Jack Welch Effect – New York Times – Reuters

Jack Welch Effect - New York Times - Reuters

Welch transformed a loyal employee base from an industrial firm into one that made the most money from its finance division and had a highly transactional relationship with its employees. This served him well during his tenure as CEO, and GE became one of the most valuable companies in the world for a time.

But in the long run, this approach caused GE to fail. The company invested less in research and development, stuck to acquiring other companies to stimulate its growth, and its financial sector was severely exposed during the financial crisis. Things started to go downhill when Welch retired, and GE announced it would split last year.

Similar stories were played out at dozens of other companies where Welch’s followers tried to copy his playbook, such as Home Depot and Albertsons. While Welchism increases short-term profits, the long-term consequences will always be catastrophic for workers, investors and business.

Welch replied Real problems in GE American economy in the 1970s and early 1980s. If his recovery creates even bigger problems, what could be the best alternative?

Restructuring the distribution of wealth created by our large corporations is an important first step. For over 40 years, we have been living in this era of primary partnership unleashed by Friedman and Welch. Meanwhile, the federal minimum wage remains low and still only $ 7.25, and the gap between workers’ wages and productivity continues to widen.

There are some temporary signs of change. The labor crisis and pressure from activists led many companies to raise wages for leading workers. Some companies, such as PayPal, distribute shares to ordinary employees.

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About the Author: Cory Weinberg

"Alcohol evangelist. Devoted twitter guru. Lifelong coffee expert. Music nerd."

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