During Jeff Immelt’s tenure as CEO of General Electric, from 2001 until 2017, the company’s stock price fell by over 30%, a decline of roughly $150 billion in shareholder value. Since Immelt’s departure, GE’s stock is down another 30%, as its new CEO, John Flannery, has struggled to cope with the cash flow drain from years of problematic acquisitions, divestitures, and buybacks. Because of these dubious decisions, GE’s ratio of debt to earnings has soared from 1.5 in 2013 to 3.7 in early 2018, according to Moody’s.
What GE’s Board Could Have Done Differently
It didn’t help that the board was so big.
July 17, 2018
Summary.
During GE’s long and steep decline, where was the company’s board of directors? While the board was composed almost entirely of independent directors — a distinguished and diversified group of former top executives and other leaders with relevant experience — its structure and processes were poorly designed for effectively overseeing former CEO Jeff Immelt and his management team. Three problems in particular stand out: (1) The board was too big, (2) it had no finance committee, and (3) its audit committee had a blind spot.