The recent passing of former GE CEO Jack Welch may represent more than the loss of an icon named Manager of the Century by Fortune magazine in 1999. It may also symbolize the passing of an era in capitalism – “shareholders first” – that Welch did so much to promulgate. What does this have to do with today’s aerospace industry? Plenty, as it turns out.
Before the “shareholders first” mantra took hold in the 1990s, publicly traded companies considered four stakeholders in allocating capital: customer, local communities, employees and suppliers, and shareholders.
Before Welch took over in 1981, GE publicly stated it valued workers and research labs before shareholders. After 20 years of relentless focus on productivity, cost-cutting and shedding more than 100,000 jobs, GE’s market capitalization skyrocketed from $12 billion to an astounding $410 billion. Much of this profit growth was driven by financial services rather than traditional manufacturing.