Does GE gain by lending the White House its CEO?
By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
When the president asks for help it would be difficult for even the busiest corporate chief to say no. It’s even harder when he owes the federal government a big favor. And so it is that Jeffrey Immelt, General Electric’s longstanding boss, is heading to Washington to advise Barack Obama on how to make the United States a job-creating colossus again.
Shareholders, already cheered by GE’s stellar fourth-quarter earnings, including a strong showing by its troublesome GE Capital unit, don’t seem bothered that Immelt will have to divert some of his attention to the president’s agenda. After all, many of the objectives — such as bolstering America’s manufacturing might and promoting access to foreign markets — dovetail nicely with GE’s own global industrial businesses.
But it’s a matter of timing. While GE’s share price has nearly tripled from the dark days of the financial crisis, it’s still around 50 percent off the highs seen before the investors panicked about dodgy investments made by the conglomerate’s finance unit. Immelt should be credited with steering the company — with generous support from the government through debt guarantees and short-term loans — in the right direction. But he also failed to avert GE’s falling into a precarious state to begin with.
Gaining access to the president’s ear has its advantages, and there’s a long history of executives, including former GE officials, advising a commander-in-chief while continuing to run their own firms. Yet the current climate carries a distinctive disadvantage: backlash from the public if it suspects the relationship is too cozy. Angry voters could make it difficult to focus on business — just ask Goldman Sachs.
And GE still needs its best minds focused on business. To Immelt’s credit, investors spend much less time worrying about the finance unit, which knocked its mammoth parent to its knees two years ago. He’s committed to cutting it down to a more manageable size by 2012 and making it less dependent on short-term financing.
But GE shareholders, especially those who stuck with the company through its darkest days and are still nursing losses, deserve a committed captain. Should Immelt appear stretched too thin, they’d be right in demanding he choose between one job and the other.