The change to the retiree medical plan significantly reduced GE’s costs for that benefit, to $35 million last year from $1.26 billion in 2011.
The move was “consistent with trends among larger companies and allowed GE to offer greater choice in coverage while striking a balance among our obligations to employees, retirees and shareowners,” a spokeswoman said by email.
Fewer businesses give health benefits to retirees. In 1988, 66 percent of large companies did, according to the Kaiser Family Foundation, and by last year it was down to 25 percent.
That’s part of a long-running shift in the U.S. from “stakeholder capitalism to shareholder capitalism where maximizing shareholder value has become the dominant ethos,” said Rick Wartzman, author of “The End of Loyalty: The Rise and Fall of Good Jobs in America.”
At GE, the pullback started in 2011, when then-Chief Executive Officer Jeff Immelt announced that the pension would be closed to new employees. Cuts to the supplemental health benefits followed. Meanwhile, Immelt began ramping up GE’s buybacks, spending $23 billion in 2015 and $22 billion in 2016, and ignoring pension obligations.
‘Horrible Leadership’
GE “is a monumental example of bad governance and horrible leadership,” Ken Langone, a former director of the company said on CNBC Wednesday. “Do you realize the number of people that have retired from GE that have seen most of their net worth wiped out?”
For 72-year-old Garland Steele, who worked 28 years at GE, the impact of the reduced benefit is one thing. He and his wife, facing at least $7,000 more in medical costs every year, can manage by cutting back on things like traveling and eating out.
As for what he described as GE’s betrayal? That’s more difficult. His generation, Steele said, was “very loyal” to the 126-year-old company.
“We had a contract,” he said. “It used to be if you had a contract, people stuck to it, and these people didn’t.”