The Two Americas
lnp3 at panix.com
Fri Sep 6 16:52:40 MDT 2002
(These two articles appear on page one of today's NY Times business section)
G.E. Expenses for Ex-Chief Cited in Divorce Papers
By GERALDINE FABRIKANT
Papers filed yesterday in the divorce of John F. Welch Jr., the former
chief executive of General Electric, by his wife contend that G.E.
covered enormous living costs for them while he led the company and will
continue to do so for him for the rest of his life. The extent of these
benefits has never been disclosed by the company.
General Electric has reported that Mr. Welch's total compensation,
including bonus and salary, was $16.7 million in 2000, his last full
year at the company before his retirement last September. It has also
said that he will remain a consultant to the company on a retainer of
$86,000 a year and will continue to have access to G.E. services and
But it did not disclose the value and the details of his perquisites as
chief executive that will apparently continue through retirement. Along
with access to corporate aircraft, mentioned previously in company
footnotes, the documents filed by his wife, Jane, describe his use of a
Manhattan apartment owned by G.E., floor-level seats to the New York
Knicks, courtside seats at the U.S. Open, satellite TV at his four homes
and all the costs associated with the New York apartment, from wine and
food to laundry, toiletries and newspapers. The privileges, down to
certain dining bills at the restaurant Jean Georges in the Manhattan
apartment building where he lives, have continued even in retirement,
the court papers indicate, without placing a value on them.
Acclaimed for his ability to deliver higher profits year after year at
G.E., Mr. Welch was one of the nation's most admired chief executives,
and his employment contract struck in 1996 reflected his company's
But people who specialize in corporate governance and compensation said
yesterday that they were taken aback by the long list of benefits,
though they had known about the corporate aircraft, for example.
Nell Minow, a governance expert and the editor of The Corporate Library,
once described Mr. Welch's employment contract as a model because it did
not appear to include a huge number of benefits. After being told about
the filing, she said yesterday: "I would have thought that perks like
this had to be disclosed, and they were not. There is really no
justification to pay for any living or traveling expenses at that level,
particularly now that he is in retirement."
Jonathan Macey, professor of law at Cornell University, said, "General
Electric was probably not legally obligated to disclose the details" of
Should the company have awarded him such benefits? "If you think he was
leaving and they induced him to stay with these perks," then perhaps it
was justified, Professor Macey said. "If it is handed to him by board
cronies, then it is not justified. But it is harder to make the argument
that this is illegal."
The G.E. proxy statement for 2001 states that the company will provide
Mr. Welch, who remains a consultant to the company, with "continued
lifetime access to company facilities and services comparable to those
which are currently made available to him by the company."
The company provides few details about what those services are. The
document did not list any personal use by Mr. Welch of corporate
aircraft last year, though it did quantify aircraft use by other
executives. There is no mention of sports tickets or restaurant meals or
the G.E.-owned apartment on Central Park West, which the court documents
value at about $80,000 a month.
According to the court papers, the subsidized benefits include a car and
driver for the Welches, and the communications and computer equipment at
the Manhattan apartment and at their homes in Connecticut, Massachusetts
and Florida. G.E. pays for security personnel when the Welches travel
Mrs. Welch states that G.E. was paying for V.I.P seating at Wimbledon, a
box at the Metropolitan Opera, a box at Red Sox games, a box at Yankee
games, four country club fees, security services in all four homes and
limousine services while traveling. Because of his relationship with
G.E., Mr. Welch and his wife also got discounts on diamonds and jewelry
Gary Sheffer, a General Electric spokesman, pointed last night to Mr.
Welch's consulting agreement with G.E., which pays him at least $86,535
annually for his first 30 days of work, with a payment of $17,307 for
every additional day.
Small Employers Severely Reduce Health Benefits
By MILT FREUDENHEIM
Kathy Steever, office manager of her family's automobile repair shop in
Sioux Falls, S.D., is expecting a baby in December. Her father, who also
works at the shop, learned last year that he has cancer.
Even so, their company, called Pro Tune Up, canceled health coverage for
all five employees last spring. Ms. Steever said premiums jumped by
two-thirds, to $2,000 a month, from $1,200 in 2001, just when demand for
the shop's services was slowing in a faltering economy.
The cancellation of benefits at Pro Tune Up added seven adults,
including two spouses, and four children to the estimated 40 million
Americans without health insurance. Cutbacks at other small businesses
squeezed between rising premiums and the sluggish economy are likely to
add to that number.
Although most large employers still offer health benefits, fewer small
companies are providing coverage. Forty-five percent of employers with
three to nine workers now offer no health benefits, up three percentage
points from 2001, the Kaiser Family Foundation said yesterday in its
annual report on employer-based insurance.
That translates into almost 150,000 more workers and dependents without
"There has been a significant decrease in the number of small firms
offering coverage," said Drew Altman, president of the Kaiser
Foundation, adding that the surge in costs would make health care
problems more difficult for policy makers in Washington and the state
Health insurance premiums across the country soared by 12.7 percent,
almost eight times the 1.6 percent overall inflation rate, in the 12
months ended this spring, the Kaiser report said.
It was the largest one-year increase since 1990. Jon Gabel, who directed
the Kaiser study, said all signs pointed to even higher premiums next
year and beyond as costs for medical care and prescription drugs
Small businesses had even higher premium increases: exceeding 14 percent
for employers with fewer than 50 workers. That has led many
small-business owners to abandon coverage, sometimes even for themselves
and their family members. "Dad is just taking a chance that he's getting
a clean bill of health on his cancer," said Ms. Steever, whose brother
owns Pro Tune Up.
Michael Wiston, president of the Valley Marble Slate Corporation, which
makes kitchen countertops in New Milford, Conn., said premiums for his
seven employees had doubled since 2000, to a total of $39,600, while the
services covered had been reduced.
"I have a liver problem," he said. "In another year, I'll be on a list
for a transplant. What worries us is: What do they cover, and what don't
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