What is Jack Welch not telling us?
by Adam Levy
Jack Welch, the storied former CEO of General Electric, went out on a limb last week and insinuated that the Obama Administration somehow manipulated the U.S. employment data for his political benefit.
He wrote a tweet to that effect and then on Wednesday wrote an op-ed in the Wall Street Journal, defending the “stink” he made and refusing to “pipe down.”
“I Was Right About that Strange Jobs Report,” Welch wrote.
Throw me in the camp of those who would like him to pipe down — or maybe come clean with how he knows. Maybe Neutron Jack knows what he’s talking about, but he’s not telling us.
Just about the same time that Welch was doubting the authenticity of the Department of Labor report, I read a couple of articles that a team of academics were questioning the veracity of U.S. corporate earnings reports. The study found that one of five U.S. companies – yep, 20 percent of U.S. firms – cook the books when they release their earnings.
Finance professors at Duke University and Emory University found that a not insignificant number of companies “manage” earnings and use aggressive accounting maneuvers to tweak the numbers — legally, of course! These companies can tap into reserves, or deploy some other sleight of hand to make sure the numbers hit or exceed targets, enabling, of course, the CEO to get his or her bonus, the stock to stay up, and so forth.
Is it too much of a leap to think that maybe somewhere in his corporate background Welch encountered such a phenomenon, and that’s influencing his certainty about the government fiddling with its report?
I’m not suggesting that Welch and/or GE cooked its books (never!). But it seems like there is a one-in-five shot that a company does that – so maybe Welch has some personal experience.
I realize it’s bad form to take a cheap shot and insinuate some malfeasance regarding a CEO considered a legend by many. But why should I pipe down? Welch won’t.