At this point, millions of Americans are no doubt wondering what happened to their local Borders Bookstore. Well, Borders closed them. Initially 200 of them. Later, more, including my own, for a total of 225. Good, decent people worked there, helpful and friendly. As close to friends as a retailer can be, and almost a second home for many of us, a place where you could relax and unwind, a place where “everybody knows your name.” Gone now. All those nice people out of work. All of us without our favorite local bookseller.
On February 16, Borders Group Inc. (BGP) filed for Chapter 11 protection and announced it would close about 30% of its stores nationwide in the coming weeks (In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York). Borders is/was currently the second-largest book chain after Barnes & Noble Inc. (BKS),
Six thousand people – 6,000 – out of work.
As the New York Times reported,
The troubles of Borders are rooted in a series of strategic missteps, executive turnover and a failure to understand the digital revolution — problems in many ways of Borders’ own making.
So it may surprise you to learn that Borders has the same belief as Wall Street with regards to rewarding incompetence. Rather than fix the problem, or punish those responsible, it punished its innocent employees, and the book-hungry public, by closing hundreds of stores. Meanwhile, the President and CEO is asking for $8.3 million in executive bonuses (including nearly $1.7 million for himself).
CEO Mike Edwards currently has a salary of $750,000. The bonus plan would give other top executives bonuses equal to as much as 90% to 150% of their base pay.
Doesn’t seem fair. But then, that’s corporate America. That’s the America Republicans love.
Borders is in debt to the tune of $1 billion, folks. As the Times reports,
In its filing in United States Bankruptcy Court in Manhattan, Borders listed $1.29 billion in debt and $1.27 billion in assets. As of the filing, Borders owed $272 million to its 30 largest unsecured creditors — including $41.1 million to the Penguin Group USA.
Employee raises have been frozen for years. Despite all this, last year the CEO got an 87 percent raise. Most Americans are lucky to see a 2 percent raise, if they’re not laid off altogether by the men giving themselves huge raises and bonuses.
The New York Times recounts Borders’ tale of woe:
For the last five years, Borders stock has drifted downward and the number of employees reduced to 19,500 from 35,000.
Its same-store sales were down more than 12 percent in the third quarter of 2010, with a loss of $74.4 million.
Does it seem to you the management of this company ought to be receiving rewards for running their business into the ground?
This seems more than a little immoral.
Yesterday, at a hearing in New York, a U.S. Bankruptcy Court Judge seemed to agree, ordering Borders to rethink its bonus plan for the company’s leading executives. Borders lawyer Bruce Buechler insisted that the bonuses were reasonable, saying that “we need management not just to be there, but to be cheerleaders or affirmative spokespeople for the company.”
Sounds like management should be fired. Most of us would be, if we exhibited this level of incompetence. Judge Martin Glenn responded that, “If this business goes down the toilet bowl, there are a lot of full or part-time employees who face the prospect of going out of work.”
Bloomberg reports that as a consequence,
Bruce Buechler, a lawyer for unsecured creditors, told U.S. Bankruptcy Judge Martin Glenn that the bonus plan was revised today so the five top executives, including Chief Executive Officer Mike Edwards and Chief Financial Officer Scott Henry, would be paid based on how much they recover for creditors under a sale or restructuring by Aug. 15.
The revised plan put forward by Buechler calls for the top five executives being given a maximum of $4.9 million “if they return more than $95 million to unsecured creditors.” This amount would drop to $1.8 billion if only $73 million is recovered.
But they should not receive any bonuses at all. Companies should not reward themselves and their management for actions that harm their employees. For what, precisely, are these bonuses due? What has management done for Borders outside of driving it into bankruptcy? I worked in retail management for more than a decade and have seen employees fired for much smaller infractions than this. Fired. Not rewarded.
This is what we can expect of a Republican or Tea Party America, a land where corporations reward themselves for running themselves into the ground and putting untold thousands out of work, all the while holding these incompetents up as examples of what this country needs. This is the bleak reality of how corporate America works. I submit to you that this country needs the 6,000 put out of work by Borders than the few executives who through gross negligence forced the company into bankruptcy.
Image from Zimbio