Circuit City wants to pay execs bonuses
Published: February 10, 2009
Circuit City Stores Inc., now liquidating the last 567 of its 721 stores, says incentive bonuses are needed to dissuade 154 executives and other workers from leaving before the company is dissolved.
Bloomberg News reported today that the Henrico County-based Circuit City’s proposal came in a motion filed in federal bankruptcy court in Richmond.
Circuit City proposed that 16 executives would split $2.3 million if they all achieve their targets, and the remaining non-managerial workers would be in line for $1.62 million if the bankruptcy judge goes along with the idea at a Feb. 25 hearing.
Circuit City also wants an additional $750,000 to distribute as discretionary bonuses to the non-management workers and others who aren’t covered by the program.
Circuit City was the second-largest electronics retailer in the U.S. when it filed under Chapter 11 in November. The final going-out-of-business sales were approved in January.
In all, the company will cut about 34,000 employees by the time the liquidation process ends by the first of April. A skeleton crew will stay on for as long as two years to finish winding-down operations.
Circuit City’s bankruptcy petition listed assets of $3.4 billion and debt totaling $2.3 billion as of Aug. 31. Papers show $898 million owing to the secured revolving credit lenders. Unsecured trade suppliers are owed another $650 million, the company said in a court filing.
—Bloomberg News
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Reader Reactions
Terrible people will loose jobs. But common sense says the execs deserve a share of the booty!
NubianHunter I second your comments.
How does a company keep qualified staff if they don’t pay them. Does the word “bonus” insult your brain or do you understand the fact that “bonus” equates to pay or raise in the service vocabulary. The company is not going excessive like a golden parachute where an executive gets xxx millions for 30 days of work. In perspective $143K for 2 years in a job termination equals about 12K a month less 2K in taxes to complete the job until day zero. This further means that the executive won’t be out job hunting during his quality years because if he quits he won’t get the “bonus”. Those finally collecting the bonus will have deserved it. We all know that CC is out of business because it’s leaders put the bottom line over service. Those running the closeout sales are the thieves not the executives staying on for the end.
I agree it’s ridiculous but it’s not the governments business or yours what
any company pays execs.
I agree with boonstag’s logic, and I love how the term ‘free market’ has somehow been twisted into a negative thing. However, if a person willingly leaves a job they get no severance. I would think the severance would be the incentive to stay until the end, especialy when the new jobs are becomeing more scarce. Sure some will get new jobs and leave, but an average of 140k each seems excessive to retain a skeleton crew to dismantle the operation. Of course I am assuming the court made severance money available, but I don’t know that for sure.
Well lets see….I have been a manager for 20+ years, and I mean middle and executive level. I have always been told by any company I have ever worked for that “bonuses” are performance based and losing money or going out of business is not a performance.Why give someone a bonus when they get a paycheck for doing this job anyway? I mean the job does have accountability and obligation for that paycheck, right? The people selling off the inventory know what they are doing and they are the ones who will turn the inventory to liquid.It is my understanding they are the ones making the decisions not the executives of Circuit City. By the way,....What are they the “executives” of anymore? Circuit City is OUT OF BUSINESS!
paradigm - What I meant by “free market” is that the government can’t compel management to stay on. If they want to leave for another job, nobody can stop them, they can only offer them more money. In a bankruptcy case, a company needs court approval to blow their noses let alone giving out bonuses. The court is just trying to make sure that the creditors get as much money back as possible. Obviously they wouldn’t approve excessive bonuses, but I would think paying bonuses to keep these people would save money in the long-run. I just don’t understand why the word “bonus” has become a bad word. It is a necessary business tool. I don’t agree with the $18 billion the banking industry gave out, but this is $5 million, with an “m”. That’s small potatoes for a large business especially if you consider they have $2.3 billion in debt to pay off.
boonstag - i would think that once they filed for bankruptcy the “free market” point is no longer valid. the company is requesting the court to approve these bonuses, so it is up to the federal court to approve or deny the motion.
Obviously the people posting comments don’t understand how the free market works. This is not like banks taking bailout money and using it to pay executive bonuses. These executives at Circuit City are going to lose their jobs same as everyone else. They are being offered “performance” based bonuses as incentive to stay when they could just as easily get a job elsewhere and avoid the hassle. Winding down a business is very difficult. It would be even more difficult and potentially even more expensive if they have to hire new people who don’t know anything about the company to do it. You have to overpay to get these people to stay long enough to finish the job and they don’t get the bonuses unless they stay. If they get another job before the winding down is finished, they don’t get the bonus. Sure these guys drove the company into the ground, but do you really expect them to stay with the company out of the goodness of their hearts with no incentive? Please.
It seems to me that we all know now why this company is down the tubes.
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