Sears Management Severance OK while workers get screwed

24 posts / 0 new
Last post
NorthReport
Sears Management Severance OK while workers get screwed
Mr. Magoo Mr. Magoo's picture

It's not "severance" for those managers, it's an incentive to keep them working through the restructuring.

I'm not going to suggest that laid-off or terminated employees aren't entitled to severance, nor that pensioners aren't entitled to their pensions, but such incentives are fairly common when a company files for bankruptcy and restructures in the hope of avoiding total collapse.  It's not some kind of bonus "for the rich" or "for the powerful", it's a plea to stay on instead of abandoning ship.  And the idea is that if the company cannot restructure, it'll be even worse for everyone.

josh

Everyone?  "This is going to hurt me as much as it hurts you.  Now, excuse me.  I have something to deposit at the bank."

Pogo

Like Magoo says it is simple economics.  Doesn't make it right.  Fact is that being a manager in a company in a collapsing market sector does not provide much of a resume for future work.  Most of these managers are going to have to reinvent themselves to find a comaparable new job - or more likely they will have to adapt to a new normal working for less. If they leave now Sears will be stuck finding someone for a temp management job, so they pay a stay bonus. Shitty and unfair but makes business sense.

Come the revolution all this will change.

Mr. Magoo Mr. Magoo's picture

Employee featured in hit Sears Canada ad with famous brother Mike Myers loses job and severance

Quote:
o give beleaguered Sears Canada a boost in 2014, employee Peter Myers recruited his famous brother, comedian Mike Myers, to star in a commercial for the retailer.

The ad was a hit. It featured both Myers brothers using humorous banter to spread the message that, despite rumours, Sears wasn't shutting down.

"I was the face of 'we're not closing,'" says Peter Myers, who at the time was a senior director of planning at Sears head office in Toronto.

Three years later, Sears still promotes the ad on the main page of its YouTube site. But Myers — who worked for the retail giant for almost 36 years — is out of a job and not getting severance.

Ironic.

Quote:
Like Magoo says it is simple economics.  Doesn't make it right.

No, and it's also got some pretty crummy optics.  If you believe the Twitterverse, lots of people aren't really going to be keen to spend dollars at the new, restructured, reinvented Sears that did this.

The one part of this that doesn't make logical -- even if unfair or cruel -- sense, is keeping the same managers that steered the ship into the rocks in the first place.  If senior management had simply been blindsided by something nobody could have seen coming then it might have made sense to ask them to be the ones to chart the new path.

As another irony, it might be reasonable to assume that part of Sears' fall from grace happened because of online retailers like Amazon -- everything you could want in one place -- which in the pre-Internet days pretty much described Sears.  Everything from clothes to hardware to major appliances, jewelry, cosmetics, stationery and watch repair all under one roof.  It's like one of those legendary prophesies where the son grows up to kill the father.

WWWTT

Fantastic news for upper management at sears! Upper management drive the company into the ground or the company was doomed anyways, and the employees get screwed! Lawsuit time! Sue the provincial government too for the stupid laws they made that allowed the court ruling!

NorthReport

Thanks Trudeau because you could change this with the stroke of a pen!

And what do you have to say John Horgan, eh!

Mr. Magoo Mr. Magoo's picture

Quote:
Thanks Trudeau because you could change this with the stroke of a pen!

By signing into law the "All Canadians Must Buy Their Socks From Sears" bill.

But he won't.  Follow the money!  Hint:  who owns stock in Winners????

Geoff

If governments were forced to cover all the pensions and benefits Sears' employees are losing, the laws would be changed before you could say, "Capitalism sucks".

Same applies to Stelco employees in Hamilton. Make it too expensive for governments not to change the laws.

NorthReport

I agree. Those workers should launch a class action suit against governments where Sears operated, and the Sears management as well, and force these failed company executives to protect their worker's benefits. Enough is enough! Maybe it's time to close up shop on these failing MBA programs, whose main feature appears to teach how to screw the workers 101!

Ugh!!!

Mr. Magoo Mr. Magoo's picture

Quote:
If governments were forced to cover all the pensions and benefits Sears' employees are losing, the laws would be changed before you could say, "Capitalism sucks".

Then the government would be asked to cover the losses for secured creditors.

That's the problem of bankruptcy:  not enough money to go around.  The last time multitudes were successfully fed with a few fishes and a few loaves was 2000 years ago.

And sure, Sears could spend all the liquid assets they have right now on severance pay and pensions and dental benefits.  Then they would surely fold, for good, and the pensioners would still be screwed.

What might make sense, though, would be for those denied severance or their pension to be nearer the front of the line *if* the attempt to restructure and become solvent is actually successful.  In other words, if Sears slashes and burns, but somehow rises from the ashes, then employees get what they're owed before shareholders.

Pogo

There is legislated severance and negotiated severane. Legistlated severane amounts need to be first in line to the point of company officers and BoD members being personally responsible so that when the company gets to a grasping at straws stage that they think twice before jeopardizing this money. For negotiated amounts it is not as clear. I left a job last year and one my motivations for the timing was that I knew my negotiated serverance would disappear with bankruptcy (revert to the legislated amounts). Not saying they shouldn't have priority, just not the same level as the legislated requirements.

Mr. Magoo Mr. Magoo's picture

Quote:
Legistlated severane amounts need to be first in line to the point of company officers and BoD members being personally responsible so that when the company gets to a grasping at straws stage that they think twice before jeopardizing this money.

If they're grasping at straws, and have to sequester a large chunk of assets to cover the severance of employees they might need to terminate in the future, then you're basically saying that when things get tough, throw in the towel.  It would ensure that legislated severance for those employees, but again, there wouldn't be a whole lot more left.  And if their revenues are primarily earmarked for the "severance" fund, to the point that the company can no longer maintain any liquidity, we're really talking about terminating everyone, yes?

So you're basically saying that every company should have some awareness of how much they'd need to have ready if they fired everyone, and if their actual assets start to resemble that number, they should fold up before it gets any worse.  Maybe that would be a good plan, I don't know.

WWWTT

NorthReport wrote:

I agree. Those workers should launch a class action suit against governments where Sears operated, and the Sears management as well, and force these failed company executives to protect their worker's benefits. Enough is enough! Maybe it's time to close up shop on these failing MBA programs, whose main feature appears to teach how to screw the workers 101!

Ugh!!!

I think Mr Magoo is right about the shareholders/creditors etc etc. And there not being enough assets liquidated to go around.

But here's the thing, these companies know very well that they have long standing employees, they know the laws, and yet they operate in a manner as if the employees can be discarded. When are workers going to be treated with dignity in this country? I guess when corporations run the country, it's not going to be anytime soon?

Pogo

Mr. Magoo wrote:

So you're basically saying that every company should have some awareness of how much they'd need to have ready if they fired everyone, and if their actual assets start to resemble that number, they should fold up before it gets any worse.  Maybe that would be a good plan, I don't know.

My last job was with a small business based in Quebec.  The rules as I understand them are that BoD members are liable the legislated severance. I think the limit of the liability was tied to their renumeration. But the rule tended to make them very involved in disussions about risk.  When a company is facing the end it often makes people try a lot of risky ideas - 'hey lets hire a bunch of telephone sales staff'.  There needs to be some sober second thought on the impact of failure on the employees involved.

Mr. Magoo Mr. Magoo's picture

Quote:
The rules as I understand them are that BoD members are liable the legislated severance.

This article, which may or not be right, suggests that under certain circumstances, Directors may be individually liable for unpaid wages, but not for severance.

The formatting of this PDF makes copying/pasting wonky, but the relevant stuff seems to be on pages 4 and 5.

Quote:
I think Mr Magoo is right about the shareholders/creditors etc etc. And there not being enough assets liquidated to go around.

It might be worth noting that Sears is not yet bankrupt and is not in the process of trying to liquidate all assets.  They're simply seeking creditor protection -- basically, ensuring that their creditors will not all come knocking as they attempt to use whatever assets they have to restructure.  To give a large chunk of those assets to terminated employees and pensioners would be blood in the water for other creditors, who would reasonably also want to close their accounts with Sears immediately before Sears folds (which it probably would).

kropotkin1951 kropotkin1951's picture

It is really about priorities at the stage when the creidtor who has sought protection then takes it to the next stage of going under. At that point IMO, the employees interests need to come ahead of all other creditors. If there is anything left in the kitty after paying out pensions and severances then the other creditors can divvy it up. Currently the Secured Creditors have top priority and they are usually banks and they don't leave much if anything for the small fish like employees.

Mr. Magoo Mr. Magoo's picture

Secured Creditors come first because that's pretty much the definition of a secured creditor.  They've made a loan to a company on the understanding that if needs be, that company's assets would be the collateral.

If you take out a bank loan using your mother's wedding ring as collateral, and then default, you can't expect to say "but that ring should really go to my sister!".

As I understand it, "preferred creditors" -- including employees and pensioners -- come next, followed by unsecured creditors (e.g. the company who sold floor wax to Sears).

But if we were to say there can be no such thing as a secured creditor then in effect we'd be saying there can be no such thing as available or affordable credit for many new businesses.  Whether it seems ruthless or not, banks don't like risks like that.

Like many Canadians, I have what's called a "secured line of credit" -- it's a line of credit that uses my house as collateral.  No big surprise that I pay much lower interest rates than someone whose collateral consists of an earnest promise.

Quote:
Currently the Secured Creditors have top priority and they are usually banks and they don't leave much if anything for the small fish like employees.

Presumably, the amount they can "take" is entirely dependent on how much cash a company borrowed.

Can a company apply for an unsecured loan?  If they could, I would expect that in the case of insolvency, that bank would be right in there with the person who sold that company floor wax in hoping for five cents on the dollar.

kropotkin1951 kropotkin1951's picture

It is about priorities and you think that the current priority system is proper. It says that capital should have priority over workers. That a bank that lent capital should come before the employees who earned pensions and severance benefits. That is an ideological driven view not a financial one.

 I think promises on pensions and severances should be binding just like a contract to pay the bank back the mortgage money and they should come first in priority on backruptcy. 

Banks will still make the same loans and if worse comes to worse and it affects their bottom line then they will only make a couple of billion in profits not ten billion. Such a hardship most capitalists would think to be unimaginable but I prefer to dream that we could have a society that puts workers rights to the money they earned ahead of bankers rights.

WWWTT

Ok now I understand the importance of lending money to get things going, however what would be interesting to look at is the salaries of the CEO's and other upper management, the dividens paid out and bonuses etc etc.

When the employees (the heart of the company) suffer like this, I smell a ratt!

 

Pogo

Mr. Magoo wrote:

Quote:
The rules as I understand them are that BoD members are liable the legislated severance.

This article, which may or not be right, suggests that under certain circumstances, Directors may be individually liable for unpaid wages, but not for severance.

I was referring to Quebec while this article refers to Ontario.

Mr. Magoo Mr. Magoo's picture

Ah, could be.  I couldn't find much about the situation in Quebec, other than a mention of "notice" -- basically, pay-in-lieu of notice.  The idea being that after X number of years of employment, a terminated employee is entitled to Y weeks of notice, and if that notice is not properly given, is entitled to the same number of weeks of pay, just as though they had worked it.

Since severance does seem to be covered federally by the CBCA, I wonder if "notice" is what you observed?

quizzical

.

quizzical

i was in sears here in kelowna the other day. whole sections of the store were emptied out and it was a tomb. bought lots though.