Revelations of the lavishly rich retirement package General Electric Co. (GE) granted former Chairman and Chief Executive John F. Welch Jr. are raising hackles among investors already angered by the financial scandals rocking America's corporations, Monday's Wall Street Journal reported.
Late last week, Mr. Welch's estranged wife, Jane, filed papers in divorce proceedings describing the couple's "extraordinary" lifestyle. In the filing, Mrs. Welch complained that her husband, who separated from her after he began an affair with former Harvard Business Review editor Suzy Wetlaufer last winter, is paying her only $35,000 a month in living expenses, far below the standard of living during their 13-year marriage.
The tab for much of that lifestyle, she says, was and is picked up by GE, even after Mr. Welch's retirement a year ago. Among the items: expenses for autos and electronics at his several residences; many costs of a GE-owned apartment in Manhattan, from flowers to faxes to food; tickets to sporting and cultural events; and services such as country-club fees, security and financial planning. Mrs. Welch says she is unable to place a value on most of those benefits, but estimates the monthly value of the GE-owned apartment on Central Park West alone at $80,000, and includes an expert's estimate that monthly use of the Boeing business aircraft by Mr. Welch is valued at $291,869.
With her filing, reported in the New York Times, Mrs. Welch put both her husband and the company on the defensive as they scrambled to justify GE's spending on Mr. Welch and demonstrate that the company had provided adequate disclosure of the contract's details.
Mr. Welch, who received $16.2 million in total compensation in 2001 and holds 22 million GE common shares and other stock-based holdings, is hardly the only CEO to receive a lush retirement package. As CEO compensation soared during the 1990s, and experienced executives became sought-after commodities by recruiters, many companies used such packages as incentives.
GE said that Mr. Welch's retirement package was unanimously approved by the board in 1996 as an inducement to keep him on until he was 65, at a time when he was talking of stepping down at age 62 or 63. It also said the contract has been "widely disseminated and discussed." GE generally doesn't award such retirement contracts, and no other current executive, including Chairman and CEO Jeffrey R. Immelt, has one.
GE included a copy of the employment agreement in its 1996 proxy, and has mentioned it annually since then. Current SEC regulations require companies to "describe" such contracts but don't enumerate requirements for detailed descriptions.
Mr. Welch issued a statement saying: "The essence of this story is that GE put a succession plan in place that included a contract with me, described the succession plan in the media, disclosed the contract as required, and the plan has worked to the benefit of all constituencies," he said. "A one-sided filing by one party in a contested divorce does not change these facts."
Mrs. Welch and her attorney, William Zabel, a partner at Schulte Roth & Zabel, declined to comment beyond the filing.
