SEC exacts vow from GE to give details of perks

Ex-wife more reliable than company, agency says

September 24, 2004|By James Toedtman | James Toedtman,NEWSDAY

WASHINGTON - Jack Welch's ex-wife was more believable than his ex-company, the Securities and Exchange Commission ruled yesterday.

Welch, General Electric Co.'s hard-driving chairman for two decades, signed a lucrative contract in 1996 that provided a vast array of retirement benefits including cash, private jet travel and country club memberships.

The SEC's complaint was that the details and breadth of the agreement were clearer in divorce papers filed by Welch's second wife than they were in GE's financial documents.

The SEC ordered GE yesterday to detail such benefits for the public in the future, and GE promised to do so. The company did not admit any wrongdoing in accepting a cease-and-desist order.

As Welch and Jane Beasley wrangled over a divorce settlement, Beasley filed an accounting of expenses covered by the retirement package that she said included a furnished $11 million Manhattan apartment, country club memberships, free corporate jet travel, and a monthly $8,982 for food and beverages, a Mercedes-Benz, $1,904 for clothing, $52,486 for gifts, security and communications at his four houses, and tickets for sporting events. Welch's monthly expenses in 2001 totaled $366,114, she said.

Welch offered Beasley alimony of $35,000 a month, which she called "patently inadequate," given the marital standard of living provided by the GE retirement package. They settled four days before trial when he agreed to pay more than $130 million.

The disclosures aroused SEC scrutiny, especially because GE had limited its description of the benefits to its annual 10-K filing with the SEC and its annual proxy statement, which stated: "The Board agreed to provide him continued lifetime access to Company facilities and services comparable to those which are currently made available to him by the Company."

"Shareholders have a clear interest in knowing how public companies compensate their top executives," said Paul Berger, associate director of the SEC's enforcement division. "Compliance with SEC disclosure rules ensures that shareholders are provided a full and accurate understanding of senior executives compensation arrangements."

Gary Sheffer, GE's communications director, said none of the company's five top executives, including CEO Jeff Immelt, has an employment or retirement contract.

The flap over Welch's retirement package arose after the breakup of his 13-year marriage to Beasley when Welch's affair with Harvard Business Review editor Suzy Wetlaufer became known in March 2002. Welch retired in 2001. He and Wetlaufer are writing a book, Winning.

Two years ago, he asked GE's board to modify his agreement. Welch agreed to pay the costs of using corporate aircraft and the company apartment, $2 million to $2.5 million a year.

"In other words, there will be no cost to GE or its shareholders for my use of these services," he wrote at the time. "One thing I have learned during my years as CEO is that perception matters. And in these times when public confidence and trust have been shaken, I've learned the hard way that perception matters more than ever."

Newsday is a Tribune Publishing newspaper.

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