At General Electric Co. managers are groomed for meticulous corporate planning. But in his first months as chief executive of the world’s most valuable company, Jeffrey R. Immelt has had more than his share of surprises.

As if it weren’t enough to be following GE’s legendary chief executive Jack Welch, Immelt knew the country was slipping into recession, the first in a decade, when he took over the executive suite on September 7.

Just four days later came the terrorist attack which wreaked havoc on many of GE’s customers, particularly in the airline industry. Immelt was forced to revise earnings projections down, a humbling experience at GE where investors pay a premium for predictable results.

Then came Enron. And even GE was lumped into the mounting cynicism about corporate America despite its stature as Fortune’s most-admired company. “So you see it just goes to show you can never plan anything in life,” Immelt joked at the start of a wide-ranging discussion about GE, the current business climate and corporate leadership during an informal session last month in Philadelphia with Wharton MBA students.

Immelt, 46, joined GE in 1982 and began his climb in marketing and sales jobs. He ran the company’s U.S. plastics business and was CEO of GE Medical Systems, the company’s $7 billion medical technology division, when he was tapped for the top job.

Now he oversees a company with $125 billion in sales, a stock market valuation approaching $400 billion and 300,000 workers selling everything from adhesives to dishwashers to industrial turbines to insurance.

Immelt characterized the business world, post-Enron, as a “carnival,” noting that while the focus is on accounting practices, the real trouble at Enron and other companies is a combination of flawed business models and a corrupt corporate culture. “Accounting is about 10% of the problem,” he said. “The business models and the evil culture are the bulk of the problem.”

Immelt said he was annoyed when GE’s financial reporting was questioned in the Fortune article accompanying the listings that proclaimed it the most admired company in the United States and the world. The article focuses largely on whether GE delivers its steady, 10% to 15% earnings growth by “managing” earnings so that losses in one or several parts of the company are balanced out against gains elsewhere.

While these are not exactly Enron-sized allegations, they are upsetting nonetheless to Immelt who said the company practices “conservative” accounting and prides itself on financial discipline enforced by a 500-member internal audit staff. GE, he added, can withstand any scrutiny and welcomes tougher accounting standards. “We’re all going to have to find ways to live in a world that has more transparency and disclosure.”

His comments come at a time when investors fear that corporate America as a whole may be overstating profits through the use of questionable and confusing accounting methods. No doubt in response to that concern, GE’s 93-page annual report this year contained 30% more information than last year. Included were more details on “special purpose entities” which had assets of $56.41 billion, up from $41.20 billion in the prior year.

Immelt acknowledged that there is always pressure between delivering short-term results and preserving long-term growth. But that’s no reason to fudge: “Companies learn ways to do both. Every day I make trade-offs.”

GE’s ability to deliver steady earnings growth even as a mature, 124-year-old company lies in a mix of characteristics, said Immelt. First the company carefully tends its portfolio, making sure it always has a good blend of businesses that are industry leaders. That allows GE to ride out cycles and use profits from healthy industries to reinvest, or make opportunistic acquisitions, in troubled sectors. “We pick the right businesses. We spend a lot of time thinking about what businesses we want to be in. We have a very tight screen.”

Second, GE plays to its size with cross-company initiatives that allow the company’s far-flung divisions to prosper from good ideas no matter where they come from – even outside GE, Immelt said, adding that he cringes when GE is called a “conglomerate,” with the implication that it is merely a holding company. “We spend a lot of time and money and effort on the things we’re doing together.”

Third, the company’s tough internal financial standards allow it to maintain a strong balance sheet with money to spare when opportunities arise, Immelt contended. “You don’t fake cash … We look at a recession as a great time to play offense.”

Finally, he said, GE’s elaborate management systems allow it to maintain a consistent and disciplined culture across its vast corporate empire. “People spend an enormous amount of time coaching, picking and developing people.” As a result, even with the external shocks of the last months, GE has the “internal capability and the preparation to be great no matter what’s going on.”

In the future, Immelt hopes to make GE a leaner, faster, more customer-focused company. “I’ve always believed GE has way too big a backroom.” He plans to shift resources from backroom functions, such as legal, administration and call centers, to the front lines of the businesses where the company comes in direct contact with its customers. He also wants to make changes in the company’s sales force which he said is too internally focused.

Immelt described the Internet as a tool that will help reduce GE’s backroom operations and make it run faster, delivering real-time data to feed GE’s internal hunger for measurement. Immelt said quarterly meetings are becoming obsolete with decisions now made more often on a weekly or monthly basis. He gives the company a ‘B’ on its understanding of technology, one of his weak spots that he knew he had to overcome to reach his current job. The other was learning to be more process-oriented. “Kicking and screaming I had to make those changes,” he said.

The key to consistent management across GE is strict accountability said Immelt, who added he twice spent time in “Jack’s doghouse.” Immelt has direct control over the top 500 executives and reviews closely the performance of 3,000 to 4,000 people who work for them. GE is not afraid to fire or single out managers for greatness, he said. “Everything has consequences in our company.”

Beyond GE, Immelt volunteered his own list of most-admired: Microsoft CEO Steve Ballmer and several companies including AIG, CitiGroup, Medtronics, Johnson & Johnson and Procter & Gamble. Internationally, he singled out Sony, Canon and Nokia.

To keep the stock where he wants it the company needs to grow by $10 billion to $15 billion a year, said Immelt. The key to that growth will be continued investment in technology and a search for new businesses in which there is a greater opportunity to provide services, not just sell equipment one piece at a time.

In addition, GE needs to grow globally, with China and Europe the main targets for growth. According to Immelt, the importance of China cannot be overstated. “In your lifetime and in my lifetime China is going to be the most significant economic force. It’s the game.” China, he added, is already putting economic pressure on Japan and the Asian tiger nations. In the future, Western companies must look to China either as a key market or the launching pad for future competitors.

Despite problems with the country’s legal system, Immelt indicated that China’s leaders have shown they are eager to open their economy to the world. That has been particularly evident in China’s agreement to abide by World Trade Organization rules, he noted.

Immelt also predicted that the recent economic unification of Europe will lead to political change that will create a more flexible European economy and generate new growth. He acknowledged that GE mishandled its $42 billion takeover attempt of Honeywell, which was blocked by European regulators. “It was the wrong deal at the wrong time at the wrong place.”

GE’s European headquarters during merger talks were in London, which many decision-makers on the continent don’t view as Europe. GE has since relocated to Brussels and has a new European chief executive. “We were viewed as the ugly Americans,” said Immelt, even though the company had $26 billion in sales in Europe and 70,000 employees. “We didn’t tell our story very well.”

GE does not search for manufacturing sites merely on the basis of cheap labor, Immelt added. He pointed to the example of how U.S. companies relocated from the north to parts of the south where they found themselves in extremely litigious environments. “It’s not about the availability of labor. It’s about quality.”

As always, GE will also grow through acquisitions, which will be accounted for properly, he said with a smile.

Immelt was not too optimistic about a quick pickup in growth in the U.S. economy, which he said is still suffering from a huge technology overhang. He does not see growth returning to a rate of 3% or 4% for several years. Stronger growth will not resume until capital spending does. “The consumer cannot swing it alone,” Immelt said.

His years coming up through the GE management system have prepared him for the job, Immelt said, adding, however, that he does not yet have anywhere near the depth and breadth of relationships – with customers, employees, and investors – that Welch was able to develop in his time on the job.

Since Sept. 11 and the revelations about Enron, he finds attitudes changing. “People want to be part of a clean company.”

Immelt acknowledged that GE stopped recruiting at business schools in the late 1990s because students were more interested in high-tech and Wall Street than in an industrial firm tracing its roots to Thomas Edison’s light bulb. “We looked old and stodgy,” he said. “But the world changed.”

At GE managers are still expected to work hard, deliver numbers, and motivate global teams, he noted. Now there is another requirement: “We want to maintain the edge of the company, but do it with more heart.”