General Electric CEO John Flannery leaves abruptly

  • Push-out Score suggests push-out forces
  • After about a year in the position
  • Thanks for Flannery
  • Larry Culp taking over

(exechange) — Boston, Massachusetts, October 1, 2018 — John Flannery, chief executive of General Electric, leaves. It is an abrupt change. As announced by General Electric Company in a news release on Monday, October 1, 2018, John L. Flannery leaves his post as Chief Executive Officer at the conglomerate company after about a year in the role, effective immediately.

No company wants a CEO to flame out in the first years.

Among the 3,000 largest publicly held companies incorporated in the U.S. based on market capitalization, the average tenure of the CEOs who departed over the past 12 months was 9 years, according to data compiled by exechange. Only 11 percent of the CEOs who departed over the past 12 months left the position within two years, and 20 percent left the position within three years.

Flannery’s duties will be taken over by H.Lawrence (Larry) Culp, a former Chief Executive Officer of Danaher Corporation.

Already a director

Culp is already a director of General Electric. Often a board member is a last resort, someone who is turned to in desperation when a company cannot find suitable candidates. On the other hand, directors-turned-executives represent a blend of outsider and insider.

They don’t have the constraints of a pure insider when it comes to leading painful changes or making unpopular decisions, and they have more company knowledge than a pure outsider.

Having been a director, Culp understands the expectations and dynamics of the board and has knowledge of General Electric’s organization, risk-management practices and strategy.

“Weaker performance in the GE Power business”

A reason for Flannery’s sudden departure from the CEO post was not explicitly given. General Electric said: “While GE’s businesses other than Power are generally performing consistently with previous guidance, due to weaker performance in the GE Power business, the Company will fall short of previously indicated guidance for free cash flow and EPS for 2018. In addition, GE expects to take a non-cash goodwill impairment charge related to the GE Power business. GE Power’s current goodwill balance is approximately $23 billion and the goodwill impairment charge is likely to constitute substantially all of this balance. The impairment charge is not yet finalized and remains subject to review. The Company will provide additional commentary when it reports third quarter results.”

Precise information about Flannery’s future plans was not immediately available.

“Succeed”

General Electric said: “Mr. Culp will succeed John Flannery as Chairman and CEO.”

Share price decline

The change follows a decline in the share price of General Electric Company since July 2016.

In the position of CEO since 2017

John L. Flannery has been the Chief Executive Officer of General Electric Company since August 1, 2017 and its Chairman since October 2, 2017.

Flannery’s CV reads as follows:

CEO and Chairman, General Electric, Boston, MA (since August and October 2017, respectively) Finance & Accounting, Industry & Operations

PRIOR BUSINESS EXPERIENCE

–SVP, GE, and President and CEO, GE Healthcare (2014–2017)

–SVP, Business Development GE (2013–2014)

–SVP, GE and President & CEO, GE India (2009–2013)

–Joined GE Capital in 1987, serving in a number of leadership positions in the leveraged finance and private equity sectors and as President & CEO of GE Equity (2002–2003), head of the Bank Loan Group (2003–2005), and President & CEO of GE Capital Asia Pacific (2005–2009) Finance & Accounting, Risk Management, Investor

CURRENT PUBLIC COMPANY BOARDS

–General Electric

OTHER POSITIONS

–Former National Advisory Board Member, Columbia University, Mailman School of Public Health

EDUCATION

–Fairfield University

–MBA, University of Pennsylvania.

At the time of Flannery’s appointment as Chief Executive Officer at General Electric, Jack Brennan, then lead independent director for GE’s Board of Directors, had said: “During this time of dynamic global markets and relentless focus on technology and operational excellence, there is no better person to lead GE than John Flannery.  He brings unique experience and a strong skill set to the job.  John has spent almost half of his career living outside of the United States and has led complex financial and industrial businesses all over the world, including running GE Healthcare, GE in India and the business development team for GE through the successful acquisition of Alstom.  John has had a direct influence on the company’s direction, its financial health and its position as the world’s premier digital industrial company.”

At the time of his appointment as Chief Executive Officer at General Electric, Flannery had said: “Today’s announcement is the greatest honor of my career.  I am privileged to have spent the last 16 years at the company working for Jeff [Immelt], one of the greatest business leaders of our time.  He has transformed the GE portfolio, globalized the company and created a vision for the GE of the future by positioning the company to lead in digital and additive manufacturing.  In the next few months, my focus will be on listening to investors, customers and employees to determine the next steps for GE.”

Push-out Score suggests push-out forces

It is not completely certain what forces eventually triggered John Flannery’s sudden move.

The Push-out Score™ determined by exechange suggests that push-out forces may have contributed to the change.

Read the full story in the exechange report 41.2018 ($).