Sep 17, 2002 4 min read

By Rich Harris Associated Press Writer

HARTFORD, Conn. (AP) – The Securities and Exchange Commission has opened an informal investigation into former General Electric Co. chief Jack Welch’s retirement perks.

Welch, stung by public criticism over the extent of the lavish package – which included use of a Manhattan apartment and corporate planes, asked GE to take back many of the benefits late last week. GE’s board of directors agreed to do so Thursday.

The company received notice of the SEC inquiry the next day and is cooperating, said GE spokesman Gary Sheffer.

The perks came to light as part of legal papers filed in a divorce case by Welch’s wife, Janet. She claims the $35,000 a month in support she is currently receiving does not provide the same lifestyle to which she was previously accustomed.

The divorce papers said GE paid for all expenses at the Manhattan apartment, including food, wine, cook and wait staff, laundry, and furnishings. In addition, the company provided for Welch’s travel expenses, entertainment, private car and driver, and computer equipment, the documents said.

On Monday, The Wall Street Journal ran 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.”

Welch, who retired just over a year ago, wrote that he agreed in 1996 to extend his tenure at GE through 2000 and opted to take a package of benefits extending into his retirement instead of taking a “special one-time payment of tens of millions of dollars.”

But he said he had since asked the GE board to eliminate everything from his contract “except the traditional office and administrative support given for decades to all retired GE chairmen and vice chairmen.”

Welch could not be reached for additional comment Monday. Messages were left at his GE office and with the attorney representing him in the divorce.

Analyst Nicholas Heymann of Prudential Securities Inc. in New York said Welch is caught up in a backlash against companies and executives who may have misled investors.

Yet if any CEO deserved such rewards, Heymann said, it might be Welch. 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 conglomerate.

Welch became one of the most admired businessmen in the country and received a $7.1 million advance for his best-selling autobiography, “Jack: Straight From the Gut.”

“Nobody created as much shareholder value on his watch, not even (Microsoft chairman) Bill Gates,” Heymann said.

Sheffer said Welch would reimburse the company for the cost of any services and facilities he has used since his retirement – an amount Welch estimated at $2 million to $2.5 million.

Sheffer said he did not know how the value was calculated. Welch would pay taxes for any personal use of the accommodations, he said.

GE said the terms of Welch’s compensation were contained in its proxy statement, filed with the SEC in March 1997. That document does not list specific perks but said the compensation was justified to ensure that “Mr. Welch’s skill and experience would be available to the company in the future.”

Heymann said Welch’s decision and the SEC probe should have no effect on GE, which reported net income of $4.4 billion, or 44 cents per share, in the three months ended June 30, compared with earnings of $3.9 billion, or 39 cents per share, in the same quarter last year.

“The $2 million or $2.5 million that was going to be involved here … is really inconsequential,” Heymann said. “I think the informal inquiry is simply a request on the SEC’s part to verify where in (the company’s quarterly and annual) reports they had previously publicly announced his agreement was in force.”

A spokesman for the Securities and Exchange Commission did not immediately return a request for comment Monday. The agency typically does not confirm or comment pending investigations.

The Welches disclosed their plans to divorce in March, shortly after Harvard Business Review editor Suzy Wetlaufer revealed she had become romantically involved with Welch while working on a story about him.

—

On the Net: http://www.ge.com