He was hailed as the Tiger Woods of management, a brilliant business magician and, as head of General Electric Co., one of the world’s most admired executives. In turn, Jack Welch heaped praise on his wife, Jane, lauding her in his bestselling autobiography as “the perfect partner.”
Now that they are divorcing, Jane Beasley Welch has become the most formidable opponent the retired chief executive has encountered.
Thirteen years after they wed on the island of Nantucket, the two are embroiled in a divorce that promises to be as costly as it is nasty.
Following disclosure of his affair with the editor of the Harvard Business Review, the captain of capitalism has been painted as a ruthless womanizer who let his shareholders pay for just about everything--right down to the GE light bulbs in his numerous homes. Jane Beasley Welch has emerged as the modern model of the savvy corporate wife: so clever that she thought to include an expiration date in her prenuptial agreement--and stayed married long enough to pass it.
With perhaps $1 billion at stake, the Welch divorce is a primer on how wealthy couples uncouple. The case also affords a window into the benefits that corporations lavish on retired top executives--everything, in Jack Welch’s case, from sports tickets to the lifetime use of GE-owned jets, with charge accounts at flower shops and one of New York’s most expensive dining establishments thrown in as well. Mostly, this is a story about how a man who routinely crushed adversaries when he ran a Fortune 500 empire was stopped in his tracks by his own wife.
Welch may be tough, shrewd and possessed of a famously competitive spirit, but, said a New York lawyer who knows Jane Welch well, “I can tell you this much: Jack Welch has clearly met his match.”
The 50-year-old former mergers-and-acquisitions lawyer fired the first salvo by telephoning the woman who was having an affair with her husband. Don’t you think, Jane Welch reportedly asked Harvard Business Review Editor Suzy Wetlaufer, that it’s inappropriate to write about someone you’re sleeping with? Flaunting a shiny diamond bracelet given to her by Welch, Wetlaufer, 42, left her job in April, weeks after she took Jane Welch’s call.
Jack Welch, 66, soon announced that he expected an amicable divorce, with details to remain “personal” and private. For her attorney, Jane Welch chose William Zabel, who specializes in keeping the details of high-profile divorces (such as those of novelist Michael Crichton and philanthropist George Soros) personal and private.
Then Jack Welch filed for divorce in Connecticut, one of four states where the couple have residences. Assets in Connecticut divorces are divided under a policy called equitable distribution, which does not guarantee a 50-50 split. Welch’s former colleague, ex-GE Capital Chief Gary Wendt, was forced to pay his wife, Lorna, $20 million when they split up in Connecticut several years ago. That amount was a fraction of Wendt’s net worth--but twice what he originally offered.
Despite Welch’s intentions to keep things private, Jane Welch filed an affidavit in Bridgeport, Conn., outlining the couple’s “extraordinary” standard of living--much of it compliments of General Electric. The next day, the New York Times ran a long article describing how GE pays for the apartment the Welches occupied on Central Park West, membership fees at five country clubs and full staffs and services at homes in Florida, New York, Connecticut and Massachusetts.
By Monday, the Securities and Exchange Commission had begun an informal inquiry into Welch’s compensation agreement. Welch himself penned a column in Monday’s Wall Street Journal revealing that he offered last week to give up many of his retirement benefits--and the GE board accepted.
“In these times when public confidence and trust have been shaken, I’ve learned the hard way that perception matters more than ever,” Welch wrote. “In this environment, I don’t want a great company with the highest integrity dragged into a public fight because of my divorce proceedings.”
Welch earned $16.7 million at GE in 2000, his last full year of employment. In retirement, he receives $86,000 per year as a consultant for 30 days’ work. For each additional day of consulting after that, GE pays Welch $17,307.
As CEO, Welch built his company’s market value by more than $450 billion over 20 years. His generous retirement package was unanimously approved by the GE board in 1996, but the company was not required to disclose Welch’s long list of benefits. Many retired executives often are rewarded with cushy consulting contracts and perks such as cars and drivers. But prime seats at Red Sox, Yankees and Knicks games, and Wimbledon tickets--all part of Welch’s deal--are considered unusual.
Jane Welch revealed in her affidavit that her husband canceled their joint credit cards and slashed her monthly support to $35,000, “which [she] has accepted under protest, as such funds are patently inadequate to maintain the marital standard of living as set forth herein.”
Indeed, the document continues, Jane Welch’s “known monthly expenses,” which make up “only a small portion” of the couple’s monthly spending, are $126,820. But that figure fails to take into account her use of jets supplied by GE, with a monthly value of $291,667. Her affidavit states that if she is denied access to the couple’s “marital real estate,” the monthly figure leaps again--to $634,487.
“This amount is far less than the actual marital cost and standard of living, as the great bulk of marital expenses are provided by GE or are paid by plaintiff,” according to the document.
For some perspective, the affidavit mentions that in the course of their 13-year marriage, the couple spent more than $32 million on real estate and furnishings.
GE chipped in an additional $7.5 million for furnishings and capital expenditures, according to the document.
Jack Welch’s lawyer, Samuel Schoonmaker III, complained in court last week about the publicity the case has garnered. Schoonmaker did not respond to an interview request.
A call to Welch’s representative at IMG Speakers, which books his speaking engagements, also was not returned.
A representative for William Zabel laughed when asked if Jane Welch was available for an interview. Zabel’s only comment was, “the papers speak for themselves.”
So, as a rule, does Jack Welch. His book “Jack: Straight From the Gut” describes a happy childhood in Salem, Mass. His father was a train conductor. His mother, a devout Catholic, doted on her only child. Welch studied engineering at the University of Massachusetts, then headed to the University of Illinois for a master’s degree. One day he decided he liked the sound of the title “Dr.” in front of someone else’s name. He signed on for a PhD.
“He had a lot of drive--more so than others, definitely,” said his thesis advisor, chemical engineering professor Jim Westwater, 82.
But Westwater, who still lives near the university, said he was surprised to watch Welch become his department’s most famous chemical engineering doctorate. “He was not the brightest that I had,” Westwater said, adding, “he was more driven than bright.”
The autobiography devotes exactly two paragraphs to Welch’s 1987 divorce after 28 years from his first wife, Carolyn, mother of his four children. (Jane and Jack Welch have no children.)
Around GE at the time, “you never heard anything about his first divorce,” said Dick McClean, an Arizona environmental consultant who worked with Welch in a plastics division at GE.
“It was in everybody’s best interest to make sure that it was all tuned down,” McClean said.
McClean stressed that “I have a tremendous amount of respect for Jack. He’s a genius. He has an enormous amount of courage. He’s willing to take things forward, and do things that are unconventional.”
But “his private life was always what was absolutely incredible,” McClean said. He declined to elaborate, saying only that when he heard about Welch’s relationship with the editor of the Harvard Business Review, “my instant reaction was, oops, Jack’s back to his old ways.”
At the University of Arizona, legal ethics professor Marianne M. Jennings has spent seven years studying Welch and GE as part of her research for a book on the only 15 American companies that have paid dividends without interruption for at least 100 years.
Welch, Jennings said, “is an enigma. There is that Neutron Jack side,” so named because he was said to be able to destroy the people in a building while leaving the walls standing.
“But there is also a sensitive side,” she continued. “On the one hand you read about this harsh management environment. On the other hand, you will find that he will take the time to send a personal note to an employee.”
Jennings said Welch not only kept a tight grip at GE--"a company that traded on its ‘good things for life’ image, when in reality, over half of their business is just lending"--but he also enthralled the business press, including the Harvard Business Review.
“Everyone was star-struck by Jack Welch,” she said.
After his divorce from Carolyn, Welch embarked on a social whirlwind.
The dating frenzy stopped when friends introduced him to a lawyer at the New York firm of Shearman & Sterling. Welch wrote that he was immediately attracted to a “bright, tough, witty” woman roughly 17 years his junior with down-to-earth roots from small-town Alabama.
Before school in Pratt Station, Ala., young, red-haired Jane Beasley used to pick sugar beans. She graduated from a nearby state university, then headed to law school at the University of Kentucky. One of her early projects as a lawyer was to work on Standard Oil of California’s $13.4-billion acquisition of Gulf Oil.
As Mrs. Jack Welch, she gave up her career.
She worked with her personal trainer and made trips to the hairdresser (enumerated in her affidavit), and she took up golf and took on charity projects.
Speaking in her soft, Southern accent at board meetings, “she was not afraid of tough questions. You could see a column of steel down her middle,” said a lawyer who served with her but did not want to be identified. “She lived like the socially active corporate wife, clearly very used to comfort. She is also steely and determined.”
Jane Beasley negotiated her own prenuptial agreement, inserting a clause that made it void after 10 years.
It was none other than Warren Buffett who likened Welch to Tiger Woods, the golf sensation. Sony Chairman and CEO Nobuyuki Idei called Welch a “brilliant business magician.”
Welch, anointed by Fortune magazine as both “the toughest boss in America” and “manager of the 20th century,” once stated in an interview that “the higher a monkey climbs, the more his [backside] is exposed.”
He also has made no secret of his penchant for reading gossip columns.
Now he has climbed high, his finances are on display and his name is filling gossip pages.
“Jane Welch is strong and measured, and she knows the company can’t handle this for too long,” said Jennings, the ethicist. “He was the CEO. Everyone deferred to him for so long. They trusted Jack, and now he’s looking a little on the edge here.”