Every major governance framework in the world identifies the board's primary duty as protecting shareholders from management that isn't performing. GE's board — described by one governance expert as "the most complacent in the history of Corporate America" — held that duty for sixteen years while the company lost more shareholder value than the combined market capitalisation of Ford, Delta, and United Airlines. The board didn't fail to notice. It failed to act.
What Actually Happened
General Electric under Jack Welch became a phenomenon. From 1981 to 2001, Welch grew GE's market cap from under $15 billion to $594 billion — one of the most remarkable runs of value creation in corporate history. What he also built, less visibly, was a machine increasingly dependent on financial engineering rather than industrial excellence, a GE Capital division that had ballooned to account for 55% of the company's profits by 2007, and a culture in which performance targets were everything and bad news was unwelcome.
Jeff Immelt inherited all of this when he took over in September 2001 — the week of the 9/11 attacks. What followed was sixteen years in which almost every major strategic decision was poorly timed, poorly executed, or both. Multiple contemporaries described Immelt as someone who did not like hearing bad news, and did not like delivering it either. One rival CEO reportedly described his M&A style as "fad surfing" — arriving at each trend late, paying top dollar, and moving on when the next one emerged.
2001: Immelt takes over. GE Capital already accounts for over 40% of earnings. The seeds of the 2008 crisis — overleveraged, under-capitalised, exposed to commercial real estate — are already planted.
2008: GE Capital nearly destroys the company. GE turns to Warren Buffett for a $3 billion emergency investment at punitive 10% terms, receives $139 billion in government loan guarantees, and cuts its dividend for the first time since the Great Depression. Stock falls from $42 to under $7. The board does not act on Immelt's tenure.
2014: Immelt announces the acquisition of Alstom's power and grid business for $10.6 billion — GE's largest-ever industrial acquisition. The board reviews the deal eight times and approves it. Alstom's own 2014 annual report notes "excess capacity in developed markets" — a warning buried in a footnote, never surfaced to the board as a strategic risk.
November 2015: The Alstom deal closes. One month later, 195 nations sign the Paris Climate Agreement, accelerating the energy transition away from fossil fuels. GE has just doubled down on gas turbines. Solar costs have fallen 69% since 2010. The market GE paid $10.6 billion to dominate is contracting.
2017: GE's stock collapses 45% in the year. Immelt is forced out after sixteen years. His successor John Flannery discovers the true scale of the damage: the power division's cash flow was far weaker than reported, insurance liabilities were $15 billion larger than disclosed, and the Alstom acquisition had destroyed rather than created value. The board cuts the dividend by half within days of Immelt's departure — having maintained it for years by borrowing money to pay shareholders when operations couldn't fund it.
October 2018: GE reports a $22.9 billion quarterly loss, largely driven by a $22 billion goodwill writedown on the Alstom acquisition — more than double what GE paid for the business. New CEO Larry Culp cuts the dividend to one cent a share — a 92% reduction. GE is removed from the Dow Jones Industrial Average for the first time in over a century.
2020: GE agrees to pay a $200 million SEC penalty for misleading shareholders about the deterioration of its insurance and power businesses. The board declines to claw back Immelt's compensation — approximately $168 million since 2006 — stating it found "no sound legal basis" to do so.
The backup jet episode captures the governance failure with unusual precision. For an undetermined period during his tenure, Immelt travelled with not one but two corporate jets — his own, and a backup following behind. When this became public in 2017, Immelt wrote to GE's lead director saying the practice had been "brought to my attention and stopped three years ago" — meaning he claimed unawareness of his own travel arrangements. A Deutsche Bank analyst called it "absolutely reckless destruction of shareholder value." The board had no knowledge of it either.
"Keeping a failing CEO for sixteen years is predominantly a board failure. At GE, the falling stock price itself should have been the clearest warning signal that management had lost its way. The board chose not to see it."
The Five NAVETRA™ Domains That Were Failing
NAVETRA™ measures the ten organisational and human domains that determine whether governance functions in practice. GE's collapse was not a failure of any single decision — the Alstom deal, the GE Capital overextension, the digital transformation push that consumed billions and produced little. It was a failure of the structural conditions that would have prevented those decisions from ever going unchallenged. Five NAVETRA™ domains were failing at GE for a decade before the reckoning arrived.
Are the CEO and board operating from the same shared picture of reality — including the risks embedded in strategic decisions — or is information being filtered before it reaches the people responsible for oversight?
At GE: the board reviewed the Alstom acquisition eight times and approved it — without conducting substantive due diligence on the footnote in Alstom's own annual report warning of excess capacity in the precise market GE was buying into. When Flannery took over, he discovered that power division cash flows had been reported in ways that understated the deterioration, and that insurance liabilities were $15 billion larger than disclosed. The board and CEO were not operating from the same picture of reality — because the board had no independent mechanism to verify what the CEO was presenting. Leadership Alignment at GE meant sixteen years of declining stock price, failed acquisitions, and one near-death experience in 2008 were processed as manageable setbacks rather than a systematic pattern requiring accountability.
Does the organisation have the structural capacity to process external signals — about market shifts, technological transitions, and competitive dynamics — and translate them into governance decisions before they become strategic catastrophes?
At GE: the energy transition was not a surprise. Solar costs had been falling for years. The Paris Agreement trajectory was visible long before November 2015. GE's own wind turbine division was the third-largest in the world and was generating significant profits from the very technology the Alstom acquisition was betting against. The organisation had the market intelligence — inside the building. What it lacked was the structural architecture to ensure that intelligence reached board-level decision-making before $10.6 billion was committed to the opposite bet. External Risk Readiness failure does not mean signals were absent. At GE, the signals were present. They had no path to the decision that mattered.
Is the organisation structurally aligned to deliver candid, accurate information upward — or has a culture formed in which the CEO's strategic preferences are reflected back rather than challenged?
At GE: multiple executives who worked with Immelt described him as someone who did not like hearing bad news and who surrounded himself with people who confirmed his own confidence. Strong leaders who challenged him — Steve Bolze, Dave Calhoun, Denis Nayden, John Krenicki, among others — left the company. When Flannery took over and demanded "more candor, more debate, more pushback," he was not describing a new aspiration. He was diagnosing sixteen years of its absence. An organisation that cannot produce candid upward communication about strategic risk is an organisation whose governance architecture is performing in reverse — protecting the strategy from scrutiny rather than scrutinising it.
Is critical knowledge — about market conditions, operational performance, and financial risk — travelling reliably from the people who hold it to the people who need it to make governance decisions?
At GE: the Alstom acquisition was approved on the basis of assumptions about gas turbine demand and renewable cost trajectories that were both internally contested and externally contradicted. The warning in Alstom's own annual report never reached the board as a governance risk. The deterioration of power division cash flows was not disclosed in ways enabling earlier action. The $15 billion insurance liability gap accumulated for years. Knowledge Transfer Gaps at GE were not about information not existing — the information existed in Alstom's filings, in GE's wind division data, in the insurance reserves. The gap was in the governance architecture that determined who shared what with whom, and under what obligation to act.
Does the organisation have the structural independence, escalation paths, and board-level visibility to surface and act on strategic risk before it becomes a financial or reputational catastrophe?
At GE: the dividend was maintained for years by borrowing money to pay shareholders when operations could not fund it — a practice the incoming CFO later confirmed publicly. Insurance liabilities accumulated for years without adequate board-level disclosure. GE Capital grew to 55% of company profits under Immelt — a concentration of financial risk the board never structurally challenged, despite the near-death experience of 2008. GE's $200 million SEC settlement, finding that GE misled shareholders about the deterioration of its insurance and power businesses, is the regulatory record of a risk function with no path to the board that didn't run through the executive team it was supposed to monitor. The board investigated and declined to claw back compensation. That sequence defines where accountability was — and was not — positioned.
What This Failure Cost — In Scale and in Kind
Separating what GE could not have controlled from what its governance produced requires care. Immelt inherited real problems from Welch — the GE Capital overextension, the 2008 crisis, the conglomerate premium that was evaporating across the market. Not every dollar of the decline was his board's failure.
But the specific, documentable governance failures are worth isolating precisely:
The $22 billion writedown is only the sharpest line item. The full account of the governance failure includes $100 billion in ill-timed share buybacks that drained cash that should have serviced debt; a dividend maintained through borrowed money for years; $15 billion in insurance liabilities undisclosed until Flannery's review; a $200 million SEC penalty for misleading shareholders; and the cost of dismantling an empire under duress — selling businesses at distressed prices in a market aware of GE's need to sell.
GE went from the most valuable company on earth to a fraction of its former self not because markets shifted — markets always shift. It shrank because the governance architecture that should have made leadership accountable to reality did not function. For sixteen years.
$594 billion to $75 billion. Sixteen years. A board that reviewed the worst acquisition in GE's history eight times and approved it. A CEO who travelled with a backup jet he claimed not to know about. Insurance liabilities $15 billion larger than disclosed. A $200 million SEC penalty for misleading shareholders. No compensation clawback. GE is not a story about a bad CEO. It is a story about a board that had no independent mechanism for assessing whether Leadership Alignment, External Risk Readiness, Organisational Alignment, Knowledge Transfer, and Internal Risk Management were functioning — and therefore had no way to see what was failing until the accounting forced it into view.
The board found "no sound legal basis" to claw back $168 million in compensation. That is the governance legacy of the most spectacular destruction of industrial value in modern American corporate history.
The Question for Every Board
GE's board was not staffed with incompetent people. It was, as one governance expert noted, "the most prestigious" in corporate America — credentialed, experienced, well-compensated directors from the highest levels of business and public life. What it lacked was not individual capability. It lacked the structural architecture that would have made capability actionable.
A board with no independent mechanism for assessing the alignment between what the CEO presents and what is actually happening inside the organisation will always be the last to know. It will approve acquisitions on the basis of management's assumptions rather than independently stress-tested reality. It will maintain dividends funded by borrowing because the CEO does not want to cut them. It will keep a failing CEO for sixteen years because the culture he has built makes challenge feel disloyal rather than essential.
NAVETRA™ is the structural mechanism that makes board capability actionable — the independent measurement of the five domains that determine whether a board is receiving a true picture of the organisation it is supposed to govern. At GE, those domains failed for sixteen years without being measured. The result was the most spectacular destruction of industrial value in modern American corporate history.
Execution risk that isn't measured doesn't disappear. It accumulates — until the accounting forces you to see it.