GE's Talent Agency

By Daniel Kadlec

In the most eagerly awaited executive decision since the scrapping of New Coke, super-CEO Jack Welch last week named an heir to the GE throne. He is Jeffrey Immelt, 44, an aggressive yet charming manager who currently runs GE's Medical Systems unit. GE was mum on Immelt's numbers, which will be laid out in the company proxy in a few months. No doubt the Welch protege won a valuable prize. As Welch pointed out during a press conference last week, "He got a helluva raise, I'll tell you that."

Yeah. But two other GE executives were possibly even bigger winners than Immelt: Robert Nardelli and W. James McNerney, two Welch-trained knights-in-the-running who failed to win the crown. With Welch's shoes filled--if that's possible--these executives won't stay at GE much longer, and the pay packages that land them will probably dwarf what will initially be given to Immelt. A signing bonus in the tens of millions of dollars? Instant vesting in stock plans? Huge guaranteed annual bonuses? A big chunk of the company? Such goodies are widely available to top-flight managers in today's mobile CEO sweepstakes.

Not since the French Revolution have so many executive heads rolled--courtesy of falling profits and stock prices and impatient boards--leaving vacancies strewn all over the FORTUNE 500. Maytag, 3M, Lucent and Gillette are among the headless, and any one of them could rain instant millions on Nardelli or McNerney or similarly qualified executives.

Consider the deal that Gary Wendt got this year at the troubled insurer Conseco: $45 million to sign and a special bonus of as much as $50 million, depending on the stock price in two years. Oh, and a salary, bonus, stock grants and options worth more than $3 million annually. Wendt, it's worth noting, is a grad of the famous Welch U., having run GE Capital Services until two years ago.

Such deals aren't reserved for GE alums. When Carly Fiorina left Lucent to become Hewlett-Packard's CEO, she reportedly landed more than $50 million up front to compensate for the value of stock options she had to leave behind. (Smart move. Lucent's stock collapsed this year, contributing to CEO Rich McGinn's recent unemployment.) Alex Mandl got $20 million up front and 18% of the company when he left the No. 2 post at AT&T to run the telecom start-up Teligent. Others landing huge pay deals include Jamie Dimon at Bank One, Joseph Nacchio at Qwest and C. Michael Armstrong at AT&T.

Times have changed a bit. With dotcoms no longer minting executive fortunes through giant stock-option grants and soaring share prices, established companies don't have to fight as hard for talent. But try telling that to a wobbling FORTUNE 500 company already looking ahead to what could be a tough economic climate in the next year or so. You can hear the vault opening. "The whole world knows they're available, and everybody knows they are the pick of the litter," says Thomas Neff, chairman of the executive-search firm SpencerStuart.

Indeed, Welch, who will be with GE another year, seems to have already said his goodbyes. "You can be sure that they're being pursued very aggressively on the outside and are evaluating their options," he said of Nardelli and McNerney while announcing that Immelt will be his successor. It was as though he wanted to start a bidding war. Was that the consolation prize?

None of this is to belittle the job of running GE, which is the ninth largest company in the world, with 1999 revenues of $112 billion, as well as one of the most profitable (net income: $10.7 billion) and one of the most valuable (market cap: $500 billion). Certainly, Immelt views himself as the winner, and Nardelli and McNerney probably do too. None would comment for this story. Prestige matters, as do the long-term financial rewards of steering the powerful company. If he can keep momentum, Immelt may be in charge for 20 years and amass hundreds of millions of dollars in pay and stock. Welch himself pocketed $61.8 million in salary, bonuses and exercised stock options in 1999 and held additional options with an estimated value of $436 million.

Nardelli, CEO of GE's Power Systems business in Schenectady, N.Y., and McNerney, who runs GE Aircraft Engines in Evendale, Ohio, will have to create that kind of security elsewhere. Odds are they'll shun start-ups. "These are people well trained to run large, complex, global companies," says SpencerStuart's Neff. "If they were to bolt to a New Economy company, it would be a waste of a national resource."

Recruiters say wealth won't be the top priority for either. "The money will be there," says Gerry Roche, senior chairman of search firm Heidrick & Struggles. "If that were their main concern, they'd be working on Wall Street. Both will look for the opportunity to run and manage a major blue-chip company." Isn't that the phone ringing now?

--With reporting by Mike Eskenazi/New York

With reporting by Mike Eskenazi/New York