General Electric Stuns Wall Street By Firing CEO John Flannery After A Year
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General Electric stunned much of Wall Street today by firing its chief executive John Flannery after about a year. GE's stock price and reputation had steadily declined over the years. They fell further under Flannery's watch. NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: Few companies have the kind of storied history that GE has.
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UNIDENTIFIED PERSON: With over a century of great ideas for our customers and the world, GE - we bring good things to life.
ZARROLI: It was one of the original companies in the Dow Jones Industrial Average. It made jet engines, dishwashers, lightbulbs, nuclear reactors. Its management techniques were studied in business schools. GE was an incubator for CEOs - top executives who went on to head other Fortune 500 companies.
But University of Michigan business professor Erik Gordon says there were problems under the surface.
ERIK GORDON: It became a big bureaucracy. And it moved slowly in a world that kept moving more quickly.
ZARROLI: Gordon says much of GE's profits turned out to be tied to its financial services arm, which was badly hurt in the crash of the housing market. In the years that followed, GE started to shrink by laying off a lot of employees and selling divisions. But it wasn't enough.
That was the company that John Flannery inherited when he became CEO in August of last year. Flannery spent months trying to convince GE's shareholders that he was addressing the company's problems. Here he was over the summer in an interview on CNBC.
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JOHN FLANNERY: We've covered the company from corner to corner in terms of analyzing all aspects of the company - insurance, capital, power, business - so I'm very comfortable we've got a handle on what's going on inside the company.
ZARROLI: But the problems only seemed to mount, especially at the troubled GE Power division. In the 14 months since Flannery took office, GE's stock fell by half. And today, GE's board announced it was booting Flannery out after an unusually short tenure for GE. Gordon says Flannery stepped into a terrible situation.
GORDON: He might've been a perfectly good CEO in calmer times. But, you know, the alarm bells were ringing, and they needed somebody to do what might be impossible, which is to make GE move quickly.
ZARROLI: In June came another milestone on the road downhill. GE was removed from the Dow. Gordon says whatever happens next, GE will probably never be the same company it was.
GORDON: It's going to be slimmed down. It's going to be more focused. And it's going to be very small compared to the GE most of us grew up with.
ZARROLI: And the man who will be leading GE through this downsizing is Lawrence Culp. Culp had what was viewed as a successful 14-year run as chief executive of the conglomerate Danaher. Unlike all of GE's previous CEOs, he's an outsider.
The hope is he will be able to do something Flannery wasn't able to do and shake things up at the company. Investors clearly think he has a good shot. Shares of GE finished the day sharply higher. Jim Zarroli, NPR News, New York.
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