Jeff Immelt: GE CEO or Obama advisor?July 6, 2011: 5:00 AM ET
What kind of protections has the White House imposed to ensure Immelt isn't using the council to shill for GE's expansive interests? The answer appears to be rather flimsy.
By Tory Newmyer, writer
FORTUNE -- Since naming General Electric CEO Jeff Immelt to head a CEO-heavy jobs council back in January, the White House has faced some tough criticism from both the left and the right.
The charge from labor-friendly liberals and free-market conservatives has been the same: the appointment represents pure crony capitalism. The leaders of the largest U.S. multinationals are hardly the best suited to give advice on domestic job creation, the line goes, when they spent the last decade eliminating 2.9 million jobs at home and adding 2.4 million overseas. And in particular, the chief of GE, No. 6 on the Fortune 500, shouldn't be charged with heading that effort, considering the company's sprawling lobbying agenda in Washington.
The company spent more than $39 million on lobbying efforts last year alone, making it the third-biggest spender in the city, according to the Center for Responsive Politics. And its advocacy reaches into just about every conceivable policy debate, from the narrow -- the Commercial Advertisement Loudness Mitigation Act, the Iran Sanctions Enabling Act -- to the sweeping, including the fights over health care and financial reform and a multibillion-dollar battle with Pratt & Whitney over a military jet engine.
Immelt himself has made clear that his part-time, volunteer work for the council won't distract him from his day job. "This is my passion, I'm committed," he told analysts on an earnings call in January. But he's been more equivocal about how GE's interests would inform his participation on the panel, officially known as the President's Council on Jobs and Competitiveness.
At a shareholder meeting in April, Immelt was confronted by an activist from a right-wing group behind an online campaign urging GE to fire him for cozying up to the Obama administration. David Ridenour, a vice president of the National Center for Public Policy Research, asked Immelt to explain whether he is representing shareholders or the broader American public on the council. The GE (GE) chief responded that he is representing his "best judgment, and frequently because of my point of reference, they'll be associated with GE, but not all the time." And he demurred on whether he'd oppose a council recommendation that hurts his shareholders. "I just don't want to give this kind of black and white philosophy," he said.
GE provides for Immelt's travel to and from jobs council activities, company spokesman Andrew Williams says, noting that Immelt uses the trips to conduct company business. After a meeting in Durham, North Carolina last month, for example, Immelt visited a GE plant that assembles jet engines. And while Treasury provides most of the staff for the council's work, GE has detailed one person to work on council business with Immelt.
No Chinese Wall
So what kind of protections has the White House imposed to ensure Immelt isn't using the council to shill for GE's expansive interests? The answer appears to be rather flimsy. An administration official says the ethics counsel for the Treasury Department, where the jobs council is officially housed, gave Immelt verbal guidance on the matter after he accepted the post.
There was some back-and-forthing between GE lawyers and Treasury over particulars, but the essence boils down to this: When Immelt is attending a meeting in his capacity as the jobs council chair, he isn't allowed to advocate for GE's interests, and vice versa. That is, if he wants to lobby the administration on company business, he has to set up a separate meeting. There is no enforcement mechanism. Immelt is on his honor to abide by the spirit of that agreement.
"Mr. Immelt is the chair of an advisory board not a federal employee," Williams says. "Mr. Immelt is acting independently in his role as chairman of the Council, advocating policies that he believes will be good for the country. Other GE CEOs have served the country in this way and Mr. Immelt is honored to answer the call to public service."
The council's output so far has been modest. Immelt and American Express (AXP) CEO Ken Chenault, a council member, penned a Wall Street Journal op-ed last month outlining five "fast action" steps they said could spur the creation of one million jobs within two years, from streamlining visas to goose tourism to easing permitting for construction and infrastructure projects. The council plans to deliver longer-term recommendations in September, and it's hard to imagine any of those will narrowly benefit GE. And it's important to note that the council is only making suggestions, not writing administration policy. But conservatives will no doubt be watching for anything with a whiff of corporate welfare, which they say GE has proved both aggressive in seeking and successful at securing.
Of course, there are quieter ways for Immelt to leverage his status as an economic whisperer to the President for GE's benefit. White House visitor logs reveal Immelt has been a consistent presence in Washington over the last two-and-a-half years, visiting the White House 26 times in that period -- close to once a month on average. The logs list descriptions for only eight of those meetings, and the White House declined a request to detail the purpose of the other 18, including a one-on-one meeting with Obama in the Oval Office on January 13.
As he's captained the jobs council, Immelt has also led a losing effort to preserve funding for an alternate engine GE is building for the Joint Strike Fighter. The project has been the subject of a years-long lobbying war between the company and Pratt & Whitney, a unit of United Technologies and the primary engine supplier for the fighter plane. United Technologies (UTX) lobbyists privately worried that Immelt would use his new perch "to put the bug in the President's ear on this," one said. But the White House remained firm in calling on Congress to zero out the funding, which it did back in February to save $450 million in 2011 alone. "If Immelt's tried, it hasn't worked," the lobbyist says.
GE isn't done trying. The company is self-funding continued development of the engine in the apparent hope they can change enough minds in the administration and on Capitol Hill to restore funding for it down the road. And on a very long menu of other issues, GE's lobbying machine rolls on. No one would suggest the White House wall itself off from private-sector input. Indeed, the creation of the jobs council itself was at least in part a response by the White House to stinging criticism from the corporate community that the administration hasn't done enough to seek their advice. They could be forgiven for thinking they can't win for trying. But taking advice directly from the wealthiest, most invested corporate players carries risks. Asked on the January earnings call how he intended to handle conflicts of interest on the jobs panel, Immelt said he'd respond "with great transparency." That's an imperfect solution for a complex concern.>