In our business world today, we revere many of our most financially successful business leaders with intense fervor. Think about all the impromptu memorials at Apple stores for Steve Jobs when he passed away. Look at the attention and respect that Elon Musk, Jeff Bezos and Richard Branson demand. But is this deserved and should small business owners try to imitate them? Or are they ultimately bad for capitalism?
On The Small Business Radio Show this week, David Gelles, New York Times columnist has interviewed a lot of CEOs. His new book is “The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy”
When David got started as a business reporter, he explains that this isn’t the type of book he imagined he would one day be writing since he “started at Forbes magazine who one of the publications playing a “boosterish role” for these CEOs.” David wanted to write this book because over the last several years, things are not working for this country.”
David explains that we put these business leaders on a pedestal because it’s a big part of the American story; “we do not have a monarchy. We are in a melting pot with a lot of different religions, so we don’t have a default unifying culture. Our common culture has become our businesspeople. This is because what has made America is our great economic engine… but we need to remember that these business leaders are only skilled at making a profit. But should this really be our highest ambition?”
David argues that Jack Welch was idolized for growing GE into the most valuable company in the world. He pushed GE’s stock price always higher, often at the expense of workers, consumers, and innovation. But he approached it “with a degree of ruthlessness- he fired people by hundreds of thousands, he outsourced to get higher profits and turn it into a financial company. Welch’s obsession with downsizing—he eliminated 10% of employees every year—fundamentally altered GE in the pursuit of short-term profits.”
How did this happen? David explains that if you look back at the founders of Johnson and Johnson and even GE in the 1950s, they focused on their employees, their communities, and the environment. But when Welch (and Milton Friedman) came on the scene, everything changed. Stagflation had set in the 1970s with Japan and Germany competing again. David knows that changes had to be made, but Welch put profits ahead of the people that worked at the company. This inspired generations of imitators who have employed his strategies at other companies around the globe.
Later in life in 2012, David says that Welch was early adopter of Twitter and espoused conspiracy theories with disinformation about President Obama and the Clinton foundation.
Stakeholder capitalism now is about the rebalancing of this approach. David wants CEOs to think of the long-term consequences of their actions, not just the next financial quarter. He adds “get we need to get beyond the stock price. Instead, we need to expect business leaders to understand consequences of their actions. It’s time to share the wealth with the employees inside the company.”
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