Where's the Heat on Neutron Jack?


It hasn't turned out to be quite the farewell Jack Welch had in mind. In his last year as CEO of General Electric (GE), the legendary exec battled the U.S. Environmental Protection Agency over chemicals his predecessors had dumped in the Hudson River, and he fought with the European Union over GE's attempted Honeywell takeover. To top things off, his autobiography -- Jack: Straight from the Gut (co-written with BusinessWeek's John Byrne) -- hit shelves on September 11, only to be overshadowed by the other events of that day.

Still, Welch retired with his reputation as sparkling as ever, his book set to soar to the top of the best-seller list, and his hand-picked successor, Jeffrey Immelt, taking the reins of the GE juggernaut. Sparkling until this month, that is, when the revelation that Welch had had an affair with Harvard Business Review Editor-in-Chief Suzy Wetlaufer dragged him off his Olympian perch into three-inch tabloid boldface.

For Wetlaufer, who became involved with Welch while doing an interview with him for HBR, the liaison ended her tenure as editor -- though she remains on staff. And it could cost Welch as well. His wife, Jane, has filed for divorce, and because the couple's prenuptial agreement expired in 1999, she could stand to claim as much as half of Welch's estimated $900 million fortune.

JACK'S MONICA? The larger question, though, is whether money is all Welch stands to lose. Will the Wetlaufer affair footnote the Welch mystique forever? Will Suzy be to Jack what Monica Lewinsky was to Bill Clinton? Maybe not, if you believe management gurus at business schools across the country: By and large, leadership professors from top-name schools find the scandal irrelevant for a variety of what might be called technical reasons.

For instance, Welch was no longer CEO at the time of his indiscretion. Nor was Wetlaufer his employee (on which point Welch's dalliance differs from L'Affair Lewinsky, according to some profs, because the White House intern was in Clinton's chain of command).

In Jack's case, "for a few weeks there will be a shimmer, and then it will fade," predicts Warren Bennis, professor of management at the University of Southern California's Marshall School of Business. Bennis published an article titled "Will the Legacy Live On?" in the February Harvard Business Review. That's the same issue that was scheduled to run the now-infamous interview (HBR reassigned the Q&A after Jane Welch pointed out the conflict of interest inherent in a piece done under such circumstances).

LONG-TERM LEGACY. In his HBR article, Bennis lauds Welch as a "role model" CEO and a "font and clearinghouse of ideas," opinions that he's sticking with. "There's a distinction between private and public ethical behavior," he says.

Noel Tichy, a University of Michigan leadership guru and former head of GE's fabled in-house training facility, Crotonville, agrees. The Wetlaufer affair "isn't going to change the long-term legacy of Jack Welch," says Tichy, whose 1993 book about Welch is entitled: Control Your Destiny or Someone Else Will. As far as Tichy is concerned, Welch cemented his reputation when he stepped down as GE's chairman.

"It would have been another thing if he did this often when he was CEO, if it were a pattern somehow," agrees Robert Bies, a management professor at Georgetown University's McDonough School of Business.

CHARISMA KING? These and other Welch supporters think posterity will focus on the ex-CEO's numbers. By that measure, of course, his record is unmatched. In Welch's 20-plus years at the helm of GE, the company's market capitalization soared from $13 billion to more than $400 billion. It now does about $130 billion in annual revenue, making it America's fifth-largest company. The list of GE alumni heading other companies is dauntingly long and without precedent. Tichy points out, in fact, that GE itself had seven viable candidates lined up to succeed Welch.

Welch's legacy transcends the numbers, however. He's the perfect embodiment of the alpha-male, in-your-face, overachiever culture that has captured the imagination of the business world in recent times. His wholesale downsizings (which gained him the nickname Neutron Jack) and rigorous performance-review process have become the stuff of legend.

In fact, Bennis thinks it's precisely because Welch's charisma created an interest in GE's culture that the Wetlaufer affair registers even a blip on the public's radar screen. When "a charismatic institution -- Harvard -- and a charismatic leader [are involved], you're bound to get this kind of press," says Bennis.

NOT SO SMART? Still, the issue of judgment remains (remember Clinton?). Welch's critics and supporters alike agree that he's normally a champ at fashioning his image. So for someone who has always -- as Tichy's book points out -- controlled his own destiny, doesn't Welch come out looking, frankly, foolish? Try "human," says Bies. "What it has done is take the saint-like image and made it look like he fell from grace."

Others see a lesson of less mythic proportions. Welch "probably isn't as smart as I thought he was," says New York University's Stern School of Business management professor William Guth. Still, he thinks the affair does less to harm to Welch's legacy -- a fanatical devotion to performance -- than it would for a CEO who for years had championed, say, "family values."

The acid test on that probably comes from Richard Stratton, B-school dean at conservative Bob Jones University in Greenville, S.C., on whose campus students are forbidden to hold hands. "It's disappointing if it's true," says Stratton. "But it doesn't impact the abilities he has shown as a manager at GE."

SKEPTICAL NOTE. In short, say the B-school professors (almost in chorus), even Welch's highly publicized extra-marital escapade won't tarnish the legacy he spent 20 feverish years building. And should Welch's impending divorce proceed amicably, they expect the public to quickly lose interest.

Leave it to a newspaper guy to inject just a tiny note of skepticism. Thomas F. O'Boyle, assistant managing editor of the Pittsburgh Post-Gazette, wrote the sharply critical 1998 tome: At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit. He doesn't think the affair will define Welch, post-GE. But he believes it calls into question his integrity, as such incidents did with Clinton and Newt Gingrich and that other Jack -- John F. Kennedy.

Welch has already been much scrutinized in several books and articles. Yet probably none of those put him under a microscope the way the Wetlaufer affair threatens to. So it could still be that the toughest battle Neutron Jack ever fights comes after retirement. By Brian Hindo in New York


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