GE CEO

By James Ledbetter The opinions expressed are his own.

For many years, the River Café, an elegant restaurant that sits just below the Brooklyn Bridge, had a plaque on its wall declaring, in effect, “If you work for General Electric, go eat somewhere else.”

This unusual exclusion policy had a simple explanation: for three decades, two GE plants in upstate New York dumped as much as 1.3 million pounds of polychlorinated biphenyls (PCBs) into the Hudson River, poisoning the fish supply that River Café depends on. The effect that this contamination had on wildlife—and on anyone who ate too much fish caught in the Hudson—was severe enough to create one of the largest Superfund projects in the history of the Environmental Protection Agency.

The Hudson pollution was not unique; the bend of the Housatonic River in Connecticut where I grew up was frequently unswimmable, because of PCBs floating down from a GE plant in Pittsfield, Massachusetts. Another aqueous assault, another massive taxpayer-funded cleanup. (Update: A GE spokesman tells me that the company paid for the cleanup of both rivers. Of course, there were also costs to taxpayers, but this is an important distinction.)

Thus, you didn’t have to own a fish restaurant to have a negative opinion of General Electric. Indeed, on the American left in the 1980s, GE was about as comprehensive a corporate bogeyman as could be imagined, and was the target of one of the few anti-corporate documentaries to win an Academy Award. In addition to its overt environmental sins, the company made nuclear power plants. It made nuclear weapons. It was one of the largest military contractors in the country, which made its ownership of a major broadcast network seem disturbing. It paid so little in corporate tax in the 1980s that it apparently offended Ronald Reagan’s sensibilities—and he’d been a GE spokesman!

So it was jarring to read in the Wall Street Journal this week that GE is now a punching bag for the political right. Sarah Palin has charged on her Facebook page that GE has become “the poster child of corporate welfare and crony capitalism.” When Newt Gingrich attacked GE for paying no taxes during the Tea Party-sponsored presidential debate last month, the audience applauded—twice.

What is going on here? How did a venerable left-wing target become an apparently convenient right-wing target?

This essay is adapted from Capitalism At Risk: Rethinking the Role of Business, by Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine.

Two sets of forces— one from outside the economic system and one arising naturally from within it—have jointly created a series of large-scale challenges that threaten the foundations and future of the global market system. Threats come from many sources: the lack of education and opportunity in some areas, the rise of radical political movements in others, environmental degradation and climate change worldwide, growing disparities in the distribution of income and benefits flowing from the system in many countries, and failures of governance across critical sectors. The challenges are large and growing, and effective countervailing forces have yet to arise or at least to become complete and effective. From this vantage point, the prospects for significantly ameliorating these constellations of negative forces appear bleak. One possible source of countervailing force is business itself. To what extent can this growing array of threats to the market system be addressed through actions by individual firms and entrepreneurs? Many would say that the challenges are too great and too massive in scale for individual firms to have a significant impact. And many argue that governments and multilateral institutions are ultimately the only actors capable of managing risks of this magnitude and that the proper role for business is to get out of the way and let governments do their job. This assessment, however, misses the mark. Companies and entrepreneurs can make a material difference. By aligning their activities with the needs of a sustainable economy and bringing their distinctive skills and capabilities to bear on these disruptive forces, companies can help strengthen the system and put it on a more secure footing.

Consider “ecomagination,” General Electric’s signature environmental effort. Conceived in 2004, ecomagination was aimed at driving innovation and generating superior returns by tackling some of the planet’s biggest problems—energy efficiency and harmful environmental impacts. Within five years, the initiative accounted for more than ninety products and services and some $18 billion in revenues.

As CEO Jeff Immelt tells it, GE was going through its annual strategic planning review in June 2004 when the management team realized that six of the company’s core businesses were deeply involved in environment- and energy-related projects. The appliance business was exploring energy conservation; the plastics business was working on the replacement of PCBs (polychlorinated biphenyls, once widely used industrial compounds found to be harmful to health and the environment); and the energy business was examining alternatives to fossil fuels. Other businesses were dealing with emissions reduction, resource scarcity, and energy efficiency. Far from reflecting a deliberate strategy on GE’s part, these projects had all been initiated by GE in response to demands from its customers.

When these common issues surfaced across different lines of business in the midst of its planning process, the group realized that something was going on that GE needed to better understand and possibly become part of. Immelt announced that he wanted to learn about greenhouse gas emissions, and the company set about educating itself on critical energy and environmental issues. Meetings with leading customers were arranged, and the management team launched a study of the science behind climate change. “We went through a process of really understanding and coming to our own points of view on the science,” recalled Immelt. At the same time, GE deepened its engagement with government officials and regulators on environmental issues and hired a consulting firm to help it understand the NGO landscape. This same consulting firm would eventually help GE identify promising products and services for its environmental portfolio.

As the management team gathered information and perspectives from external sources, GE also looked inward. A review of the company’s technologies and technical capabilities revealed some important gaps that needed to be filled. The culture, some managers felt, needed to become more innovative and more externally focused. At several points in the learning and self-evaluation process, Immelt shared the management group’s findings with GE’s board of directors. He wanted board members to understand both the financial and the social aspects of the “green is green” message that was emerging and to be comfortable with the strategy that was taking shape.

After nearly a year of information gathering and analysis, the management team settled on an environmentally focused strategy that would cut across five or six key businesses. Immelt had become convinced that the world was changing dramatically and that climate change was a “technical fact.” He believed that GE could prosper by helping its customers improve their environmental performance.Some of his deputies disagreed, but Immelt was ready to put people and resources behind these ideas. The new strategy was dubbed “ecomagination” for its links to economics and ecology and its echo of GE’s “imagination at work” tagline. As Immelt made clear, ecomagination was not a feel-good effort or just a rebranding move—it was aimed fundamentally at driving growth and innovation.

One year to go

This year’s Wimbledon Championships had a lot of interesting stories. On the men's side it was all about the top 4 players in the world. On the ladies it was about Sharapova, the Williams sisters, and whether or not any of the young pretenders could win the Championships.

All of the top 4 cruised into the men’s quarter-finals. Only Rafael Nadal was a bit of a worry hurting his foot against Juan Del Potro in the first set. After the match he said he would have to take painkillers for the rest of the tournament and possibly miss the next 6 weeks after Wimbledon finished. This brought hope that possibly Andy Murray could beat Nadal if they both reached the semi-finals which they both did easily. Expectations were reaching fever pitch now with a real belief Murray could make the finals.

In the other quarter-finals Djokovic was playing the 18-year-old qualifier Bernard Tomic. Tomic was the third youngest player in the history of Wimbledon to make the quarter-finals with only Becker and McEnroe being younger. Djokovic won in 4 tight sets, but Tomic proved he was world class and will be one to look out for in the future.

The match of the quarter-finals everyone was looking forward to was Roger Federer versus Jo-Wilfried Tsonga, the Queens Club finalist. Federer played a sublime first two sets and had never ever lost a grand slam match from two sets to love up, but on this occasion Tsonga lifted his game and won the next 3 sets to win in 5.

UK Labour Party leader

UK Labour Party leader

Back in April when we created a word cloud of what Fed Chairman Ben Bernanke said in his first post-rate decision press conference we noted that the word “inflation” loomed much larger than did any mention of unemployment or jobs.

Today, eight weeks later, Bernanke went in front of the press again, and judging by our new analysis he had a lot more to say about unemployment than he did back in the spring. Take a look below.

Obviously Inflation is still a hot topic, but the word “unemployment” has grown much larger – indicating Bernanke used the word more often this time around. This isn’t  surprising given recent unemployment news and some of the reaction to the his last press conference.

Some other words that show marked increases in frequency of use this time include:

• Projections – Likely due to discussion of the revised estimates for economic growth released today.
• Rate – Used more often in conjunction with “unemployment” than it was back in April
• Growth – Again due to discussion of revised economic projections

Interestingly, as you can see above, the word “think” was clearly among Bernanke’s most  used words today, and it was most frequently preceded by “I.”  Perhaps Bernanke is becoming more comfortable with the press conference format and is becoming more willing to express his opinions. We’ll see how his performances develop over the coming months.

We’ve created a word cloud of the minutes of the April 26-27 FOMC meeting to try to divine what’s foremost in the mind of Fed members. Words used more often in the minutes translate into larger words within the cloud. As you can see below, inflation was by far the most used word in the minutes, however there’s a new word competing for top billing – “rate.”

This fits in with news that that most Federal Reserve officials would prefer to raise benchmark interest rates before selling assets when the time comes to tighten policy. Evidence that the Fed is indeed discussing exit strategy can be found in the fact that the word “sales” also crops up in the new cloud, although it’s not as large as the word rate.

For comparison below is a cloud based on the last set of FOMC minutes, from a meeting held on March 15. Note that the word rate is much smaller in that cloud and the word sales doesn’t seem to appear at all.

You might remember that we preformed a similar analysis of what was said during Ben Bernanke’s first post rate-decision press conference back on April 27. At the time we were struck by how much larger the word inflation was vs. any mention of unemployment or jobs. As you can see by comparing that cloud (below) to those above though it seems that Fed members talk even less about unemployment when they’re behind closed doors.