Struggling retailers lay off workers and pay millions in executive bonuses
J.C. Penney, Macy’s and Neiman Marcus are three retailers that have at least one thing in common, besides the fact that they have all had to take drastic steps to deal with the hits their businesses have taken as a result of the coronavirus pandemic. All three have paid or are trying to pay millions in bonuses to their executives after making big cuts to their businesses presented as absolutely essential to keep them going.
A $4.5 million bonus due to Penney CEO Jill Soltau has drawn scrutiny in light of that chain’s Chapter 11 bankruptcy filing and plans to close 152 stores, which will put thousands out of work. The bonus due Ms. Soltau, Bloomberg reports, was part of her contractual agreement signed when she joined the company in 2018 and was not part of a recently devised “pay-to-stay” offer prohibited under U.S. bankruptcy law.
Penney also announced on Wednesday that it is further reducing its corporate, field management and international workforce by 1,000 jobs.
“These decisions are always extremely difficult, and I would like to thank these associates for their hard work and dedication,” said Ms. Soltau in a statement. “We are committed to supporting them during this period of transition.”
Macy’s, according to CNBC, paid out $9 million in stock bonuses to CEO Jeff Gennette and five other executives days after cutting 3,900 corporate jobs. These cuts were on top of the chain’s plans, announced in February, to permanently close 125 stores over a period of three years. Macy’s, which has avoided bankruptcy, furloughed the vast majority of its workforce earlier this year when the pandemic forced it to close stores to customers. An unspecified number of furloughed workers returned to their jobs in the first week of July.
The U.S. Justice Department is contesting $10 million in bonuses that the bankrupt Neiman Marcus Group is looking to pay CEO Geoffroy van Raemdonck and seven other top executives at the retailer. Henry Hobbs, the government’s lawyer monitoring the case, contends that Neiman Marcus needs to demonstrate that the executives have materially helped to improve its earnings. According to a Wall Street Journal report, the company paid the eight executives more than $3 million in bonuses before it filed for Chapter 11 in May.
- Executives at Bankrupt Companies Scored $131 Million in Bonuses – Bloomberg
- JCPenney Announces Organizational Restructuring – J.C. Penney Company, Inc.
- Macy’s doled out $9 million in bonuses to top execs after thousands of jobs are cut – CNBC
- Macy’s, Inc. Announces Restructuring to Address Sales Impact from the COVID-19 Pandemic – Macy’s, Inc.
- Neiman Marcus Bankruptcy Watchdog Says Company Must Justify Bonuses – The Wall Street Journal
- Neiman Marcus Group Enters into a Restructuring Support Agreement with a Significant Majority of its Creditors to Substantially Reduce Debt and Position the Company for Long-Term Growth – Neiman Marcus Group LTD LL
- Who will come to J.C. Penney’s rescue? – RetailWire
- What’s J.C. Penney’s next move? – RetailWire
- Will a smaller Macy’s be a better Macy’s? – RetailWire
- Canceled orders and furloughed employees are part of today’s retail reality – RetailWire
- Neiman Marcus must survive both bankruptcy and COVID-19 – RetailWire
DISCUSSION QUESTIONS: How does the payout of large financial bonuses to top executives at struggling and bankrupt retailers affect the morale and performance of employees within those organizations? Do you think corporate America, specifically the retail industry, needs to rethink how employees from the frontline to the c-suite are compensated for their work?