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The Almighty Buck Businesses United States

Circuit City Rewards Execs As Stock Tanks 354

Posted by kdawson
from the corporate-cranial-rectal-inversion dept.
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.
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Circuit City Rewards Execs As Stock Tanks

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  • by Anonymous Coward on Saturday December 22, 2007 @09:24PM (#21794408)
    Just think how much they could save if they fired all the salespeople?
    • Better yet (Score:4, Insightful)

      by WindBourne (631190) on Saturday December 22, 2007 @09:46PM (#21794546) Journal
      they should consider closing their stores, while outsourcing what little remains. Why those VPs would save all sorts of money.
      • Re:Better yet (Score:5, Interesting)

        by Anonymous Coward on Saturday December 22, 2007 @10:09PM (#21794660)
        The alternative is to reward great employees with fat options, and then have shareholders complain that employees are benefiting at their expense!

        Take a look at Apple, where shareholders are suing despite its stock outperforming the industry by a huge margin, because they're worried that company employees might have received awards for their efforts.

        ---
        Save a whale - harpoon a bind-torture-kill NeoCon
        • Re: (Score:3, Interesting)

          by Peter_JS_Blue (801871)
          In some cases shareholders are necessary but it seems to me that they are the main problem. What many seem to have forgotten is that if you pay your workers less, they :-
          1. Become demoralized and work less effectively.
          2. Leave and take their expertise elsewhere.
          3. Have less cash to spend on your products - ensuring you have to make more cuts.
          4. Have less cash to spend on their kids education - ensuring that the next generation is even less effective.

          Money is like blood - its only useful if its moving around.

    • Re:Excellent move! (Score:5, Interesting)

      by Duhavid (677874) on Saturday December 22, 2007 @09:54PM (#21794590)
      Think of how much *more* money they could save if they fired
      all the Executives, the ones who make the decisions that are
      obviously quite poor! It runs to millions!
    • seems the weasels at Circus City didn't want the folks who could answer questions and fit you with the right product, they wanted quick, cheap, and expendable.

      so Circus City also became expendable. Haven't gone there, don't intend to go there, the weasels are crowbarring the last loose dollars for their pockets before it goes under.
    • Re: (Score:3, Insightful)

      by couchslug (175151)
      From the POV of personal profit, there is no reason not to loot and destroy a company if there are no negative consequences.
  • Let's see here ... (Score:5, Insightful)

    by ScrewMaster (602015) on Saturday December 22, 2007 @09:24PM (#21794410)
    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!
    • by xs650 (741277) on Saturday December 22, 2007 @09:27PM (#21794428)
      It's the Golden Rule in action. Those who have the gold rule.

    • by timeOday (582209) on Saturday December 22, 2007 @09:33PM (#21794456)
      If the company does poorly, you pay big bucks to bring in new hotshot execs. If the company does well, you pay them well to reward their results. It's quite a racket!

      The big problem I see in all this is that US executives have a huge upside (Goldman Sachs CEO got a $68 million dollar bonus this year), but with no downside (Merrill Lynch fired its failed CEO with a $160 million golden parachute). If you want to argue execs deserve huge pay because so much money is at stake, then they should also stand to leave the company hundreds of millions poorer than they came into it, if they underperform. If they don't want to be personally liable for their huge losses, neither should they stand to take so much of the potential winnings (as they do now).

      • by ScrewMaster (602015) on Saturday December 22, 2007 @09:38PM (#21794496)
        Much of the fault lies in the fact that the relationship between the CEO and Board of Directors is no longer adversarial in large corporations. This has the effect of removing any check on an errant CEO's actions. Personally, I think a good first step toward fixing that would be to make it illegal for a CEO to serve on the board of another company.
        • by OECD (639690)

          Personally, I think a good first step toward fixing that would be to make it illegal for a CEO to serve on the board of another company.

          Bingo. Classic conflict of interest. There's too much back-rubbing going on.

      • US executives have a huge upside (Goldman Sachs CEO got a $68 million dollar bonus this year), but with no downside.

        Given that Lloyd Blankfein's firm has sidestepped the losses plaguing its rivals [cnn.com], that strikes me as a terribly odd example to fire upon. You may also note from the CNNMoney article that it's not all wine and roses for Wall Street execs this year. Yes, top execs are by and large paid a lot, but they do take their lumps (relatively speaking) when the situation demands it.

        • by timeOday (582209) on Sunday December 23, 2007 @12:28AM (#21795426)

          Yes, top execs are by and large paid a lot, but they do take their lumps (relatively speaking) when the situation demands it.
          Actually they don't, that's the point. At the very worst, they might leave the company with only the money they made before getting fired (like any other employee). If they do well on the other hand (as at Goldman Sachs currently) they can make a vast fortune in a year or two (unlike any other employee). Standing to make a fortune without also standing to lose your shirt means you're gambling with somebody else's money. That's bad, because it promotes risky behavior.
      • by radish (98371)
        Say what you like about the others, but Blankfein (of GS) earned his money this year given that they made record profits vs most of their competitors losses.
      • Re: (Score:3, Informative)

        by rasputin465 (1032646)
        If you want to argue execs deserve huge pay because so much money is at stake, then they should also stand to leave the company hundreds of millions poorer than they came into it, if they underperform.

        This is the whole purpose behind corporations; they were originally given the rights and privileges of a human being in order to alleviate much of the risk to the execs. If the company goes bankrupt, the people associated with the corporation (particularly, the execs) get off scott-free. The movie The Corpor [thecorporation.com]
        • Re: (Score:3, Interesting)

          by Firethorn (177587)
          I think it wasn't so much to protect the executives so much as the investors.

          Previously, if a company went belly up in a really bad way, the creditors could go after everybody who owned some of the company, even if they had nothing to do with the affairs of the company.

          It'd be quite chilling to business investing if people had to worry that a Enron style failure would be able to reduce their entire portfolio to zero, even cost them their house, instead of just losing the previous value of those shares.

          Some
          • Re: (Score:3, Interesting)

            Previously, if a company went belly up in a really bad way, the creditors could go after everybody who owned some of the company, even if they had nothing to do with the affairs of the company.

            Well, boo-goddamn-hoo. Maybe if shareholders paid more attention to what the companies they invest in are doing, we wouldn't have so much corporate malfeasance.
      • Re: (Score:3, Interesting)

        The big problem I see in all this is that US executives have a huge upside (Goldman Sachs CEO got a $68 million dollar bonus this year), but with no downside (Merrill Lynch fired its failed CEO with a $160 million golden parachute).

        First off Goldman Sachs is a terrible example you used. Their performance is phenomenal and their shareholders and clients are happy to pay out these bonuses. The funny part is that $68M isn't even that much for them. They had one of their investment guys making almost $~80M a
        • by timeOday (582209) on Sunday December 23, 2007 @12:50AM (#21795538)

          First off Goldman Sachs is a terrible example you used.
          Goldman Sachs perfectly illustrates the point that CEOs who do well can make vast sums of money very quickly. Since the company is doing well and the CEO pay is small relative to the company, what's the problem? Simple. Since there's no corresponding personal downside for bad performance, the CEO is financially motivated to "go long," putting the company at risk. That's what the leadership over at Merril Lynch did for several years, and they raked it in. It turned out to be a bad bet, but so what? The millions paid in bonuses for past years' "good performance" is long gone, only to be repaid by investors and (if there's a mortgage bailout) the taxpayer.

          CxOs have a huge downside. Most get one shot and that's it.
          Being paid hundreds of millions to go away is not a huge downside. They're set for life and don't need another shot.
        • Chance (Score:3, Insightful)

          by Mark_MF-WN (678030)
          Where's the downside?

          If you fail you'll most likely not have another chance

          Yes, but you fail with enough money that you could immediately retire and STILL live out the rest of your life in wealth and luxury. Hell, even one million dollars is enough -- properly invested -- to live out the rest of your life wealthier than 60% or 70% of all Americans.

          How, exactly, have CEOs convinced moronic jackasses that they're soooo hard done by when they get their multimillion dollar golden parachutes?

      • by xouumalperxe (815707) on Saturday December 22, 2007 @11:43PM (#21795154)

        The big problem I see in all this is that US executives have a huge upside (Goldman Sachs CEO got a $68 million dollar bonus this year), but with no downside (Merrill Lynch fired its failed CEO with a $160 million golden parachute)

        I used to think the same, but was explained recently how the "injustice" of the gold parachute thing is actually a misconception, and that it actually makes perfect business sense.

        Let's use Merrill Lynch, which you brought up, as example. According to Wikipedia [wikipedia.org], they reported a net income of $7.49 Billion in 2006 (all further numbers are derived from simple arithmetic or taken from this same article). That's about $625M a month. Or $146M every week. Keep that number in mind.

        Now, imagine you're in the board for a big high-stakes company (banking, insurance, that sort of stuff). If you have an incompetent CEO (hey, if Merrill Lynch had one, almost anyone is liable to get one at some point). You want to get rid of him, but, since being CEO for this sort of company is an intrinsically high-paying job, he obviously resists getting the boot. Assuming you don't have anything strong enough to outright fire the CEO, how much money can he make your company lose between now and you actually getting him sacked? That's the monetary value of getting him to leave of his own free will right now.

        Stanley O'Neal got about $161M in stock options and retirement benefits as "severance pay". Based on my earlier math, that's just over 1 week of net income, which is, simply put, peanuts, seeing as he reportedly lost Merrill Lynch some $2.24 Billion (over 3 months' worth of net income) in how he was handling the sub prime crisis. How much would the company stand to lose by keeping him on-board any longer?

        • by PixelScuba (686633) on Sunday December 23, 2007 @01:24AM (#21795704)
          How about they fire him and he leaves with NO money? That makes even BETTER business sense. I can pretty much guarantee that if I royally screw up at my job I won't be receiving any bonus and I'll be looking for work again.

          Merill Lynch employs 56,300 people. 161 MILLION dollars for one man is a travesty... I will stake my life that the work of any CEO is no more demanding than jobs most of us do. That chunk of change would have amounted to almost $3000 per employee, now wouldn't THAT be a nice Christmas bonus for those individuals.

          I believe the average CEO pay in the US is FIVE HUNDRED times the average employee wage. Now, I work... oh maybe 55-60 hours a week, including unpaid time spent outside of work ON work. Now... I sure hope that O'Neal, who earned 48 MILLION dollars in 2006, works 27,000 hours a week. I will wager anything that most of us work just as hard and will probably just break ONE million in our lives.

          Maybe some people see egregious severance packages as a "good business decision" but I cannot in good conscience and reasoning even see that. Pay CEO's less and treat them like any employee... bad at your job, 'You're Fired'(tm).
        • Contracts (Score:3, Insightful)

          by Mark_MF-WN (678030)
          There's something wrong with the fact that someone who has lost the company $2.24 billion dollars can't be fired on the spot. Frankly, there's something wrong with the fact that someone who has lost the company $2.24 billion dollars can't be taken out behind the warehouse and promptly dispatched.

          It's ridiculous that's it's so hard to fire people.

    • by desertfool (21262)
      It is the new American way. In the company I work for we have VP's and CxO's traveling the world to visit the 5000 people who replaced the 300 who kept IT running very well and very inexpensively. They never visited us.

      Now, they get all get bonuses for saving millions, while they don't count the millions in downtime as the systems no longer can run at 99.999% availability. Next big lost shipment should earn them a new boat/car/house.....
      • Re: (Score:3, Insightful)

        by smilindog2000 (907665)
        I hear you. It's not the "new" American way, though. It's been that way since I entered the work force full time in '86. The problems at Circuit City are that stupid people got into positions of power (kinda like some governments close to home lately). This kind of thing is more common than bombs exploding in Baghdad. I'm surprised it made it onto the main Slashdot page.
    • 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.

    • by G Fab (1142219)
      I understand where you're coming from. In fact, I'm good friends with a lawyer who has some sort of involvement with some sort of litigation relating to that, and idle conversations have really got me ticked at Circuit City for being so cruel to those who built the chain...

      but when I shopped at Circuit City a few years ago, it sucked. Inattentive salepeople who didn't know crap except that I need to buy crap I don't need. I went there a month ago, and same story.

      I don't think the firings had a major effe
  • by cgenman (325138) on Saturday December 22, 2007 @09:26PM (#21794424) Homepage
    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.
    • by TubeSteak (669689)
      Maybe Executive/Management contracts need a "Sinking Ship" clause that essentially prevents them from bailing out on a company that is in/going into bankruptcy (reorganization or dissolution) proceedings.

      I'm sure some corporate lawyers could draft it up & it'd be cheaper than retention bonuses.
      • by cmowire (254489)
        The problem is that a person forced into continued employment in those sorts of situations is just going to spend the whole day reading pointy-haired-boss.slashdot.org instead of doing what they are supposed to be doing.

        If this is a good thing or a bad thing is left as an exercise to the reader. :P
  • by Jah-Wren Ryel (80510) on Saturday December 22, 2007 @09:28PM (#21794436)
    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...
    • Re: (Score:2, Insightful)

      by ucblockhead (63650)
      It's much more likely that the guys that are being retained are golfing buddies with members of the board.

      I do find your comment mightily amusing, though. Gotta retain the execs who fired all the low-level employees with institutional knowledge of how to help customers because you've got to keep the institutional knowledge of how to run the company into the ground with idiotic, self-destructive bean counter decisions.

      Seems kind of like amputating an arm to cure the cancer but leaving the tumor in so as no
      • I do find your comment mightily amusing
        Good thing yer a know it all. Else the first hit in a google search for "Retention bonus" [google.com] might have made you laugh yer ass off.

        Retention bonuses prove effective for companies in transition [findarticles.com]
        • No no. It's much more fun to show class envy than worry about facts here on /.
          • Class warfare? Hardly. There are plenty of companies that are actually run well, and the people who run them deserve every sent of their incomes.

            It's not class warfare. It's a belief that morons should not be enriched because of their connections. In a free market, executives would pay for their failures from their pocketbooks. Unfortunately, the good ol' boy's network too often subverts that free market, allowing idiots to fail upwards.
        • Re: (Score:2, Interesting)

          by ucblockhead (63650)
          You're still missing the amusing part: the lack of "retention bonuses" given to the people that actually make the sales and actually bring in the money. Sure, this "pay the execs more to captain the Titanic" approach is a popular approach among the failed executive set...it gives them the excuses they need.

          Circuit City's problems were caused by its executives. Retaining the incompetents only shows they aren't likely to turn around, which is likely why their stock is tanking.
    • by arotenbe (1203922) on Saturday December 22, 2007 @09:50PM (#21794562) Journal

      The idea behind them is that without the institutional knowledge that these people have, the company would die even quicker.
      Right, but... aren't the people with the "institutional knowledge" the same ones who are steering the company into the ground? As you point out, it is very difficult to sort the good executives from the parasites. Once they are in, though, you can't get rid of either type without losing money. If you keep the bad management, you are obviously going to keep losing money. If you fire them, they get a golden parachute and you still have to pay the replacement. If you have a management system where the executives control their own bonuses, you have a no-win situation... except for the executives.
      • by akintayo (17599)
        I think the company has already hit the ground. They only retain the executives to ensure the corporate assets are sold and the company has been 'wrapped up'. After which the executives will be laid off. So the money is to have these people stick around through the end, rather than quit now.
    • Re: (Score:2, Insightful)

      by CrazyDuke (529195)
      Back to reality, it's much more likely the execs are trying to pump as much cash into themselves as they can before the company goes backrupt.
    • Re: (Score:3, Insightful)

      by radish (98371)
      Indeed. It's an unpopular opinion around here, but the truth is it's easy and cheap to hire sales droids and difficult and expensive to hire good management. Firms get sick for lots of reasons, it's not always just because the managers suck. The opinion here is obviously that as badly off as the company is, it'd be much worse if all the VPs left (which they would, if they're good enough to get a job elsewhere).
      • by wwahammy (765566)
        Firms get sick for one reason: the managers who are responsible for preparing for the future didn't do so. As ridiculous as it sounds, management is paid to predict the future. Is it unreasonable to hold upper management to a nearly impossible standard? If they're getting paid 7,8 or 9 digits, have the power to create or end thousands of careers and the potential to create or lose billions of dollars of shareholder value then it's totally reasonable to do.
      • Sales Droids (Score:5, Insightful)

        by Mark_MF-WN (678030) on Sunday December 23, 2007 @03:32AM (#21796240)
        You've never actually worked in the service industry have you? It's easy and cheap to hire shitty salespeople -- the kind that make customers think "I'm am NEVER coming back here". The kind that don't speak English. The kind that don't bathe real often. The kind that don't comprehend how to properly utilize the technology of the "belt", so as to prevent the display of asscrack. The kind that steal shit.

        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.

  • and they are going to grab what they can before they go the way of comp usa.
  • 35 years salary? (Score:5, Informative)

    by nacturation (646836) <[nacturation] [at] [gmail.com]> on Saturday December 22, 2007 @09:30PM (#21794448) Journal

    ... firing of all its highest-paid salespeople ... 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.
    So their highest paid salespeople made just under $30K a year? If highest-paid == best producing, they can easily command a lot more than that elsewhere.
     
    • Re: (Score:3, Informative)

      by iamhassi (659463)
      "So their highest paid salespeople made just under $30K a year?"

      $30k/yr is about $15/hr, which sounds like high pay for someone that works at circuit city and isn't upper management.
  • by Chas (5144) on Saturday December 22, 2007 @09:36PM (#21794474) Homepage Journal
    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.

  • by Anonymous Coward
    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.
    • by ObiWonKanblomi (320618) on Saturday December 22, 2007 @11:14PM (#21794976) Journal
      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?
  • Circuit City had a number of sales employees who were paid far in excess of industry standards, and not based on commission. Circuit City shouldn't be expected to pay its employees far in excess of industry standards. Many of those salespeople were hired back at lower pay. The bonuses now being paid to executives is a completely separate issue. As noted in the post, Circuit City is struggling. After two of their top executives left, the board decided that drastic measures were necessary to keep the res
  • Broken Logic (Score:4, Interesting)

    by MobileTatsu-NJG (946591) on Saturday December 22, 2007 @09:38PM (#21794488)
    "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.

    • even though that little blippet was intended to make them sound idiotic.

      Which does not, when all is said and done, make them any less idiotic. We live in an age where corporations like Circuit City can purchase their stock at ridiculously low cost from Chinese manufacturers, and they still can't make their businesses work.
    • by GregPK (991973)
      Actually, as a dedicated vendor salesperson selling printers. I alone only working about 12 hours a week sold roughly 3 million a year worth of printers, ink, and paper. Company burned me, so I convinced over half those customers to go to another company and I've probably cost them at least triple that in lost revenue since.

      I'm only slightly vengful... In an Ebeneezer scrooge mixed with the memory of an elephant sort of way.

      If they looked within thier own ranks I'm sure they could find some young people t
    • Hire the right sales people, and they can turn the company around with astounding jumps in sales. Without these people, management can do absolutely nothing but what they are doing now - sucking the company dry as it sinks.

      Circuit City's stocks have taken a dive since this boneheaded maneuver, which you are saying is not idiotic, was carried out. Darwin says they failed the natural selection test by doing this.

      I say let all those execs go and hire someone who will oversee a return to a base+commission based
      • "Hire the right sales people, and they can turn the company around with astounding jumps in sales."

        We're talking about a store that sells DVDs and video games, not a used car lot.
  • Last Time (Score:3, Interesting)

    by Divebus (860563) on Saturday December 22, 2007 @09:41PM (#21794514)
    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.
  • all industries (Score:5, Insightful)

    by phrostie (121428) on Saturday December 22, 2007 @09:47PM (#21794548)
    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.

    • Summit Seekers (Score:5, Insightful)

      by scoove (71173) on Sunday December 23, 2007 @12:46AM (#21795522)
      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.
  • by whoever57 (658626) on Saturday December 22, 2007 @09:50PM (#21794556) Journal
    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.
    • IANAL. Slashdot could likely use IANASB too. I Am Not A Stock Broker. Nor are many of the others on Slashdot.

      Fidelity, on the other hand, pays people huge amounts of money to be very, very good at that kind of thing.

      One possibility is that rewarding execs to keep them from deserting a sinking ship, slowing the speed at which it sinks is a completely crazy idea and that only the geniuses on internet forums can spot this obvious issue whilst fund managers, whose lives and careers hang by the balance of their
      • How much did the dispassionate professionals at Fidelity lose to the dot bomb?

        There's a lot of superstition and voodoo in the financial market.
  • by Kludge (13653) on Saturday December 22, 2007 @09:52PM (#21794572)
    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.
    • by Bob9113 (14996)
      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.

      So torn. Mod "Insightful" or respond? Alas, my apologies to your karma (though given your ID, I'm guessing that was not an issue long ago). But I digress.

      I wholeheartedly concur. Mom & Pops have a shorter feedback loop from the customer to the decision maker, so they are more customer oriented. They generally pay their employees better. They are
      • Re: (Score:3, Insightful)

        by Detritus (11846)
        Mom & Pops often have problems with relatives. There are plenty of psychopaths that are never fired because they are a relative/spouse of the owner.
    • A small Mom & Pop shop is not at all worth the effort. Their prices are higher and the service is no better. I walk into a Circuit City, grab what I need, pay, and leave. There isn't any room for a smaller store to improve that process any, unless they offer lower prices or a larger selection, which they don't. In fact, all three of the local computer stores I can think of can fit their entire stock in a single aisle at Best Buy, and most of that stock is either over-priced "gamer" crap (who pays $3
  • Gosh I used to hate Circuit City "salesmen" as they were abrasively aggressive...that is until they found I wanted a stack of disks instead of a $2k wide screen TV, whereupon they literally wheeled off to the next marke through the metal detectors.
  • The stock is negative 30% since 2000. Ok it's up a bit from the bottom this year so we'll give him that. In the meantime Sam Palmisano I'm sure is wishing for his entire Unites States workforce to quit and then die, for Christmas.
  • Humans are programmed to worship leadership. There's nothing else to it.

  • ...that Circuit City is a prime example of everything that is wrong with technology retailers.
  • Responsibility? (Score:5, Interesting)

    by Lost Penguin (636359) on Saturday December 22, 2007 @10:27PM (#21794784) Homepage
    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.
  • Good to Great (Score:5, Insightful)

    by rpillala (583965) on Saturday December 22, 2007 @10:48PM (#21794878)
    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.
    • Competitive advantage left CC long ago.
    • Re: (Score:3, Insightful)

      by ucblockhead (63650)
      I'm a white man and get shitty service there too. Not as bad as at CompUSA, but significantly worse than at Fry's. (And if you've ever been to Fry's, you know how damn low that bar is.)

      There is one simple way to create good customer service: Treat your employees well. Look at any company known for good customer service, and you'll find reasonably happy employees. This is understandable, because people who hate their jobs are likely to take that anger out on whoever they deal with day to day. (Your cus
  • by ScrewMaster (602015) on Saturday December 22, 2007 @11:26PM (#21795038)
    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.
  • by Wise Dragon (71071) on Sunday December 23, 2007 @12:13AM (#21795350) Homepage
    It's obvious to me that the corporate system rewards short-sighted execs. What can be done to fix this systemic problem?
    • Re: (Score:3, Insightful)

      by evilviper (135110)

      It's obvious to me that the corporate system rewards short-sighted execs. What can be done to fix this systemic problem?

      Change the tax code to eliminate the double taxation on dividends. I recall numerous people, much smarter than I, confidently announcing that the decline of dividends (due to the increase in taxation many years ago) would have a terribly destabilizing effect on the stock market. In hindsight, it's amazing just how understated their doom and gloom predictions seem to have been.

      I believe y

  • by unassimilatible (225662) on Sunday December 23, 2007 @12:40AM (#21795500) Journal
    My standard comment would be "what a publicly held corporation pays its employees is not any of the average Slashdotter's business - assuming you aren't CC stockholders - since I know you are all libertarians and not lefty redistributionists." How is this tech news or any of your business, for that matter? Is this Liberal-dot-org?

    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.

    • by Mark_MF-WN (678030) on Sunday December 23, 2007 @04:45AM (#21796472)

      what a publicly held corporation pays its employees is not any of the average Slashdotter's business - assuming you aren't CC stockholders - since I know you are all libertarians and not lefty redistributionists.
      Since I know you are a libertarian and not a neocon sycophant, you'll no doubt agree that we're free to debate and discuss any goddam fucking thing we please, and if some of us would prefer not to shop at Circuit City because we disapprove of their compensation schemes, we're free to do that as well. That's the great thing about the free market -- we can buy or not, for any reason whatsoever. And we can think whatever we please about Circuit City. And say whatever we please about Circuit City. Our business is whatsoever we choose it to be, thank you very much.
  • by jhylkema (545853) on Sunday December 23, 2007 @01:47AM (#21795810)
    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?
  • by Newer Guy (520108) on Sunday December 23, 2007 @03:10AM (#21796166)
    Well, is it?

How many NASA managers does it take to screw in a lightbulb? "That's a known problem... don't worry about it."

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