Byron on Jack Welch

In this context, Christopher Byron’s book Testosterone Inc (John Wiley & Sons 2004) is exciting and relevant. Byron has taken GE’s former boss Jack Welch as the centre of his chronicle of the self–destructive lives of Alpha Male leaders. As well as Welch, he describes Ron Perelman (Revlon), Al Dunlop (Sunbeam) and Dennis Kozlowski (Tyco). Testosterone Inc could have been written as a series of case histories to support this book. For our purposes, let us first review Welch’s upbringing and then use Byron’s account of him as a way of introducing our next chapter – understanding how we need and respond to leaders, both individually and in groups: Understanding Followership.

Jack Welch was born into poverty in Salem, Massachusetts: “We were poor, I mean really and truly poor.” said a school friend, Ed Curtin, “In my family we had to put a quarter into the meter to get electricity for the apartment. And everyone I knew was in pretty much the same situation, including Jack Welch.”. His parents were second generation Irish immigrants, members of the “permanent underclass of Salem’s North End ghetto”. An only child, born in 1935, Jack’s parents were unable to afford their own home and lived with his mother’s parents until he was nine years old. He describes his childhood as an outsider, his“nose pressed up against the glass” coveting what lay beyond his grasp. Jack’s father worked on the railways and brought home a mood of “silence, withdrawal and black despair”. He was not there for the young Welch, precisely at the time when adolescent boys need a father to help them with the issues of sexual identity and coping with other boys. His mother is rarely spoken about, there is no warmth and affection, only some moments of extraordinary anger, such as when Jack’s team lose a hockey match and she bursts into the Salem High School boys’ locker room after he has thrown his hockey stick across the ice in a rage: “You punk!” she screams, “If you don’t know how to lose, you’ll never know how to win!”.

By 13 years old, Jack is a stuttering boy, prey to fears of being abandoned by his mother, small, and using his personality to dominate his friends. Byron races his readers through Welch’s early days as a street–fighting, ambitious executive driven to find success, but no less driven to move on – momentum characterises his every action. As he overcomes one challenge after another, he becomes more Alpha, more male. Like winning athletes whose testosterone levels rise after victory, so Alpha Males feed on their successes, as Cassius was implying to Brutus when he asked “Now in the name of all the gods at once, upon what meat doth this our Caesar feed that he is grown so great”.

We have moved far from the world of humility, strong values and shared debate, to the world of the narcissist CEO, made possible, even promoted by the short–termist strategies of Wall Street and the City. Narcissists are emotionally isolated and highly distrustful. Perceived threats such as rejection can trigger uncontrollable rage. Byron recounts how not everyone liked having Welch around. A bad loser, he had been omitted from a Saturday factory basketball game. Welch heard of the game and burst into the YMCA gym as the teams were warming up. “His face was purple with fury, and he began cursing in an out–of–control stammer: ‘Why the f–f–f-f-fuck wasn’t I invited to this f–f–f–f–fucking game! This is going to be very b–b–b–b–bad for your career you p–p–p–p–prick!”.”

It has been said of Oracle’s narcissistic CEO, Larry Ellison, “The difference between God and Larry is that God does not believe he is Larry!” We need productive narcissists to push through the massive transformation that society periodically undertakes. The trouble is controlling their tendency to self–blind grandiosity. Freud, whilst recognising that there is a virtually infinite spectrum of personality, identified three main types. He labelled them “erotic”, “obsessive” and “narcissistic”. I’ve always felt these labels were unfortunate. In the first place, we all have aspects of each in our make–up. Secondly, each label carries misleading connotations. When talking about the Erotic personality, Freud did not mean a sexual person, so much as one for whom loving and being loved is most important. Such people – teachers, nurses, social workers – are caring and supportive. As managers they will avoid overt conflict. They are “people people”. Obsessives do not “obsess” they are self–reliant, independent, ruled by carefully developed values, and set conscientious and high standards. The most productive are great mentors and team players. Narcissists are independent, driven to seek power and glory. They want to be admired rather than loved. Their search for glory can lead them to over–reaching, to isolation and to the driven need for ever more fantastical achievement – consider Robert B Shapiro, CEO of Monsanto. Shapiro has described his vision of genetically modifying crops as “the single most successful introduction of technology in the history of agriculture, including the plow” (New York Times, August 5, 1999).

The Narcissistic character, formed, as it will be, out of childhood experiences, threatened fundamental drivers and chemical make–up, like Caesar’s, grows by the success it experiences. Such Alpha Males have a vision that can be breathtaking and then grandiose. They have charisma that can stir followers, whose followership they, in turn, thrive upon. But they also need the balancing of trusted critics. As they become more successful and are driven to attempt yet greater glory, so they indulge themselves in an increasingly selective perception. Profoundly sensitive, bearing the scars of early suffering, they shun shows of emotion. They become excessively sensitive to criticism and dissent. Imagine a chairman whose day revolves around the extent to which people agree with him – the greater the agreement, the better the day. Interestingly, like many narcissists, he is also a bad listener, hearing what he wants to hear. In the main, this is very little. He spends most of his time happily locked inside his own head, apparently unaware of the feelings or sensitivities of those around him. He lacks empathy with his subordinates, who are consistently wrong–footed and frustrated by his destructive micro–management. As far as he is concerned – and there is no one else within his purview – he is simply meeting his own needs, with no awareness of the effect he is having.

The Narcissistic / Alpha Male leader is difficult to deal with and hard to change. For those who work for him, challenge and change are virtually impossible – you will have gone through the exit door before your efforts are appreciated. However, strong coaching , an appointed untouchable, such as non–executive chairman, can indeed not only succeed but achieve the best of all worlds: The driven Alpha Male building on and using their likeable charismatic personalities to take criticism on board, to laugh at themselves and to develop and grow their talents to help others.

Perhaps the ultimate irony of leadership, and certainly the most complex challenge leaders pose to their advisors and coaches, is how to help them to maintain their essential momentum, how to keep going this “charge” that revs their engines and, at the same time, how to clip their wings and keep them in touch with a reality, without which, like Icarus, they will ultimately fly too close to their sun and spiral out of control. And, have no doubt, all leaders need their confidential crew of critics.

The first thing to go relates to corporate and personal expenses. The company private jets start to multiply, the cover photograph and self–serving articles about “leadership” increase. The next step, in particular during the 1990s, is the revolving door of wives and girlfriends. By 1987 in “Bonfire of the Vanities”, Tom Wolfe had already coined the term “X–Rays” to describe the very much younger, “achingly thin” trophy wives that out–of–kilter, valueless CEOs had to have. Byron describes the procession:

“Edgar Bronfman, the fifty–six year old chairman and CEO of the Seagram Company liquor dynasty, had one – a barmaid named Georgiana Webb Bronfman, thirty–five, whom he met while pub–crawling in Britain in 1975. Junk–bond raider Saul Steinberg had one too, a socialite named Gayfryd Steinberg. Henry Kravis, the head of the Kholbert, Kravis & Roberts leverage buyout firm, had one as well in the person of socialite Carolyne Roehm. The head of the Salomon Brothers investment firm, John Gutfreund, had one: a former stewardess named Susan.

Now Ron Perelman was to get one as well. Her name was Claudia Cohen, and she was a former gossip columnist for the New York Post who had lately moved from print journalism onto the faster media track of television as a gossip “correspondent” for ABC television’s Morning Show. Claudia was attractive, she was from a wealthy Jewish family, and she was on the prowl for a man, which meant that, all things considered, she was set to snag Ron on the short hop.”

Byron goes on to catalogue the sensational and destructive domestic lives of his four Kings of Wall Street. Jack Welch of GE, however, remains his primary focus – an Icarus, Alpha Male, Narcissist if ever their was one.

In 1981, English language newspapers and magazines worldwide published just 40 stories mentioning the new GE chairman and CEO, and most were little more than perfunctory announcements of his appointment. In 1982, the number rose modestly to 59 stories, then to 86 stories in 1983 and 93 stories in 1984. But when the RCA deal was announced at year–end 1985, public interest in Welch exploded; the number of stories surged to 152 and continued to rise dramatically thereafter. In the last two years of his tenure as chairman and CEO, the number of stories topped 8,600, and nearly all were adulatory retrospectives about his accomplishments. (During his retirement, media coverage of Welch has continued to run high, but the tenor of the coverage began to change as a result of the scandals that enveloped both Welch and the corporate world at the end of the decade.)

Jack Welch is not alone – see the Tomkins story from the UK.

And so the momentum builds. First, within the company, the leader starts to believe his own publicity. His confidence grows; inspired and on a roll, he works hard and well, takes decisions quickly, seizes opportunities successfully. To sustain his own drive, he needs ever more, ever larger wins. Gradually his needs lose touch with reality, and now, almost crazed by the feeding frenzy, he will brook no critic. Look at the exodus of top flight staff, the untrammelled levels of personal compensation and greed, and finally the willingness to bend rules and even break the law to show themselves in the light of public adoration. Byron describes Dennis Kozlowski in 2000:

“For Dennis, the year 2000 had been his best ever, with total cash compensation of an incredible $137 million for his work at Tyco – much of it from having Tyco waive and forgive millions it had lent him under the Key Employee Loan Program – so he certainly could have afforded to pay for the party out of his own pocket, no matter how gauche and extravagant he intended it to be.

But Tyco’s shareholders had also enjoyed a good year, with the price of their stock rising more than 46 percent even though the market as a whole had topped out in January and had been weakening ever since. And that may have been all Kozlowski needed to consider (if indeed he considered anything at all) before deciding to stick the cost of Karen’s birthday bash on the shareholders instead of paying for it himself. After all, the idea of having Tyco pick up the tab certainly would have seemed routine by that time anyway.*

Meanwhile – and thanks to the momentum that had developed – opportunities were now multiplying before him in all directions. One of his board member buddies, Frank Walsh, pitched him an idea for an investment in a finance company called CIT Group, Inc. The price was huge – $9.2 billion – by far the biggest deal he had ever considered. And CIT’s track record as a lender hadn’t been all that great either. But owning a captive finance operation would make Tyco look more like GE (and of course make Dennis look more like Jack Welch), so he went for it. And just to show his gratitude to Walsh for bringing him the deal, he paid him a finder’s fee of $20 million.†

Quotations

*Testimony in Kozlowski’s New York State trial suggested that initially he had wanted to disguise the event, for accounting purposes, as a “Tyco Electronics Incentive Meeting” and that this was eventually changed to “Chairman’s Meeting”. People of the State of New York v L Dennis Kozlowski and Mark H Swarts (September 2003).

† When a reporter for Business Week called for a comment, he said, “Hopefully we can become the next General Electric,” making clear enough what the $9.2 billion expenditure was all about. A year later, Tyco sold the CIT business for barely $2 billion.

And there was more. Dennis was a wheel now, even in New York, so he needed suitable digs if he wanted to throw a party, or just have someone over for drinks. So he signed for a $19.8 million Fifth Avenue co–op, and had Tyco pick up the bill for that too, just as he had the company pay for artwork that he and Karen hung on its walls – like a $5.5 million Renoir for example, and a $3.95 million Monet. Then came the interior decorations and renovations, which ran to another $5.5 million, including a $15,000 umbrella stand in the shape of a poodle, and a $6,000 shower curtain. And in the middle of all this came an opportunity to upgrade the company’s Fifth Avenue offices to something really grand. Even better, the new offices were just around the corner – a high–rise looking north across Central Park at No. 9, West 57th Street – and he went for that too. *† In just the last four weeks before leaving for Sardinia, Kozlowski presided over enough such adventures to last a normal CEO six lifetimes. In addition to wrapping up the CIT deal and moving offices, he:

  • Completed the $393 million acquisition of a gas mask company,
  • Signed a deal to acquire a $1 billion collection of security protection businesses from an Illinois investment group,
  • Negotiated a deal to buy a medical products company for $3.2 billion,
  • Gave the commencement address at Roger Williams University in Rhode Island,
  • Sailed his 134–foot racing sloop, the Endeavor, in the waters off Antigua in the British West Indies,
  • and married Karen Mayo in Antigua on the deck of the Endeavor.”
Quotations

* For Dennis, the best part of the new office was its location on the building’s 43rd floor, which happened to be one floor above the international headquarters of the Kohlberg, Kravis and Roberts leveraged buyout fund, widely regarded as the most powerful group of its kind in all of high finance. This drove Dennis wild with delight. “He thought the symbolism was great”, explained a colleague who worked with him during the period. “He couldn’t get over the fact that every time Henry Kravis looked at the ceiling, he’d actually be staring up Dennis’s asshole”.

Kozlowski was perhaps not so exceptional. According to the Institute of Policy Research in Washington DC, the 1982 income of all CEOs in the S&P 500 Index was 42 times that of the average for the companies’ employers. Twenty years later, by 2002, this figure had widened to 411!

Throughout this book has sought to explain, in one chapter after another, the ingredients that go into the leadership mix. In particular, it has shown how we can so easily become driven characters, if our basic pre–programmed attitudes about parental love, security, learning and social status are threatened.

All Byron’s chief characters suffered from dysfunctional childhood. I’m in no doubt we could make a solid case for their lives fitting tidily into the behavioural pattern described earlier, as they each sought for recognition and public adoration to replace the lovelessness of their childhood. There is an intriguing footnote in Byron’s book. He is referring to Welch’s need for acclaim, for affection and recognition and how he reacted favourably to being asked to stay at GE as a young man by his then boss Reuben Gutoff:

“There seems little doubt that another force was at work here also: Welch’s lifelong search for what psychologists sometimes refer to as “stroking” – a particularly powerful need among only–child males with doting mothers. In a 1988 interview with author Ken Auletta, Welch touched the raw nerve of what he had really been seeking in his temper tantrum, and why he had agreed to stay. He told Auletta, “Someone told me they loved me”. See K Auletta, Three Blind Mice (New York: Random House 1991), p97. In his own autobiography a decade later, Welch toned down the quote, perhaps to obscure the vulnerability it revealed. Nonetheless, the unwitting insight into the deeper lesson he drew from Reuben Gutoff’s offer of money and more freedom if Welch would simply not resign showed through. He quoted himself as follows: “Gutoff showed me he really cared”. J Welch and J Byrne, Jack: Straight from the Gut (New York: Warner Books 2001), p25.”

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