(FORTUNE Magazine) – Jack Welch was tearing himself apart.

We had a breakfast scheduled in mid-September, and by the appointed day he had been the focus of some ugly headlines for nearly a week. In a now famous divorce filing, his wife had listed in minute detail the perks he received as General Electric's retired CEO. He got a lot--though not, it turns out, quite as much as the filing suggests--and in today's news climate it made him look like another greedy, ethically slimy corporate shakedown artist. It made the GE board, which gave him all that stuff, look complicit in this yucky behavior. It made GE employees resent their old boss for dragging the company into a series of news stories that had begun with Enron and WorldCom. He hated it all, and he desperately wanted to do something about it--and he could not for the life of him figure out what.

His instinct was to announce that henceforth he would pay for all the perks GE was giving him--primarily the use of the corporate apartment in Manhattan and of company aircraft, plus minuscule things like newspapers and satellite TV. GE says those services cost about $2.8 million a year, and for Jack Welch that is not a whole lot of money. Paying it would be no problem.

But as of breakfast time that day, he was far from certain he should go that route. Many people, including celebrated communications executives, lawyers, and GE board members, were advising him fiercely against it. To start paying for the perks, they said, would be to admit that taking them had been wrong in the first place. He'd look as though he'd been caught doing something bad.

But, he had argued, what if I explained that I was doing it because times had changed, and it was hurting GE? No, said most of his advisors--once you take the action, no one listens to anything you say afterward.

Most of his advisors counseled him to shut up and tough it out. The story will fade away in a week, they said. More important, they told him, you haven't done anything wrong. Those perks are part of a fully disclosed, entirely proper employment agreement made six years ago. Let the storm pass, and history will judge you well.

But that course had problems. Welch loves traveling around, speaking, meeting people, being recognized. Do nothing, he figured, and everyone who saw him would always wonder, if only fleetingly, How'd you get here, Jack? Who paid for the plane ride? Was it really legitimate?

Yet paying for it all posed problems too, and not just the danger of looking as if he'd been caught. In those speeches he loves to give, Welch exhorts his audiences to stand firm for what they think is right and not be swayed by the media. If some newspaper stories lambaste his perks, and a week later he says he'll pay for them, would anyone ever take his message seriously again?

Those lines of argument were fighting inside Welch's head that morning. He was clear that this was all about his legacy. And it was driving him nuts. You've seen those old movies in which an actor bites his knuckle to express anxiety and tension? Welch was doing it for real.

We left breakfast, and he still hadn't decided what to do. By that afternoon he apparently had. Late in the day the desk of his New York office was piling up with drafts of the article he was writing for the Wall Street Journal's editorial page, announcing his decision: He'd start paying for his perks and hope at least some people would listen to his reasons. (The Journal's editors, understandably eager to have a piece by Welch, agreed to run it without knowing what he'd announce.) Warren Buffett had pledged his public support. As Fortune went to press, Welch seemed settled on his decision, but when I asked him about his plans on Wall Street Week, he wouldn't commit.

Welch didn't want to dispute the news reports of those perks line by line, but some advisors convinced him that the details were killing him, and that if they weren't true, he should say so. Many weren't true. He doesn't eat free at the excellent restaurant in his apartment building; he showed me his bills and the checks he wrote to pay them. Those private boxes at Yankee Stadium, Fenway Park, Madison Square Garden, and other venues? They're GE's and NBC's boxes, used heavily by the companies' employees and customers but almost never by Welch.

So Welch sought the best advice he could find and went against most of it. If that sounds familiar, it should: It's a pattern that has served him well throughout his career.

GEOFFREY COLVIN, editorial director of FORTUNE, can be reached at gcolvin@fortunemail.com. Watch him on Wall $treet Week With FORTUNE, Friday evenings on PBS.