Culture Vulture: Borders Argues Bankruptcy "No Fault" of Top Execs And Requests Six-Figure Bonuses
Yesterday, the Wall Street Journal reported that Borders executives are getting in one last punch below the belt of the company’s 10,000 workers who lost their jobs. As laid off workers battle for their remaining compensation, and on the same day Borders Group Inc.’s employees filed a suit which alleges that did not receive proper notice of their terminations, the failed bookseller asked to make six-figure payments to its former top executives, including Chief Executive Mike Edwards, who earned $750,000 per year, plus bonuses.
On February 16, Borders Group Inc. (BGP) filed for Chapter 11 protection and announced it would close about one-third of its stores, and put 6,000 workers out of their jobs. (In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York). Borders was the second-largest book chain after Barnes & Noble Inc.
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.
In April 2011, the President and CEO asked the court to award $8.3 million in executive bonuses (including nearly $1.7 million for himself). Fortunately, U.S. Bankruptcy Court Judge Martin Glenn ordered Borders to rethink its bonus plan. Bruce Buechler, lawyer for Borders, told the court, “we need management not just to be there, but to be cheerleaders or affirmative spokespeople for the company.” The bonus plan was reasonable, he argued.
The company is finished, and in retrospect the April 2011 request for the outlandish bonuses appears to have been a last ditch effort to loot the treasury while there was still something to loot.
Now, some four months later, Borders’s bankruptcy estate sought permission last week to make $125,000 severance payments each to Edwards, former Chief Financial Officer Scott Henry and two other senior managers.
Border’s went belly up on their watch, and the guys at the top believe they deserve to be rewarded.
According to the Wall Street Journal:
The request came just hours after Jared Pinsker, a former employee at the company’s Ann Arbor, Michigan headquarters, filed a class-action lawsuit on behalf of other Borders saying the retailer violated the federal Worker Adjustment and Retraining Notification Act by not giving employees 60 days’ notice that they’d be laid off.
Pinsker is asking that the company pay two months worth of wages to him and others like him.
Incidentally, the four executives are each receiving at least two months’ salary.
Borders did offer severance to their workers: a week’s pay for every year the employee worked for the company up to a maximum of 12 weeks’ pay, court papers said.
In exchange for the payments, both the executives and the lower-level employees agreed to waive all claims they may have against the company.
Even though Edwards and his executive suite colleagues failed in their goal to turnaround the bookseller or find a buyer for the company, Borders said the severance payments are justified in part because Edwards and Henry have worked “on a non-compensated basis” since their July 29th terminations to help complete store sales and tie up other loose ends, court papers said.
The managers “bargained for and expected severance in the event their positions were terminated due to no fault of their own, which is exactly what is occurring,” the company said in court papers.
An attorney for Borders’s estate did not immediately respond to a request for comment.
Borders began liquidating in July. During its bankruptcy, Borders closed more than 400 stores, and more than 10,000 workers lost their jobs.
How much money are people allowed to make?
These execs may be making more money than those working in
the stores but look at the level of responsibility. At the
store, the shift ends, you can go do what you feel like doing.
If you’re a good exec, you’re always at work, you’re getting
yelled at for being at work while you’re home, you’re being
tracked down by work. You’re at a level of indentured
servitude.
This comes down to class warfare and in the end helps no one.