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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.
Just think how much they could save if they fired all the 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.
And people wonder why they cannot rely upon employee loyalty these days. Personally, I'm investing all of my money in pitchforks and fire insurance.
The ______ Agenda
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.
... firing of all its highest-paid salespeopleWant to improve your Karma? Instead of "Post Anonymously", try the "Post Humously" option.
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.
"Baker points out that each one of these bonuses represents 35 years' salary for one of the fired salespeople."
Right. There's a small little detail, though: The execs make the decisions that make the difference between making and losing millions of dollars. The sales people, even if they were paid 1 million dollars, would not generate anywhere near that much income to save the company. If Circuit City's business model is broken, then it makes sense they try to keep the decision makers from leaving the sinking ship. If anything, to devise and carry out a new strategy. What they're doing actually makes some sense, even though that little blippet was intended to make them sound idiotic.
But, that's just me responding to sensationalist bullshit. I personally think they should use those retention bonuses to hire new execs, preferably those with a proven track record in this sort of business. Hypocricial? Nah. Still non-sensical? Yeah, maybe.
"I like to lick butts!" by MobileTatsu-NJG (#32700246) (Score:5, Informative)
That's the last time I buy something from Circuit City. If that's where my money is going, then (1) I KNEW there was more margin in that sale and (2) I'll buy from the same sales people when they move to a different place.
Most of the stuff on
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.
Years ago, I used to work for CompUSA corporate in Atlanta, GA. When they got bought out by the holding company that recently liquidated the company (took years longer than I thought it would), CompUSA fired all their corporate, education, and government sales staff. Oddly enough, I kept my job along with a few others in the southeast, albeit with more responsibilities and better pay. The vast majority of folks working for them weren't so lucky. They got their pink slips on a Monday morning, if I recall correctly, with no advance warning.
Essentially, it's like you put it: let's lay off everybody in the company who had anything to do with generating sales out of three huge markets, and who cares about the personal relationships they had built with customers (especially with respect to public sector folks)? Oh, I forgot to mention... lots of people were offered a "chance" to keep their job if they felt like relocating to Dallas, TX where CompUSA was building a multimillion dollar call center to centralize all their corp/gov/edu sales operations. What a bargain, right?
On the many occasions I visited that new call center on business, I got the distinct impression that things were, well, about as fucked up as a football bat. They had it all; an entire hotel rented out for six months housing only CompUSA employees, a new SAP rollout that kept mysteriously screwing up orders large and small (while sucking up untold amounts of contractor labor and prompting Microsoft execs to hold fun-filled meetings about revoking CompUSA's large account reseller status), midlevel managers running around trying to figure out whether their charges were coming or going.
Let's be fair in Circuit City's case, though... the old expressions goes: Never attribute to malice that which can be adequately explained by stupidity.
512 MB RAM, 20 GB disk, 200 GB transfer, five datacenters. $19.95/month.
I think a bankrupt company like CompUSA should be able to recover funds from the executives whose decisions tanked the company.
Instead of bonuses, they would pay for the damages they caused.
I am the unwilling control for my Origin.
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."
It's too bad you are modded up for this. I just saw Wall Street for the first time a week ago and thought of corporate raiders.
In case you may not know, there is an upcoming sequel coming out next year. I believe the title is "Money Never Sleeps", taking place in the present day and Gordon coming out of prison to take a piece of the hedge fund market. Michael Douglass is returning as Mr.Gecko.
Interestingly enough, it's amazing that a lot of people who are brokers look up to the fictional Gecko... Here's a quote from a NY Times article:
Speaking by telephone from Bermuda, Mr. Douglas said he wouldn't mind if he never had "one more drunken Wall Street broker come up to me and say, 'You're the man!' "
Pretty sick, eh?
I think that's the kind of common sense that MBA programs spend two years beating out of people.
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
Circuit City Rewards Execs As Stock Tanks
Well, I'm not sure what a stock tank is (I presume it's where you keep your liquid stocks) but maybe if they'd tried rewarding their execs as people rather than as storage facilities, they might've had better luck.
The higher the technology, the sharper that two-edged sword.
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.
It's obvious to me that the corporate system rewards short-sighted execs. What can be done to fix this systemic problem?
But having just been in a Circuit City looking for a TV, I can tell you that company is doomed. The customer experience in there is so bad, mostly due to the lowest-common-denominator employee. Young, dumb, surly, and don't give a rat's ass about the company or the customer. From a business perspective, CC retail is a disaster. The CC execs shopuld walk into an Apple (up 120% this year, and the most profitable retail business per square foot on the earth) store (advice I have just written to them) and see how the customer experience differs from that in a CC (stock down 66% this year) store. Yes, Apple pays a lot more, but it is a pleasure to walk in there. Now that is an argument for better pay.
If they wanted to have crappy, harmful employees that alienate customers, they sure are going about it the right way.
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you
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?
Well, is it?
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.
Comment removed based on user account deletion
A good analogy here is that when a sports team is under performing, generally the owner fires the coach, not the entire team.
Circuit City has turned that rule upside-down and seems to be suffering the consequences of it.
If I was a shareholder, perhaps I'd want to fire the entire management team at this point.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
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?