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Skeletons in the Corporate Closet: General Electric


The conglomerate held out in post-revolution Iran until public criticism grew too severe.

Although the conglomerate might sell its products in more than 100 countries around the world, there is one nation in which General Electric (GE) decided the costs clearly outweighed the benefits of continuing to do business: Iran.

For many years, GE had done business in post-revolution Iran through foreign subsidiaries, selling energy-related products and health-care equipment, says GE spokesman Gary Sheffer.

"At the time, some of the business was what we inherited when we purchased subsidiaries," Sheffer tells Minyanville. "Also, we worked with the US government, which allowed us to sell humanitarian equipment to hospitals and clinics there."

Sheffer emphasizes that the business was always a very tiny one for the multinational powerhouse: It amounted to less than 1% of the company's revenue, he says.

Still, regardless of how small this bump proved to the company's bottom line, criticism of GE's involvement in the country ratcheted up in the middle of the last decade.

Policymakers and shareholders, upset with the company's involvement in a country branded by the US government as a state sponsor of terrorism, demanded change from GE's front offices.

But, initially, despite public rebukes, GE fought to maintain a footprint in Tehran.

As Fortune magazine points out, a 2003 shareholder proposal from the pension funds of New York City police officers and firefighters asked GE to review its operations in Iran with respect to reputation and financial risks.

The proposal was defeated at GE's urging, according to Fortune, and little wonder: Iran was a big country where many of GE's European rivals raked in significant amounts of money.

CEO Jeff Immelt said at the time, "This is an issue that is under constant review by the company and the board."

Other executives were reportedly quick to chime in, defending their company by noting that "constructive engagement" with Iran was the best method to encourage real reform.

Pressure continued to mount, however, from many different corners: In 2004, Senator Frank Lautenberg opened up on the conglomerate, accusing GE of collecting "blood money" by doing business in Iran.

"When American companies do business with Iran they are helping the Iranians create revenue that is funneled to terrorists," the Senator from New Jersey said.

New York City comptroller William Thompson, as manager of employee pension funds, also weighed in, pressuring GE and other companies, according to the Associated Press.

In late 2004, confronted with this increasing criticism from both lawmakers and the public, GE and its board reversed course and called it quits, voting to stop doing business in Iran.

"Our actions regarding Iran reflect our shareholders' concerns, our board of directors' judgment, and GE's dedication to being a responsible corporate citizen," the company said in a statement at the time.

GE added, "In light of business and reputation risks that may arise from doing business with countries designated as State Sponsors of Terrorism by the US Department of State (Cuba, Iran, North Korea, Sudan and Syria), GE will not accept business in any of these countries, except activity that is authorized by the US government for humanitarian or public policy purposes."

The decision didn't end the drama, however.

While GE might have announced that it would accept no new business in Iran and would close out existing contracts, the company's relationship with Iran became fodder for what is described as perhaps the fiercest media feud of this past decade: The head-to-head slugfest between Keith Olbermann of MSNBC and Bill O'Reilly of the Fox News Channel.

As Howard Kurtz of the Washington Post detailed in a May 2008 column, O'Reilly mounted an "extraordinary televised assault" on Immelt, calling the CEO a "pinhead" and a "despicable human being" who bore responsibility for the deaths of American soldiers in Iraq.

O'Reilly added: "If my child were killed in Iraq, I would blame the likes of Jeffrey Immelt."

(Olbermann shot back, ridiculing "Billy-O", ripping into what he called "Fox Noise" and smearing O'Reilly with what he called his "Worst Person in the World" award).

Kurtz wrote that, on the surface, O'Reilly's charges revolved around GE's history of doing business with Iran. But, he said, the attacks really grew out of an increasingly bitter and unrelated feud between O'Reilly and the company's subsidiary, NBC.

The back-and-forth might have made for some good TV but, eventually, the executives of both companies decided that the nationally publicized swipes had gone too far.

The New York Times reported in July of last year that the parent companies employing the two 6-foot-4 prime timers ultimately decided to quietly broker a cease-fire.

Sheffer refused to comment on O'Reilly's remarks specifically, telling us only that, "We were confident that what we were doing was legal and in the best interests of our shareholders. I will leave the commentary to others. Our actions speak for themselves."

Of course, today, Iran continues to make headlines for all the wrong reasons here in the US: Reports are now circulating that the Iranians are continuing to acquire key nuclear components from unsuspecting Western companies via intermediaries.

Meanwhile, US Defense Secretary Robert Gates recently said that Iran is providing at least some arms and money to the Taliban fighters trying to kill American soldiers in Afghanistan.

For its part, Sheffer tells us GE no longer does business in Iran. He says any efforts on the part of the conglomerate in that area of the world now remain purely humanitarian.

The company sells health-care equipment to Iran but donates the profits to charity, which is permitted by the US government, he says.

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