Years ago. I had the privilege of meeting the legendary Archbishop Desmond Tutu, and I asked him how South Africa was able to get beyond apartheid to have a peaceful new society.
He talked to me about the Truth and Reconciliation Commission that he chaired, which helped explain what happened with apartheid and how the country was able to put the past behind them and start anew.
It was a brilliant discourse and we talked about how there are often situations that have to be studied and explained and examined, sometimes in the harshest way, to really get to the bottom of what went wrong before you can figure out what can go right.
I don't mean to minimize the real Truth and Reconciliation Commission, but I think Archbishop Tutu's lessons can and should be applied to situations where there's a financial fiasco, and we have a humdinger of one right now at General Electric (GE) . (General Electric is part of TheStreet's Action Alerts PLUS portfolio.)
This morning my colleagues David Faber and Carl Quintanilla and I interviewed the new CEO, John Flannery, about the changes that are going on at General Electric. While I am very interested in his plans, I wanted some sort of truth and reconciliation before recommending that anyone buy the stock even down here 12 points below where it was when former CEO Jeff Immelt came on Mad Money and assured us that everything's fine and that the company was in excellent shape. Immelt talked about how he could hit $1.60 a share in earnings and that he was so proud of the $30 billion the company returned to shareholders last year in buybacks and dividends. I held up research about how some very good analysts had put sells on the stock and were worried about the cash situation. He said the analysts were "just wrong" and that "we're going to have a really strong year, a really good year."
Mind you, that was just nine months ago, and this is a very large conglomerate that should be able to forecast what could happen with the business. Turns out the negative analysts were dead right. The company's not going to earn $1.60 but more like $1.05. There are very serious cash worries or the company wouldn't have taken the very drastic action of cutting the dividend in half. It wouldn't have to offload divisions Immelt praised during my interview if the company were having "a really strong year."
Believe me when I say that's what I wanted, and we sure didn't get it. When I asked Flannery about it, he dismissed the need to have any sort of reconciliation with what happened in the past as being unimportant and that what mattered is what's going to happen going forward. I understand that view. Flannery doesn't want to waste time. That's smart. But as someone who believed the company was doing much better than it was, I want to know: Was the company misleading us or were they misleading themselves?
Both are awful and we are right to demand to know which it is, especially because the board of directors checked off on everything, and while the board is being shaken up, Flannery said its lead director, Vanguard chairman emeritus Jack Brennan, is going to stay on. I am so tempted to put the whole board of directors on the Wall of Shame for agreeing to buy back billions in stock that is so needed now and for not holding management more culpable or accountable for what occurred.
As it is now, we will never know and that means we might never understand how things went so wrong, which informs our view of how they could possibly go right without unearthing all the accounting issues and misinformation or lack of information that was presented to us. It's almost as if the company refuses to confront what went wrong, refuses to find out the truth so it can have reconciliation with the ultimate owners of the business, the shareholders who have lost so much here. The board owes us that. If they don't give it to us, how can we trust them to do the right thing next time?
I wish Flannery well and I sure as heck hope he can do the heavy lifting in 2018 to right the ship. But by never looking back, never examining how the company could miss so badly -- and it missed far worse than its end markets played out -- I think the company will remain broken. I think we are owed an explanation and it sure sounds like we are never going to get it. That's just a shame and we can only hope that at least internally they have fixed the controls and the data that could have produced such results that now smack more of fantasy than fact.