In August 2017 GE's board handed the chief executive's job to John Flannery, a 30-year company man who had run GE Healthcare. He was brought in to reset a conglomerate that had been hollowed out by its finance arm and a declining power-equipment business. The reset lasted about fourteen months.
The damage surfaced fast. On 13 November 2017 GE halved its dividend, to 12 cents a share from 24. In June 2018 it was removed from the Dow Jones Industrial Average, where it had been the longest-serving component, for 111 years. Then on 1 October 2018 GE announced a roughly $23 billion non-cash charge against the goodwill of its Power unit, and withdrew its 2018 free-cash-flow and earnings guidance.
The same day, the board replaced Flannery with H. Lawrence Culp Jr., the former Danaher chief executive who had only joined GE's board in April. Culp was named chairman and chief executive effective 30 September 2018, on a package of $2.5 million in base salary, a target bonus of 150 percent of base, annual equity grants valued at $15 million, and a one-time inducement award of 2.5 million to 7.5 million shares. Flannery resigned from the board.
The severance and the new pay package were small beside the real bill. GE had now cycled from Jeff Immelt to Flannery to Culp in roughly as many years, each chief repudiating the last. The board had changed the person three times without ever settling the question underneath: what the conglomerate was actually for.
The $23 billion writedown and CEO ouster after 14 months cost GE its Dow Jones place, but the real cost was three chiefs in three years without a plan.
The board hired an insider to reset the conglomerate without first deciding what the conglomerate should become, so the reset had no destination and no test for success
Each chief executive repudiated the one before — expansion, then pruning, then breakup — so every tenure restarted instead of compounding
A $23 billion non-cash writedown and ejection from the Dow were the portfolio's failures, but treating them as the CEO's let the board avoid the structural question
Replacing a chief executive is cheap and visible; restructuring a 130-year-old conglomerate is slow and painful, so the board chose the move that looked like leadership
Replacing the CEO is not a strategy. Until a board settles the question underneath — here, what GE was actually for — each new chief inherits the same unresolved problem and a shorter runway.
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