In the Feb. 19 edition of Barron’s featured a story that dissected the valuation of General Electric but the article did not reference the question of “how did it come to this”? The fall of the GE Empire was driven by both exogenous events and self-inflicted wounds. External forces that began the GE dominoes to tumble long before the Great Recession were the requirements of Reg FD, the 2002 revelation of a massively over-levered GE Capital balance sheet topped off by implementation of fair-value accounting. Internally, CEO Immelt’s new management team fumbled away early opportunities to sell GE Capital businesses at higher valuations, added billions in debt for three disastrous acquisitions and probably the most egregious, killed off the Welch-era strategic planning and accountability practices. Mr. Flannery and his team would do well re-setting GE’s culture back to when management scoured every level of the company for ideas about growth and innovation. They will be pleasantly surprised at what they find.
