Briana Santaniello 09/28/13 Jack Welch at General Electric Case Notes Week 3 1. During the Jack Welch era, GE partially fulfilled the duty of social responsibility. As defined, corporate social responsibility is “the corporate duty to create wealth by using means that avoid harm to, protect, or enhance societal assets” (Steiner & Steiner, 2012). Certainly Welch’s management created wealth, as seen by Steiner’s statement, “If you had invested $100 in GE stock when Welch took the reins and held it for 20 years, it would have been work $6,749” (Steiner & Steiner, 2012). Welch’s management also seemed to protect and enhance societal assets. Welch bought and sold both small and large business and “during his last four years alone he made more than 400 acquisitions” (Steiner & Steiner, 2012). Welch acquired these businesses to improve them and reap the profits in the process. However the portion of definition regarding avoiding harm to society is where Welch seems to fall short. To achieve the goals of maximizing profit and creating wealth, Welch took all the steps he deemed necessary and many of these steps caused a great deal of harm to others. Welch eliminated many jobs in the attempt to save money, enhance overall efficiency, and to motivate employees to work harder. In doing so, many employees lost their jobs because Welch deemed either the position or the employee unnecessary or unfit for GE’s business activities. The employees who remained were not safe however. Each year Welch made additional cuts and even ranked employees based on their performance and abilities. Employees were now competing against one another, resulting not only in an uncomfortable work environment, but also in a company which lacked diversity among management. Critics took note of the absence of diversity; however Welch defended this lack of differentiation by stating, “Winning companies are meritocracies…[that] practice differentiation,” and “this is the most effective way for an organization to field the best team” (Steiner & Steiner, 2012). This seems almost contradictory of protecting or enhancing societal assets, as diversity or differentiation can be seen as a societal asset. In this case, Welch’s management would fail to fulfill any part of the definition of corporate social responsibility, save the act of creating wealth. 2. Milton Friedman stated, “There is one and only one social responsibility of business— to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud” (Steiner & Steiner, 2012). GE under Welch seemed to operate in a manner very similar to what Friedman described. At-will employment permits the dismissal of employees by employers for any reason and without warning. Although controversial, none
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- Spring '16
- John Z
- Business, Business Ethics, Jack Welch, Corporate social responsibility