GE stock was slightly lower on Thursday, after falling more than 12 percent drop earlier this week. The 125-year-old industrial conglomerate began the week by announcing restructuring plans and a 50 percent dividend cut.
When asked whether the 81-year-old Welch, who served as chairman and CEO from 1981 to 2001, should return to help the company, Cramer said, "Who wouldn't want Jack Welch on the board? Because Jack's got more business sense than ever."
Welch increased the value of GE from $13 billion to "several hundred billion," according to company's website. GE's stock is down more than 50 percent over the last 10 years.
"I know that [Chairman and CEO John] Flannery and Jack talk, which is good," Cramer said on "Squawk Box."
"If you put him on, maybe he can find out what went wrong, fix a lot of the stuff that went wrong, so it can inform Flannery's decisions," Cramer said. "And he wouldn't be afraid — he's a tough guy, but he's a fair guy."
Cramer also said Flannery wouldn't be bothered by Welch coming in. He's "very comfortable in his own skin," Cramer said. Cramer also suggested that Flannery could make Welch a "special advisor."
Flannery told CNBC earlier this week that he was not surprised by the stock's recent downturn, but said he has a "strong command" of the company.
"I'm not trying to run the company for the reaction on Monday and Tuesday or Wednesday of this week," Flannery told CNBC on Tuesday. "We have a long-term plan. We have a lot of work to do."