SEC Probing Welch’s GE Benefits For Possible Disclosure ViolationsBy Kathy M. Kristof
LOS ANGELES TIMES -- General Electric Co. disclosed Monday that federal regulators are investigating its deal paying millions of dollars in retirement perks to former chief executive officer Jack Welch, who separately agreed to cancel most of the controversial benefits package.
Welch, long admired for his stewardship of GE and the profits he returned to shareholders, has seen his reputation tarnished in recent weeks and has been forced to defend the retirement deal that gave him free use of corporate jets, a luxury apartment and even free groceries and flowers.
The Securities and Exchange Commission has asked GE for information about Welch’s employment and post-retirement agreement that he signed in 1996, apparently to examine whether the perks were fully disclosed to shareholders and the public.
Welch has insisted all the benefits were disclosed, but said Monday he would give up most of them and begin reimbursing GE for between $2 million and $2.5 million for riding in the company plane and the use of a company-paid apartment. He will retain the use of a GE office and secretary, a benefit offered to every former GE chief executive, he said.
The 66-year-old executive’s retirement package touched off a firestorm of protest earlier this month when Welch’s ex-wife listed in a divorce filing the scope and estimated value of what Welch was getting. The filing said that in addition to paying for country club memberships, family phones and computers in five homes, GE paid for flowers, wine, maid service, and provided tickets to sporting events and the opera.
Welch, who earned more than $16 million annually as GE’s chief executive before retiring last year, maintained his benefits were grossly distorted by his ex-wife. Welch’s said in a guest column in the Wall Street Journal Monday he was giving up the benefits, even though he thought they were reasonable, to save GE further embarrassment. Welch, reached Monday, said the column said everything he had to say, and wouldn’t comment further.
In his guest column, Welch noted that the retirement agreement was penned in 1996, when he was being courted by other Fortune 500 companies. The board wanted to give him a cash retention bonus equating to “tens of millions of dollars,” he added in the guest column, but he opted for the benefits instead.
Despite believing the agreement was proper, Welch said he was giving it up because in today’s scandal-plagued world it could be misperceived. Welch said he decided to give up the benefits last Thursday after discussing the matter with the GE board.
“In today’s reality, my 1996 employment contract could be misportrayed as an excessive retirement package, rather than what it is -- part of a fair employment and post-employment contract made six years ago,” he wrote in the column. “For GE and its board to be dragged into these stories because of a divorce dispute is just plain wrong.”
Corporate pay experts said the SEC probe is likely to focus on disclosure.
Although Welch’s employment agreement stipulated that the company would provide Welch “continued access to company facilities and services comparable to those provided to him prior to his retirement, including access to company aircraft, cars, office, apartments, and financial planning services” for life, nowhere in that agreement -- nor in the company’s proxy statement -- was GE ever specific about the cost of this arrangement.