Here is another typical example of the free market at work.
Last March the senior management of Circuit City decided that if they laid off their senior sales clerks who earned $14 - $15 an hour and had been there long enough for benefits, they could replace them with new hires who only earned $9 an hour. That's a savings of more than 1/3rd in salary. So they did it.
Without experienced clerks to help the customers determine what to buy, Circuit City's revenue dropped sharply. OK. Call up the laid off clerks and offer to hire them back. Of course, the story is that they offered to hire them back as new hires at $9 an hour. The response was as good as might be expected, and Circuit City is having a poor sales year now. As Ezra Klein says, "...things have not gone well for the bottom line. The company is now losing money and its share price is down more than 75 percent from its value earlier this year."
So of course, the geniuses who brought the company this far, the executive vice-presidents, will each get retention awards of $1 million. I guess that's pay for performance.
See how that works? Screw the employees and damage the company and get paid million dollar retention bonuses. Really, does circuit city want to retain those bozos? The Board of Directors who approved those retention bonuses are more interested in sharing the wealth with their fellow executives than they are in managing a successful business. When it goes under, they will all move on the equally lucrative Directorships.
My advice is to stay away from Circuit City and start a pool betting on what month they declare bankruptcy. The Board and the executives will, of course, blame the economy.
The bankruptcy judge can, of course, demand that the retention bonuses be repaid if the bankruptcy happens in the next couple of years. My bet is that the bankruptcy will occur next Summer at the latest (depending on how rapidly the Recession set in), and that the bankruptcy judge will not demand the repayment.
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