Why GE’s Jeff Immelt Lost His Job: Disruption and Activist Investors

https://hbr.org/2017/10/why-ges-jeff-immelt-lost-his-job-disruption-and-activist-investors

by etblg • 9 years ago

16 6 9 years ago

gumby2• 9 years ago

These kind of "activist investors" are simply asset strippers. Amazing they could get a foothold in a blue chip giant like GE.

valuearb3• 9 years ago

They got a “foothold” because they are owners, who own more stock than all of management and the board put together. The amazing part is it took 20 years for an activist to get a seat.

“During Immelt’s tenure, GE’s stock market value fell by about half. Its stock is trading where it was 20 years ago.“

This is a testament to the amazing power of entrenched management.

The author is just butthurt because a CEO who helped espouse his personal lean management mantra got canned as incompetent. His complaint that the activists will gut innovation at GE is ludicrous, given GE hasn’t successfully innovated in over twenty years.

Activist investors are investors. Gutting a good business for parts to make a short term profit at the expense of long term value isn’t good investing. But recognizing the stage a business is in, and managements ability to fix it is important into fdetermining the best possible future for it.

Warren Buffett once let himself get talked into letting management of one of his investments to invest cash flow back into its tough business and ended up regretting it greatly. Since he finally made the decision to shut down Berkshire Hathaway’s textile business and strip its remaining assets and cash flow to invest in far better companies, BRK.A stock price has increased a bit, from around $10/share to $200,000/share.

gumby2• 9 years ago

Activist investors are investors. Gutting a good business for parts to make a short term profit at the expense of long term value isn’t good investing.

Yes, tautologically activist investors are investors and indeed, a system that prevented the business owners from managing the business would be a bad idea, regardless of what you think of their decisions.

But, though short-termism is typically bad for the company it has been good for some entities, like Carl Icahn, Bain Capital et al. I wouldn't call it good for the economy. Buffet is a buy and hold.

Whether Imelt was investing in the future or squandering it is a judgement call. The markets certainly showed their judgement

Why GE’s Jeff Immelt Lost His Job: Disruption and Activist Investors

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