How Do You Spell Excess?

Published: November 29, 2017

By Jim Lichtman
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In an age of gilded toilets and mink-covered walls, even I was surprised by this story.

On the front page of the Business section of The New York Times (Nov. 4), journalist James B. Stewart writes about a story originally reported by The Wall Street Journal (Oct. 18), about how former G.E. CEO Jeff Immelt traveled around the world in a corporate jet followed by… a second corporate jet.


Immelt said, “They decided to deploy a ‘backup’ plane when I traveled on complicated, multi-stop trips or when we were traveling to areas with security concerns. This practice was brought to my attention and stopped three years ago. Let me reiterate, when I was in China or Pakistan or Turkey or Angola, the administration of our planes was never something I thought about, talked about or considered in any way.

“Other than to say ‘Hello,’ I never spoke to the leader of corporate air in 16 years,” Immelt said.

The CEO of one of the largest companies in the world just said that he was completely out of touch regarding his own travel arrangements.

“ ‘I literally felt sick to my stomach,’ Scott Davis, an analyst and founding partner of Melius Research who has covered G.E. for years, told me this week. ‘I immediately called the company and asked if this could possibly be true.’

“Mr. Davis said G.E. had told him that the issue had been ‘blown all out of proportion.’ Publicly, the company said that the two-plane arrangement had been used only on ‘limited occasions’ and was halted by Mr. Immelt in 2014.

“That response prompted The Journal to report this week that the second jet — known in aviation circles as a ‘chase plane’ — had followed Mr. Immelt’s aircraft as recently as March, when two G.E. jets flew to Anchorage after taking off from Boston within minutes of each other. The second plane stayed in Alaska for five days while Mr. Immelt went on to South Korea and China. After he returned to Anchorage, the plane followed him back to Boston.

The Journal documented multiple additional instances of two jets being used after the practice had supposedly stopped.

“Mr. Immelt told The Journal he wasn’t aware of the practice and wouldn’t have allowed it. When I inquired about it this week, he acknowledged, through a spokesman, that he first became aware that it was happening in 2014, after a whistle-blower complained about it and the board’s audit committee ordered it stopped. He said he didn’t know the practice had continued after that. …

“ ‘Not even heads of state get that kind of treatment,’ Mr. Davis said. ‘You hear about this and you have to wonder what else they were spending money on. You really have to question the financial oversight and controls and internal audit. You have to question the entire organization.’

“Charles Elson, a professor and director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, agreed. ‘This isn’t a minor issue,’ he said. ‘This may be why G.E. is in such trouble these days. It’s representative of an old-style C.E.O. culture that hasn’t helped G.E.’ Professor Elson added, ‘My students were discussing this in class today.’ ”

The people who really need to be discussing this issue are the board members, and how those members are going to explain about this to shareholders.


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