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What ‘Lights Out’ gets wrong about GE

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The book Lights Out, written by Wall Street Journal reporters Thomas Gryta and Ted Mann, and which Fortune recently excerpted, gets some critical things wrong about General Electric and its former CEO, Jeff Immelt. I know—I was there.

But one of those mistakes deserves direct refutation. In their chapter focused on the events of the global financial crisis in September and October 2008, the authors erroneously assert that GE knew it was having problems issuing short-term debt—or commercial paper—but did not communicate that information to investors.

They write: “On Sept. 14, a Sunday, GE’s investor relations department issued a letter reiterating that the company was in healthy condition and maintaining that its commercial paper programs continued to be ‘robust’ and that ‘we are not raising external capital and have no need to.’

“But the very next day, Immelt showed up at [former Treasury Secretary Hank] Paulson’s office in the evening to again sound the alarm about potential problems at GE. He told the Treasury Secretary that the commercial paper operation was getting worse and that GE was having a hard time selling debt that lasted longer than overnight.”

The paragraph immediately above is completely untrue. Immelt’s meeting with Paulson was about tax reform, not GE’s ability to roll short-term paper. GE was having no problem issuing commercial paper at the time of the meeting with Paulson.

Lights Out’s apparent source for its misinformation seems to be Paulson’s book on the financial crisis, which indeed puts the meeting with Immelt in September. But Paulson acknowledges in his book that he based his recollections of conversations on calendar entries and telephone logs that did not record subject matters and, in view of all that was happening at the time, it’s understandable he got the dates wrong. GE told journalists when Paulson’s book came out in 2010 that he had the wrong dates for his meeting with Immelt.

Paulson was actually referring to conversations in October 2008 when Immelt was discussing with him and others (e.g. Sheila Bair, then the chair of the U.S. Federal Deposit Insurance Corp.) the difficulties that the U.S. government had inadvertently caused for GE by initially excluding the company from the Temporary Liquidity Guarantee Program, or TLGP. That would have left GE as one of the few issuers whose debt was not guaranteed by the government. This decision was later reversed.

Based on Paulson’s book, the U.S. Securities and Exchange Commission launched a thorough investigation of GE’s disclosures during that period. The SEC closed the investigation without taking any action against GE.

It should be noted that the Lights Out authors never asked Immelt about this serious and erroneous assertion about GE’s disclosures despite opportunities to do so during a three-hour interview in December 2018.

Another item from the chapter further illustrates issues with Lights Out. The authors write that on Sept. 11, 2008, Immelt had dinner at a fancy Hollywood restaurant with director Steven Spielberg, Universal Studios president Ron Meyer (GE owned NBCUniversal at the time), and Stacey Snider, then the CEO of DreamWorks. This never happened, even though the entertainment gossip site Deadline reported otherwise. Immelt was in Los Angeles for meetings with GE’s corporate audit staff, investors, and NBC executives—none of which were held at a fancy Hollywood restaurant. The night of the 11th, he had dinner with the GE audit staff.

Sheffer is the former head of communications at GE and today a consultant to Jeff Immelt.

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GlaxoSmithKline plc Just Beat EPS By 44%: Here’s What Analysts Think Will Happen Next

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GlaxoSmithKline plc Just Beat EPS By 44%: Here's What Analysts Think Will Happen NextGlaxoSmithKline plc (LON:GSK) shareholders are probably feeling a little disappointed, since its shares fell 3.9% to…


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Why surveying the American public can help us change capitalism

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The fallout from the COVID-19 pandemic has demonstrated the need for business leadership more clearly than ever. Americans increasingly trust business leaders to serve as societal leaders. And inequality and racial injustice have put a fine point on how urgent the challenge is. As a result, the stakeholder capitalism movement is gathering real momentum.

But changing capitalism isn’t easy. It needs new voices at the table, new narratives, and a better grasp of what value creation means. And it necessitates the development of new systems for defining what drives business success, for gathering data, and for measuring and reporting performance. 

JUST Capital has carved out a unique role in this transition by providing a credible and unbiased assessment of how America’s largest corporations are doing on the stakeholder criteria of greatest importance to the public, as well as the tools, products, and programs that actually drive change. 

As last Saturday’s Fortune op-ed illustrates, our approach is not without its critics. We welcome such feedback and see our strategy—like stakeholder capitalism itself—as a work in progress. One thing that’s abundantly clear is that building a stakeholder-led economy is not a competition. It’s a movement, with complementary parts, including CEOs and business leaders, investors, workers, civil society, policymakers, and more. 

The B Corp initiative championed by op-ed author Christopher Marquis is certainly an excellent option for any business wishing to commit to a stakeholder-based pathway. But the B Corp route doesn’t work for every company. Indeed, this is the point. No single initiative, organization, or project can upend shareholder primacy. It will take the entire ecosystem, working together, to drive real change. 

For our system to evolve, we first must rethink what business leadership means. Focusing on short-term returns to shareholders or measuring success solely on the P&L statement is clearly no longer enough. But how else might we measure it? To answer this, JUST Capital turns to the American people.

(Read, “In a time of crisis, Americans send a clear message to Corporate America: Focus on workers.”)

It’s vital that the public feels that stakeholder capitalism reflects their priorities because a movement isn’t credible without real people’s values. It isn’t a perfect science, but by partnering with the best public opinion research groups to reach a representative sampling of Americans, we feel confident that we are capturing many of the key issues. We rarely use polling to assess the efficacy of corporate practices. Instead, our polling ensures we stay rooted in the experiences of everyday people, rather than dealing in academic hypotheticals. 

Case in point: For the fifth year in a row, Americans said the most important action a company can take is to pay a fair and livable wage. With tens of millions of hardworking people still reliant on food stamps to feed their families, this makes sense. But without our survey work, it might not have been so apparent. This year, we’ve also used polling to get the public’s guidance on how companies should be responding to COVID-19, racial equity, and our democratic processes. 

When it comes to accurately measuring corporate stakeholder performance, the challenges are many and varied. 

One is getting to the truth on how companies are performing, as opposed to what they’re saying. For many of the issues we’re trying to measure, there is no definitive data source and no standardized way of reporting, which means you have to use proxies or estimates, to piece together the best possible analysis. We try to tell a balanced story, but it’s an inherently messy, inefficient process.

Another issue is relativity. Fundamentally, we’re assessing company performance relative to one another. We find the best players on the field, rather than assess where the field is going. Which is why the work of organizations like B Lab, which are working to move the whole field, is so valuable. Our work also doesn’t address every societal challenge. Overall, rankings are a blunt tool. The fact is that company stakeholder performance, like company financial performance, is uneven. 

Finally, there is the challenge of actually driving change. We see the work we do as a resource for the broader movement. It shed light on what companies actually did in the early days of COVID-19. It creates investment products that can drive capital toward companies that are better performers. It investigates the correlation between top performers and market performance. And it drives transparency and supports change, like advancing racial equity in the workplace. Recently we launched a new effort to ask CEOs to assess the financial health and security of their workers, because in this time, it’s no longer appropriate for CEOs to not have this information. 

Ultimately, we believe the market will drive toward corporate stakeholder performance, as more and more people seek to buy from, invest in, work for, and otherwise support those companies that do right by their stakeholders. But this can only happen with clarity on what we’re driving toward, and that’s the work of JUST Capital and others in the coming years.

Martin Whittaker is the CEO of JUST Capital. Alison Omens is the chief strategy officer of JUST Capital.

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4 Key Benefits of Video Content

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Convenience and timing play important roles if you and your business really want to stand out.

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