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Circuit City Rewards Execs As Stock Tanks
jamie tipped us to Dean Baker's Beat the Press blog, where Baker comments on a followup to Circuit City's firing of all its highest-paid salespeople last March (Slashdot discussion here). Circuit City's stock has cratered in the meanwhile, and their response has been to offer $1 million retention bonuses to executive VPs. Baker points out that each one of these bonuses represents 35 years' salary for one of the fired salespeople.
Lay off all the people that were actually making money for the company, and pay big bucks to keep the people who brought the company to the point where it had to lay people off.
Brilliant!
The higher the technology, the sharper that two-edged sword.
Retention bonuses are common in situations involving sick companies.
The idea behind them is that without the institutional knowledge that these people have, the company would die even quicker. Few people, including upper management want to stick around on a sinking ship, so in order to keep potentially valuable people from moving to a healthier company, they offer retention bonuses.
Obviously the hard part is sorting the wheat from chaff and only giving the bonuses to the useful people, at least the marginally useful. Seems to be that they just hand them out to everyone in upper management "just to be safe" which in the end may not be all that safe...
When information is power, privacy is freedom.
It's typical corporate "head up ass" syndrome.
CC is on it's way out/down, so the execs are going to raid the coffers before everything tanks.
Chas - The one, the only.
THANK GOD!!!
This is the last year for corporations to cash in bush-style on corporate raiding. Watch Wall Street with michael douglas and charlie sheen is still the best movie on this strategy. Hell I never made any money in corporations... might try it 9 years from now myself.
they should consider closing their stores, while outsourcing what little remains. Why those VPs would save all sorts of money.
I prefer the "u" in honour as it seems to be missing these days.
there is a growing trend where all Ex's are being paid more and more and the pay for the people who do the work is stagnating.
many of these Executives never do anything to justify the increases.
it's all industries though, not any one.
Investment funds have huge ownership of shares -- it is the fund managers who should be looking out for the interests of their investors and putting an end to this BS. IMHO, their lack of action makes them complicit. It's the guys at Fidelity and others that we should get mad at.
The real "Libtards" are the Libertarians!
Why the frak would you want to keep, and reward, the people that butt fucked the company into the ground in the first place?
1) You reward success.
2) You punish failure.
3) Profit.
Now you owe me $1M Euros in management consulting fees.
Here's a suggestion: Don't shop Circuit City even if it is convenient. Find a nice mom & pop electronics store. They're harder to find, but worth the effort.
In his book Good to Great, Jim Collins cites Circuit City as an example of a company that made the transition to greatness, bypassing its comparison company Silo. For each GTG company, Collins identified the company's core purpose, which in his theory must be identified as the one thing that company can do better than anyone in the world. Circuit City's concept was the creation of a large number of stores that provided a consistent experience for the customer. I can say from my own experience at Circuit City stores that they seem to have gotten that part right. I always get bad or no service. Does everyone? I don't know. I'm from India and nonwhite - my sister gets the same treatment with the added derision afforded to girls in that setting. Things like customer service can be hit or miss depending on where we travel. Now, maybe the same people who led the company to "greatness" aren't there anymore. It seems more likely to me that Collins' metric of return on money invested is the wrong way to measure greatness in a company.
When the axe came to the forest, the trees said, "Look out - the handle was once one of us."
Sounds more like a case of the problem dictating the solution to me.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
And for every one of you in America, there's about fifty otherwise perfectly functional people who haven't the foggiest idea how to set up a home theater system, and cannot be educated by anyone as to how. They simply need a sales person or a nerd to tell them what to buy, and a lot of them feel downright embarrassed about asking a teenager to do it for them.
From the POV of personal profit, there is no reason not to loot and destroy a company if there are no negative consequences.
"This post is an artistic work of fiction and falsehood. Only a fool would take anything posted here as fact."
"And people wonder why they cannot rely upon employee loyalty these days."
And what makes you think employees were loyal? How many of you jumped ship for more money? How many up and left when the company needed you the most? It's nice to live the lie that everyone was loyal and suddenly one morning companies were stabbing left and right. But reality is more complicated. Both sides were rewriting the bargin, and now are reaping the pain.
It's obvious to me that the corporate system rewards short-sighted execs. What can be done to fix this systemic problem?
many of these Executives never do anything to justify the increases.
Actually, they do quite a bit in the short term to "justify" the increases, but to the detriment of the rest of us.
A year ago, I read a speech by Sir Edmund Hillary explaining how horrified he was that climbers of Mount Everest violated the ethical code of climbers, ignoring a man in trouble on their climb upward and letting him die without help. These summit-seekers were intent on reaching their own self-gratifying goal. They spent their tens of thousands on the "trip of a lifetime" and weren't about to let someone else's misfortune spoil it. Instead of setting aside their summit-reaching goal to rescue someone in trouble, they choose to let him die while they kept on seeking great returns.
As a professional operational risk manager, I see the same behavior in countless execs. It's called leptokurtic risk (or kurtosis) - the condition of seeking artificial enhancement of returns at the center of a distribution while also taking on excessive outlier risk in the tails (called "fat tails"). These executives take on excessive risk for all of us as they seek their own personally-rewarding summits. The company I work for has struggled through significant catastrophic risk due to the neglect of systems maintenance by previous executives. Instead of spending money refreshing hardware, maintaining trained staffing and continuing license agreements with vendors, they threw it all overboard so they could puff up quarterly numbers and reward themselves for their "achievements." They left before the disasters began to occur, millions richer. They cashed out with hundreds of millions while shareholders and employees were left holding the bag. Their summit-seeking behavior let them seek greatness and riches while screwing the rest of us.
A simple example of this would be a airline pilot who is rewarded for getting to his destination faster. Once he realizes all the safety equipment (mid-air collision avoidance, oxygen systems for depressurization, fire retardants and other items taking up weight) can be discarded letting him fly faster, he tosses it all overboard and takes on excessive risk for all the passengers. He flies this way until he's realized the plane's certain to crash, and jumps out with a golden parachute, letting the gutted aircraft collide directly into the side of a mountain, taking the lives of everyone on board. Increasingly, this is a common practice for public company and private equity executives.
As Circuit City witnessed, there is a direct correlation between this behavior in executives and the failure of the company they harvested. The only thing I can recommend for those who find their behavior disgusting is to flee any and all companies that you observe rewarding executives for summit seeking. If they're taking on excessive risk (usually by ignoring it and dismantling all the safeguards so they have even greater funds to line their pockets with), abandon these companies. Let them collapse while the parasites are within, taking them down with them. Until capital markets become savvy to this parasite racket, we're all at risk. Watch for this summit-seeking behavior in the companies you work for and invest in.
I wonder if these geeks still think unions are "outmoded" and "unnecessary." In other words, the real world is slight at variance with your Ayn Rand masturbation fantasies in your parents' basements, right?
How, exactly, have CEOs convinced moronic jackasses that they're soooo hard done by when they get their multimillion dollar golden parachutes?
It's ridiculous that's it's so hard to fire people.
In the service industry, a competent employee is a gem, a thing of wonder and beauty to be treasured. Although they certainly are as cheap as the shitty ones, they are extraordinarily difficult to hire because they're so rare. Companies that are well-run identify those competent employees and hang on to them, work aggressively to retain them, because they make a HUGE difference in the bottom line. Failing companies routinely purge the competent employees, because they're often somewhat better paid or get more benefits -- because someone had the good goddam sense to try and retain them.
When I say competent, I'm not referring to some kind of genius wunderemployees here. I'm just talking about people who can be trained to do the job properly, who don't leave the customer/client with a bad taste in their mouth. They truly are rare.
No sane person would claim that the Democratic Party is a panacea, or anything better than a least-of-two-evils. But the Republican party has become an extraordinarily destructive force in the world. To America, and to people and societies around the globe. There are seventy nine thousand innocent people dead because of the Republican Party's lies and deceptions, and a whole generation of Islamic extremists who need nothing more than an accurate history of this decade to motivate them to violence.
And for what? Some magical non-existent deregulation that the Bush government hasn't provided? A reduction in government power? The PATRIOT act?! Massive increases in warrantless domestic spying? And you can actually sit there and bitch that the Democrats wont fix things?
As long as they wont make things worse as quickly as Bush is, that should be enough for you to at least admit that they are vastly preferable to the Republicans. I mean, how perfectly do the Republicans have to re-enact the rise of Fascism before people sit up and notice?