When the generous retirement package for former General Electric chief executive Jack Welch's was made public in divorce proceedings earlier this month, the public furor forced him to renounce those benefits. He explained that he was offered the perks in lieu of a large bonus that the company wanted to pay him in return for not retiring early.
But in the end, he gave up the benefits in deference to public perception. In short: He did it to appease the public regardless of the facts of the case.
This surrender, from the man who is arguably one of the greatest CEOs in American history, who increased GE stockholder value by over $400 billion in two decades, has far greater significance than the relatively paltry $2.5 million annual value of the retirement benefits. His cave-in is symbolic: It means he is not willing to accept compensation that he earned by long, hard, competent, honest work because of public disapproval. This suggests that public approval is more important than one's right to the profits from one's efforts.
The cave-in is especially damaging because of the great esteem in which he's held by the business community and the public. Unlike the string of executives recently cited for fraud, the money Mr. Welch made for himself and GE was earned honestly, through productive effort and voluntary trade.
What are executives to think when they see a man of Welch's stature forego money that is both modest in amount and honestly earned just because he fears disapproval?
For more than a century, the conservatives have lost battles with "progressives" or liberals concerning business regulation, because they were reluctant to admit that businessman like their employees work for their own, rational self-interest and that they have an absolute right to run their business as they see fit, to make the biggest profit they can earn honestly, and to be justly rewarded for their efforts.
At the deepest level, Welch's cave-in reaffirms the altruistic morality of the left that suggests the only justification of the businessman's right to exist is selfless service to the public. As a result of accepting this premise, even America's greatest executive dare not assert his moral right to what he has earned.
The attack on Welch is only the tip of the iceberg. Also under attack today are the size of CEO salaries, the use of stock options, the right of a company to choose its own board of directors, the right to save on taxes through offshore subsidiaries, and the right to attain market dominance by producing better or cheaper products than rivals. What chance does the rest of the business community have when the best one of them lacks the moral courage to stand up for what is right? Capitalism can't survive without a moral base, as the writer Ayn Rand observed decades ago. The only proper moral basis of capitalism is: man's right to exist for his own happiness, neither sacrificing himself to others nor others to himself. Man has a right to his own life, which includes the right to trade freely with others without government interference (other than to prevent fraud).
Welch's proper answer to his critics should have been this: "I earned the benefits through decades of hard and successful work. I am proud of what I earned, and I intend to keep it."
Edwin A. Locke, professor emeritus of management at the University of Maryland at College Park, is a senior writer for the Ayn Rand Institute in Irvine, Calif. www.aynrand.org