See Jack Run

The corporate icon himself, wearing gray sweats after a late-morning workout, cruises into his office on the sunlit fourth floor of the historic Nathan Appleton House on Beacon Street, a Bulfinch-designed town house overlooking Boston Common that once housed the Women's City Club of Boston but is now home to Jack and Suzy Welch, whose May-December marriage a year ago made gossip columnists weep with joy. After checking a few e-mails, the North Shore native, whose 20-year tenure as chairman and CEO of General Electric made him every business magazine's favorite cover boy, changes clothes for the rest of this weekend day. Go with Suzy to a wrestling match for one of her four kids. Catch a late-afternoon flick with the family. Dinner. The 69-year-old Welch, whose Pilates and workout regimens have helped him recover from recent back operations, looks and feels good even though he's had to give up his beloved golf). Photos of a smiling Jack and smiling Suzy, 45, are everywhere. Framed newspaper clippings tout their $4 million advance to write Winning, a how-to business book by "Jack Welch with Suzy Welch," released last week. Jack and Suzy beam in those shots, too.

Even when not on his current book tour, Welch is in demand as a speaker and consultant. Rich, famous, traveling the globe, buying modern art (a new passion), fully in the glow of new love, Jack Welch is a powerfully happy man. And four years after leaving the top job at GE, he remains happily powerful. "I love what I did," he says, "and now I love what I'm doing."

Fully justified or not, Welch is still seen by many as the Mr. Wizard of business strategy and organizational effectiveness. Foreign governments seek his counsel. So do corporate titans, even those who rarely think they need much advice from anyone. Among them is Barry Diller, chief executive officer and chairman of IAC/InterActiveCorp. "Jack brings so much to the table that the table belongs to him," says Diller, who founded Fox Broadcasting and has run an A list of media giants. "I'm not shy, but his experience, his pure pitch not only for business but every nuance around it, is unequaled. When he's with us, in a sense he really becomes the chairman. I remain the CEO, but a relatively weak one."

But in the state where he was raised (born in Peabody, Welch grew up in Salem), attended college (UMass-Amherst, graduating in 1957 with a bachelor of science degree in chemical engineering), and launched his GE career (in 1960 at GE's plastics plant in Pittsfield) Welch remains relatively uninvolved in local or state business matters, even as Boston sees its marquee corporations disappear into mergerland. Bank of Boston is swallowed by Fleet, which in turn is acquired by North Carolina-based Bank of America. A Canadian insurance giant buys John Hancock Financial Services. And now Cincinnati's Procter & Gamble takes over once-blue-as-Boston Gillette. As politicians posture, business leaders fret, and workers just plain worry about the city's economic identity crisis, the man often called the world's most brilliant CEO is sitting on Beacon Hill, largely untapped. Why isn't he helping Boston and Massachusetts think through and plan their economic future? Because no one has asked.

"When I retired, Fortune [magazine] basically hung out a shingle - I said I was going to consult for a number of CEOs and help them build leadership culture," Welch says. "Tens of companies responded. None were from Boston, so that opportunity hasn't ever been there." Not that Welch isn't intrigued by what's happening on the local economic front. Indeed, his new book advises career-seeking MBAs "to look into companies doing business at the intersection of biology and information technology," two roads that happen to run right through Boston.

"Boston's job is to replace these businesses that it has been losing," he says. "It has the greatest university system in the world. It is in the midst of the convergence of biotech and information technology. They have to have 30 Genzymes in the making. They have to own that industry and build CEOs in that industry." Would Welch still consider a hometown request for help? Only if he could make a real impact. "I don't want to just be a name on a committee," he says, "but if the right situation came along, I'd be the most curious guy in the world to go do it." Just by saying that, doesn't he open the floodgates to a bunch of let's-get-Jack phone calls? "I don't think so," he says. "I'm not a cheap date, for one thing. And I'm fully booked."

Nonetheless, Mayor Tom Menino would like to tap into Welch, says Menino spokesman Seth Gitell. "The mayor and Jack Welch have talked on several occasions about ways Mr. Welch could be helpful toward the city," says Gitell, noting Welch's recent contribution to the city's grade-school literacy program ReadBoston. "The mayor looks forward to continuing those conversations."

Other Bay State figures would like to see local business leaders and policymakers reach out to Welch. "Ordinarily, Jack Welch is called upon when there is a business question, and that is his strong point," says former University of Massachusetts president William Bulger, who says a promotional TV spot he got Welch to do for his alma mater proved highly effective. "But this man is multidimensional. He should be encouraged to express himself." Bulger says Boston could benefit from Welch's talents, especially in the area of education.

Welch was invited into just such an effort, only not in Boston. At a dinner party hosted by ABC's Barbara Walters a couple of years ago, Welch's future wife, Suzy Wetlaufer, was sitting next to Joel Klein, former CEO of media giant Bertelsmann Inc. and, before that, head of the US Justice Department's antitrust division. New York City mayor Michael Bloomberg had just named Klein chancellor of the city's massive and troubled public school system.

"I buttonholed Jack after dinner," recalls Klein. Welch almost immediately agreed to chair an advisory committee and teach at a new Leadership Academy for school principals modeled after GE's famous Crotonville training center for managers. "This is not a cameo by Jack," says Klein. "I can call him 24/7." That Welch has even gone near such a massive public undertaking is itself curious, given his rather dubious views of public-sector effectiveness. Welch concedes that government does good things but says it does them poorly. "Government is riddled with bureaucracy, waste, and inefficiency," he writes in Winning. "In a company, you can clean those up, and you have to. In government, they're forever." And one of the organizational tools with which Welch is most identified is what he calls "differentiation," a business-world Darwinism by which managers identify and fire underperforming employees. "Neutron Jack" - the moniker Welch was given for his emphasis on keeping profits up by closing plants and laying off workers - could use such harsh methods in the corporate world. But now he and Klein (and Bloomberg) must operate in the public world, with its seniority, work rules, and union protection.

Welch was drawn in by Bloomberg's willingness to make education his top priority and to hire Klein and his talented team. "This is the hardest turnaround mission you'll ever see," says Welch. Even after eight years, "you won't turn it around. You'll turn it. You'll have a directional change." But only if Bloomberg, who is staking his campaign in large part on school reform, is reelected. Otherwise, says Welch, "we threw four years of work down the drain."

Welch did get involved in one semi-public process in Massachusetts, when he became an active member of the search committee to find a replacement at UMass for Bulger, the longtime state Senate president. Active but not winning - Welch won't comment, but other sources who were close to the process say his preferred candidate was not chosen.

"Many people sit on search committees and don't do anything, but [Welch] was anything but pro forma," says Boston attorney Diane Bissonnette Moes, who co-chaired the committee. "In terms of generating a pool of candidates, he did more work than the search firm. He called and asked people who he thought would be great in the job. And his network was incredible." Welch also served as an intermediary to ease tensions between Bulger's UMass and Governor Mitt Romney, says Grace Fey, former University of Massachusetts board of trustees chairwoman. "Welch helped mend the relationship between the governor and the university," Fey says. "I went with Welch to see the governor several times. I think Romney felt comfortable with him."

But not comfortable enough to back what those sources say was Welch's personal preference for the job, Alan Solomont. Solomont is a successful Weston businessman and prodigious political fund-raiser, and the ability to raise money has become a top criterion for any university chief. But Solomont raises funds for Democratic candidates, which was one big reason why Republican Romney wasn't thrilled about the choice of Solomont, despite Solomont's support among many search committee members. The UMass trustees ended up selecting interim president Jack Wilson, who had successfully launched and operated UMassOnline.

"My sense is that [Welch] responded positively to the passion I expressed for the university and its mission," says Solomont. "I understand he was supportive [of my candidacy], but he was not unaware of which way the political winds were blowing. He was a stand-up guy, and I respect him for that." Though he and Welch, a strong backer of President George W. Bush, are poles apart politically, Solomont still called him during last fall's election on behalf of Democrat John Kerry. "I wanted to give him a chance to support his Beacon Hill neighbor who was running for the presidency. Jack let me know he was otherwise committed."

Despite his wealth and celebrity, Welch likes to think of himself as a guy - playing ball with his buddies in a dusty field they called "the Pit" in Salem - who just happened to end up doing well. "I don't think of myself as anything other than myself," says Welch. "I'm very comfortable with who I am. I hate to sound like a cornball, but I'm not very self-impressed." Meaning that the reviews of his brilliance are overstated? "I think that's a reasonable statement. It's somebody else's reviews, not mine."

Welch doesn't sense the awe in which he is held by others, says Suzy Welch. "Jack is completely oblivious to his effect on people, to the fact that other people experience him differently than I or my kids experience him," she says. "Because of media coverage of him, people expect Jack to be very tough. And he does intimidate people - it's like the cover of Fortune magazine is going to walk into the room. But one of my first impressions of Jack when I interviewed him was, why don't people talk about how friendly he is? Jack's extreme candor took me totally by surprise, that he's so real and human."

That October 2001 interview for the article, of course, began what Jack Welch calls "the detonation." Suzy Wetlaufer, the divorced editor of the Harvard Business Review, became romantically involved with her interview subject, infuriating her colleagues and eventually leading to the loss of her prestigious post. The romance, Business Week wrote at the time, "dragged [Welch] off his Olympian perch into three-inch tabloid boldface." Welch says he knew he was "going to get a press bashing. Harvard. Love. GE. Sex. Jack Welch. We had made a cocktail. That's why you never hear me complain about [the coverage]. And I'd go do it again tomorrow to get to where I am. You can't find a happier guy, except maybe my Pilates teacher."

Suzy has also survived the bruises, says Andy Wasynczuk, a friend for almost 20 years from their days at Bain & Co. "Watching the two of them together, you can see they are very much in love," says Wasynczuk, who was the New England Patriots' chief operating officer before joining the faculty at Harvard Business School in February. "Suzy provides a great sounding board for him, both on ideas and their articulation, and she enjoys the stimulation and challenges he brings."

Welch figured the Jack and Suzy storm would fade soon enough, especially if he refused to talk about it. He also felt his legacy would survive more serious issues that emerged toward the end of his GE tenure, such as GE's proposed merger with Honeywell (Welch and GE failed to fully assess the depth of European Union opposition, which killed the plan) and charges that Welch's predecessors at GE knowingly dumped pollutants into the Hudson River over the course of 30 years. (Despite settling with federal environmental officials, Welch bristles at the dumping charge, which involved GE's plastics plant in Pittsfield, where Welch began his GE career.) Welch and his admirers figure that his overall accomplishments - such as raising GE's market capitalization from about $13 billion to more than $400 billion during his 20-year run as CEO - will ultimately clinch his legacy.

Even the few analysts who are less sanguine about Welch's GE performance grant that he did much good for the company. "No one can question the contributions he made to GE's culture, business strategy, and long-term financial performance and shareholder returns," says Robert Friedman, a Standard & Poor's equity analyst who has tracked GE since 1998. "But several of the factors that drove a lot of GE's earnings in the 1990s were not sustainable. For example, GE took on enormous amounts of debt . . . to boost earnings growth of the company's enormous GE Capital unit." When Welch took over in 1981, the company's total debt was 115 percent of equity, Friedman says. At the end of his tenure in 2001, according to Friedman, total debt was 425 percent of equity. "However," he says, "I believe companies can only leverage up their balance sheets so much."

Welch, clearly used to hearing such things, dismisses these assessments, noting that GE never had to restate its earnings. But he says he was "caught totally by surprise" by the firestorm that emerged in revelations contained in a 2002 divorce filing by his second wife, Jane Beasley Welch. Those papers made public a range of perks Jack Welch had secured in late 1996 from GE in exchange for agreeing to stay on as chairman and CEO before retiring and continuing to consult for the company. The perks ranged from rent on a Manhattan apartment and personal use of a GE plane to wine and tickets to the opera and sporting events. Straight From the Gut Welch (it's the title of his autobiography) knew that he faced a huge perception problem, and he quickly surrendered most of the perks. "The tickets seemed to irritate people more than the plane and the apartment, and justifiably so," says Welch. "People think, 'The guy has enough money. Why doesn't he buy his own tickets?'"

Welch isn't at all apologetic about the perks themselves - he says they were part of a retention contract that kept him at GE for a lot less than it would have cost the company in salary. However, the Securities and Exchange Commission found fault with GE's arrangement with Welch, and last year the company agreed to change how it discloses such executive benefits to investors. Welch does resent how the timing of the perks story lumped him with misbehaving CEOs. "The main blot on Welch in the public mind is the [perks]," says MIT's Richard Schmalensee, dean of the Sloan School of Management. Five years earlier, he says, Welch's perks would have been seen as justified. But the story hit at Tyco time, he says, with officials of that and other major corporations being criticized, investigated, and even convicted for cooking their books, lavish personal spending, and other conduct that might shame even Wall Street's Gordon Gekko.

"You see no mea culpas about what happened to me over the misunderstanding of my retention contract in the book," Welch says. "I don't want to sound in any way like a complainer. Whatever came out of this, I did it aboveboard, and I should take the rap for anybody who's angry because I fell in love, and that's basically it. And I know that net net, I'm a huge beneficiary [of press coverage]." Welch points out that he was number one in a Financial Times survey about admired business advisers. "So I'm not out there to recreate who Jack Welch is or was."

But Welch does feel an almost missionarylike need to re-create public faith in American capitalism, which has been shaken by a steady stream of stories about corporate scandals, obscene CEO pay packages, and megamergers.

"During the deepest days of Enron, Tyco, and so on, we were traveling and giving speeches," Welch says. "People in the audience were feeling a little squeamish about being businesspeople. So I'd ask them, 'How many of you know anyone who's participating in illegal [business] activities? Then why are you letting a bunch of people writing newspaper articles make you feel lousy about yourselves?'" He adds: "In the 1990s, it probably went too far the other way. Every [CEO] was a hero. But in 2000, it was almost like being a lawyer. What does get me angry is when CEOs get these severance packages for a lousy job. That's where I run into real problems."

He has no such problems with Donald Gogel, president and CEO of Clayton, Dubilier & Rice Inc., a New York-based private equity investment firm with which Welch works as a "special partner." Welch advises Gogel, helps screen potential investments, and runs the operating reviews of companies in which Clayton has invested. How do some of the young MBA types running these companies react when they learn that Jack Welch will be their reviewer?

"Sheer terror," says Gogel, adding that the terror fades quickly as they get to know Welch. "Jack always likes to engage bright young minds to see what is new and innovative. He's been able to reinvent himself a number of times, and you don't do that by holding onto the gems of your old wisdom. People sometimes have the wrong impression that Jack tells people what to do. What he loves is to pull out ideas and extend discussion to its logical conclusion."

Welch can now pursue such analysis and review - what he calls "deep diving" - without the pressure of quarterly reports and other daily CEO pressures. "It's very hard to retire from something like GE," says Barry Diller. "But Jack has the character and discipline to have reset his life so there's no yearning or bitterness or any of the things that CEOs and others who run things often go through when they stop running them." Instead, Welch today is able to go to more Red Sox games, bringing his new stepchildren and sometimes meeting up with his old buddies from Salem, including George Ryan. Ryan, a former sales manager at IBM who still consults for the company, says it's a good thing Welch is in the stands, not on the mound.

"Jack's curveball was about as roundhouse as it could get," says Ryan. "And he couldn't throw his fastball much slower without it dropping out of his hand. He made the right move getting into business."

Phil Primack is a Medford-based freelance writer and editor.