When Jack Welch retired as chief executive officer of General Electric he did so to the hosannas of tens of thousands of employees and hundreds of thousands of shareholders (not to mention the business press). When it came to management styles and practices his were considered to be the gold standard.
No one begrudged him his retirement package, stock options or even his consulting contract to provide five days of work a year to GE for $86,000. Since then, however, a good deal more has come to light in the wake of his wife’s divorce suit (prompted by his much publicized “friendship” with an editor of the Harvard Business Review). Welch, it now appears, was so afraid of poverty that he got GE to agree to embellish his retirement with a basketful of perquisites including automobiles, use of a GE private jet, a New York apartment, box seats at Red Sox games and various home gadgets. All that seems missing is a lifetime supply of toothpaste. It’s a good thing we have air conditioning. Without it he might have demanded the services of a fan bearer, à la the late Emperor Haile Selassie of Ethiopia.
What prompted this grasping for comparative trivia by a man worth something on the order of $700 million (before the divorce settlement)? Who knows, but it says much about the way he’s managed his retirement.
Getting much bigger headlines are the unplanned retirements of several other CEOs — those of such companies as Enron, Global Crossing, ImClone, WorldCom and Tyco. Most of them–along with various colleagues — have been accused or indicted of having cooked the books, shortchanged employees and shareholders and been all-around masters of greed. Take Dennis Kozlowski, the CEO of Tyco, a conglomerate which owns several hundred businesses. He was brought down by a scheme to defraud New York State of the sales tax on some paintings he purchased. Compared to his high net worth, the amount of the sales tax was relatively minor, but he had risen to great heights in the business world and came to believe the testimony of his sycophants that he was invincible.
The sales tax scheme led to larger investigations and, last week, the indictment of Kowslowki and two confederates of looting Tyco of $170 million! The Rigas family — father and sons — has been accused of a similar crime at Adelphia, a cable television company. Both companies are publicly traded. The penalty for treating such companies as private piggy banks is a one-way ticket to a publicly owned license-plate factory up river. Some retirement.
Another type of CEO retirement that happens now and then involves the executive who suddenly realizes he has nothing to fill his days. I recall one CEO of a large U.S. company who retired a few years ago, satisfied he had placed the right successor in his office. His old chair was scarcely cold when he decided it was a mistake. He spent the next year, as a board member, campaigning to get rid of his successor. He succeeded. But what to do for an encore? Golf seems tame by comparison.
The fourth way for a CEO to retire is quietly and with dignity. He is comfortable putting the company in the hands of a carefully chosen successor; he does not think all good judgment resides in himself alone. He hands his successor the key to the office, says “Call me if you need me,” and is gone. Walter Wriston, the former CEO of Citibank, comes to mind as an example of this type. For several years thereafter he wrote thoughtful pieces on broad-gauge problems of mankind. He engaged in no public second-guessing about his successors and went about his affairs with self-assurance and dignity.
Whether they like it or not, the chief executives of large publicly traded companies live in glass houses, not on isolated islands. And, like it or not, they are members of a segment of the leadership of the nation. Those CEOs who rode atop the dotcom and telecom bubbles did not have enough seasoning in the business of management to understand this. Others, such as Welch, did, but forgot to take a foot off the gas pedal when it came time to turn over the keys.