In the latest ripple effect of the recent wave of accounting scandals, Jack Welch, former CEO of General Electric, asked GE to take back some retirement perks made public in his recent divorce proceeding. Separately, the company received word of an inquiry into the matter by the U.S. Securities and Exchange Commission (SEC). So unusual were these events that one securities analyst dubbed it a case of "People Magazine comes to Wall Street."
In a statement announcing the SEC's investigation, GE said it believes it has complied with all disclosure requirements regarding Mr. Welch's benefits. The company explained that the contract was signed in December 1996 and filed with the SEC in March 1997.
GE's board had already agreed to modify the 1996 agreement a day before the company received word of the SEC's inquiry. In an article published in the Wall Street Journal, Mr. Welch explained, "The world has changed during the past year. Reports of corporate malfeasance fill the media… For GE and its board to be dragged into these stories because of a divorce dispute is just plain wrong."
The perks exposed to public scrutiny included use of the company's planes and an apartment overlooking Central Park in Manhattan. In the newly modified contract, Mr. Welch agreed to pay the company between $2 and $2.5 million a year for these benefits. He also gave back a consulting contract under which he was paid $86,000 for five days of work a year and offered instead to consult on an as-needed basis and teach courses at GE's management development center for free.
In effect, Mr. Welch has eliminated everything from the retirement package formerly granted by the company, except for traditional office and administrative support. Observers say the GE case sets precedent, and other ex-CEOs may be pressured into doing the same to avoid accusations of corporate greed and excessive pay.