Friday, November 14, 2008

At least that worked out well.

Guess what year this happened. Guess!

"Circuit City said yesterday that it had fired 3,400 of its highest-paid sales staff and will replace them with lower-paid workers, a risky strategy to cut costs that goes beyond the layoffs, buyouts and hiring freezes commonly used by struggling companies.

The fired workers will receive severance packages and a chance to apply for lower-paying positions after a 10-week delay, said the 655-store electronics chain based in Richmond, Va."

March 29th, 2007. That's right. Early 2007. Trackback here. Wasn't the economy red hot still? Yes.. yes it was.

Yet the CEO of Circuit City CEO Schoonover received $1.4 million in salary and bonuses. I even read an article that by the time he was done with it - the compensation was upwards of 6.5 mil. A great gig if you can get it. For producing no results and all.

Guess what year this happened. Do it!

"The key initiative that year was the elimination of commissions at its stores as Circuit City adopted a single hourly pay structure chainwide. It dismissed 3,900 commissioned salespeople and replaced them with 2,100 hourly employees. In addition to reducing annual operating costs by as much as $130 million, eliminating commissions furthered the move toward a more self-service approach in the stores. Circuit City's continued weak position was highlighted that year when the owner of CompUSA, Inc., operator of computer superstores, made a bid to acquire the company for about $1.5 billion."

2003! Trackback here.

This is called disincentivizing your workforce from selling product. Why should we all be shocked the company failed? WHY?

Now, I don't mind one bit that people make a lot of money. If you work hard - I think you should make as much as you can get. But, why should we pay them such absorbatent sums for running companies into the ground?


  1. Keyser (who, as you know, shares your disapprobation of management getting paid astronomical "bonuses" when the companies they run run aground) images that it's because the people who decide that these people are indispensable for the management of companies and need to be paid "accordingly" are--none other than these people themselves!

    Until shareholders baulk at this sort of nonsense, it will be just go on. After all, who benefits from these managerial decisions more than the mangers themselves who make them?

  2. I keep reading that AIG needs to pay big bucks to retain people. Considering their performance, I can't help thinking they'd be better off picking replacement folks using qualifications like astrological sign or birth place zip code.

    All these folks are in an echo chamber, surrounded by others who are plunging buckets into what Vonnegut called "the money river," or else struggling to get to that point.

    If you're so hot on being "incentivized," then surely you won't mind clawbacks that can go after you for bonuses three, four, five years out.

    Shareholder democracy is an oxymoron, like military music. Look what it took to shove Nardelli out of Home Depot. I'm surprised they didn't give him his own armored car for the $210 million severance package.