormous pressure on managers — pressures that can lead to unethical and illegal behavior. At GE, it did.
In the Kidder, Peabody scandal of the early 1990s, a trader responded to parent company GE’s corporate pressure – and its rewards – by manipulating the Kidder Peabody IT system to misstate his earnings. That led to the biggest trading loss in history, as of its occurrence in 1994. Did his managers know what he was doing? That’s not clear – but they certainly had reasons not to look too closely. Did Welch know? There’s absolutely no reason to think he did.
But did Welch learn from this disaster? Did he change his management style after discovering that his overly aggressive, short-term-oriented punishment and reward system was morally and financially corrosive?
Unfortunately, there’s no evidence that he did. Welch wrote afterward that he regretted not checking on the situation personally. But he stuck with his aggressive, carrot-and-stick approach to managers’ incentives. And the scandals continued.
FAIR has the run-down on some of GE’s corporate convictions:
A 1990 conviction for “defrauding the Defense Department by overcharging the Army for a battlefield computer system,” according to Fortune magazine, leading to $20 million in fines.
A guilty plea on charges of “fraud, money laundering and corrupt business practices in connection with its sale of military jet engines to Israel.”
And, as FAIR notes, “A February 1994 report of the Project on Government Oversight found that GE had 16 instances of fraudulent activity against the government since 1990.”
The rap sheet’s gotten even longer under Welch’s hand-picked successor (who he later disavowed — for financial, not moral, reasons). But we don’t need him. The list of convictions during Welch’s tenure is long enough.
And questions have long lingered about Welch’s use of GE Capital, which he acquired, to practice what The Economist described in early 2002 as the “black art” of earnings manipulation.
“GE used to feature on university courses as a model of probity,” The Economist noted. “These days, it crops up in the seminars about earnings-manipulation.”
“Earnings manipulation.” Or, as it’s also known, “cooking the numbers.”
School For Scandal
Did you know that there’s something called the “Jack Welch Management Institute”? Perhaps unsurprisingly, it’s attached to a for-profit “university,” one of those scandal-plagued and overpriced degree mills that bilk the student loan system, have half the graduation rate of legitimate colleges, and wind up stripping students of both their money and their dreams.
Welch has no compunction about lending his name to a “university” whose president, as US News notes, “is paid $41.9 million a year, 26 times the highest paid presidents of America’s finest colleges and universities.”
But then, if you thought that might trouble his conscience, you don’t know Jack.
The “Jack Welch Management Institute” even offers a course in “Managerial Economics.” Managerial economics? From the guy who can’t read a jobs report without seeing little green men in the margins? What’s on the required reading list — alchemists’ potions? Dan Brown novels?
“Tap into the CEO mindset,” says the caption beneath Welch’s picture on the school’s website. To use an old Woody Allen line: No thanks, I’m due back on planet Earth.
The chortling, chuckling Welch on display with Chris Matthews is clearly satisfied with the work of his lifetime. No remorse, no regrets. People can draw their own conclusions about that.
Whenever I write about people like Jack Welch I’m asked if I hate them. Hey, I’ve spent very enjoyable evenings with guys like Jack Welch. (Not that it’s likely to happen with Welch, especially after this.) I don’t hate them at all. I just see them.
The behavior of our top executives is entirely predictable and, in its own amoral way, even reasonable. They are who they are. They’re a lot like football players: We select them for aggression, reward them handsomely for it, and then act surprised when they behave aggressively.
What’s truly irrational is society’s behavior, not theirs. We elevate these executives into figures to be admired and emulated, as if bank balances alone conferred wisdom or moralilty on their possessors. We’re the misguided ones, for treating them like sages. Sure, there are exceptions, but the typical high-powered executive isn’t likely to be a wise elder — especially about economic policy, which is a reflection of our national values.
When a CEO holds himself out as an economics expert, he’s saying the two fields of expertise are interchangeable. So why not suggest he hire an economist to run his corporation? Krugman may be interested.
We should see executives like Jack Welch for what they are: often talented but self-interested competitors whose behavior must be regulated, and whose incentives must not be designed to encourage illegal, immoral, or socially destructive acts.
Besides, let’s face it: Like their sports-playing compatriots and a lot of other people, they get a little unhinged sometimes. Take Jack Welch: He’s made his peers look like goggle-eyed members of a flying saucer club who see Venus in the night sky and think the mothership is approaching.
And he’s a member of the once-solemn Grand Old Party? Somewhere, out among the stars, Chester Alan Arthur is rolling his eyes in embarrassment.
(UPDATE: I see that the excellent financial blogger Barry Ritholtz also observed that “if anyone knows a thing or two about cooking the books,” and he did so with an impressive graph that backs up the observation.)