Sears Canada Pays Execs Bonuses While Laid-Off Workers Get No Severance

Tyler Durden's picture

After filing for bankruptcy protection in an Ontario court last month, Sears Canada said Friday that it plans to dole out big bonuses to senior management while the retailer trudges through a painful restructuring, even as thousands of laid-off workers aren't being paid promised severance.

According to court documents, Sears - which promised to close 59 stores and eliminate 2,900 jobs across the country as part of a court-supervised restructuring process - will pay up to $7.6 million in retention bonuses to 43 executives and senior managers at the company's head office in Toronto – the same management team that lead the company as sales plummeted and it spiraled into insolvency. As CBC News reports, that works out to an average of $176,744 per employee, although it's unlikely the money will be divided up so evenly.

Meanwhile, the company said it won't be paying lower-level employees a severance, which could equate to a loss of tens of thousands of dollars per person. Predictably, the news isn't going over well with the company's laid-off workers.

"Why aren't they able to pay us out the severance if they have this [bonus] money?" says Zobeida Maharaj, a laid-off senior operations manager who spent 28 years working for Sears in the Toronto area.

"They have no moral values, no compassion, nothing in their hearts."

Sears argues that the hefty paydays are necessary to keep the management team from jumping ship as the company restructures.

Sears Canada points out that the bonus payments — known as the Key Employee Retention Program (KERP) — have been approved by the Ontario Superior Court. Offering cash incentives during restructuring is common and often necessary to retain key employees, the company said.

 

"A lack of a KERP in this scenario would potentially result in a worse outcome and negatively impact a variety of stakeholders," spokesperson Joel Shaffer told CBC News.

In a revelatory twist, the managers who guided the company into bankruptcy stand to profit handsomely by doing so; many could reap enormous bonus payments beyond those mentioned above, including incentive-based payoffs, if they can bring the company through bankruptcy intact.

“The executives and senior managers tasked with guiding Sears through the restructuring will earn up to an additional 25 per cent to 100 per cent, on top of their base salary.

 

Most will get their bonuses in quarterly installments, receiving 75 per cent of their payments within six months. The final 25 per cent won't be paid out until a successful restructuring is complete.

 

Sears also plans to pay retention bonuses of up to $1.6 million to 116 senior store employees who will oversee liquidation sales at locations that are closing. That amount works out to an average of $13,793 each and will be contingent on certain sales targets.”

But try explaining to recently unemployed Sears workers why the compay should be allowed to pay out these bonuses before the severence payments promised to them and thousands of their peers.

[Zobeida ] Maharaj says she can understand paying retention bonuses to store employees working on the front lines. But she argues the big payouts to higher-ups at head office are unfair when ex-workers like her have lost their severance.

 

"I'm shocked as to how they got this grant permitted to have these people — these headquarters [big-wigs] — fill their pockets even more on the suffering of Sears employees," says Maharaj. "We're just the little ants at the bottom."

 

Rosa Dalessandro also wonders why there's money to pay Sears executives when she's losing severance that amounts to about a year's salary.

 

"It's very upsetting," says the former Toronto-based sales manager, who worked for the company for 20 years.

 

Dalessandro was laid off in March and Sears cut off her severance payments last month. This week, the retailer also cut her benefits and she got hit with an unexpected $400 dental bill.

 

"I'm opening all the bills right now and I'm like, 'Wow, wow, wow,' because you don't have money coming in. It's really affected me and my family," says Dalessandro.

 

"It's almost like what they took from us, they're giving to the executives downtown."

Sears management argues that the bonuses are necessary to ensure that important employees stick around to help rebuild the company as it struggles through bankruptcy.

While it may sound "cold and heartless" to some workers, putting money aside to keep key employees is considered a prudent move, says employment lawyer Adrian Ishak. "These KERPS are a necessary evil."

When a company is insolvent, Ishak explains, creditors line up to try to recoup their losses. While laid-off employees are considered low priority, retention bonuses for key staff — if approved by the court — often get top priority because those employees are needed to help restructure the company.

 

"Where you really need to incentivize are people at the top levels, those who are going to be responsible for elaborating the plan, as well as implementing it," says Ishak, a partner with Rubin Thomlinson LLP in Toronto.

 

If key staff manage to successfully restructure Sears, he adds, it will be the best-case scenario for the company's creditors. "If it's a continuing enterprise, there will be far fewer losers," he says.

But perhaps the most outrageous injustices can be found at the highest level of Sears senior management, where CEO Eddie Lambert has spent years laying claim to the company’s assets.

As we’ve reported, previously if Sears Canada were to go bankrupt, Lambert - also the company's largest shareholder - loses his equity stake, but he remains the company’s principal creditor. Already, Lampert has effectively laid claim to enormous amounts of the company’s assets through loans he’s made. His hedge fund, ESL Investments, also owns large stakes in Lands’ End and a Real Estate Investment Trust that gained control of some of Sears’ best properties in a $2.8 billion deal back in 2015, then leased them back to the company.

As is the case in many bankruptcy filings, the owners and managers of the company protected themselves while the company floundered. Now, Sears employees will need to make do without thousands of dollars in wages they had been anticipating.
 

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Idaho potato head's picture

I'm Shocked! Shocked I say!

CoCosAB's picture

Me to! The bonus are very small.

curbjob's picture

My grandmother told me of how they used Sears Roebuck catalog pages as wallpaper during the Depression  ... to add a little cheer so to speak.

Jim Sampson's picture

They are being so blatant about it...  people are starting to open their eyes and see the truth.  RISE UP ANTS...  RISE UP!!!

jcaz's picture

God forbid Sears should lose this spectacular upper-management team- they're clearly all-stars.....

Maybe Amazon can lure them away.....

Die, Bezos.

Offthebeach's picture

Good for Sears.  

Workers wake. up.  It's not a "family".

You aren't on a "team".

You are not an "associate ".

You sold a irreplaceable hour of your life for a couple of Big Macs.  Day by day, hour by hour, again and again for years.  You are a ditch digger.  

I can't stand Mewing,  deluded,  children labor.  The infantalism is pathetic.

 

Michigander's picture

"Where you really need to incentivize are people at the top levels, those who are going to be responsible for elaborating the plan."

You mean, incentivise the same people that fucked it up in the first place.

a Smudge by any other name's picture

Yes. Out with this along wtih all illusions of loyalty, hard work, respect for one's employer and fair reward for just day's labor.

SCREW ALL THOSE FUCKED UP TRADITIONAL VALUES.

It's all pathetic infantilism. So let's all adopt new pronouns and get funny haircuts and be shemales! Oh yeah and LETS ALL BECOME INVESTORS AND CONTRIBUTE TO THE NON PRODUCTIVE VAMPIRE CLASS!

You put it that way how can we not want to adopt new values?

Offthebeach's picture

We're talking Sears here.  The evil Sears tbat from 1880's-1960's was the Amazon/Wal-Mart of their day, "fairly" crushing mom and pop retailers in "our community ".......

Hey, it was a good gravy train for not too bright people.  In 40 years you'll be crying for Amazon going tapioca.   Hows about....its a ...J.O.B.  Nothing more.  Anything more and you have bought into corporate pap, or and, are a delusionist.  

F Sears.  They sell stuff. Bug deal..  They are not curing cancer, or foot fungus. 

Working stiffs don't shoo there, because Sears, its management...AND employees fked them. So working stiffs went were they were better treated.   

Agstacker's picture

I've always been told it was used as toilet paper.

CoCosAB's picture

And since when does Laid-Off SLAVES have the privilege of severance?

not dead yet's picture

Because the company agreed to it. Then the company backed out. The question that you and those giving an upvote should ask is why do the employees who sold the goods and serviced the customers that resulted in sales to keep the company operating, at all companies not just Sears, not deserve a severence but the execs who ran the company into the ground with their incompetence get generous severance packages along with retention bonuses. Before Sears merged with them KMart filed for bankruptcy too. The new head man brought in to "save" them brought in his own team and then with one of his first actions he gave them all huge loans that they didn't have pay back.

Solyndra, that poster boy of government stupidity, went bankrupt shortly after receiving a $500+ million government loan. Obama even visited the plant for a grand tour of solar panel making. Within months of receiving the loan Solydra filed for bankruptcy for the purpose of going out of business. Months prior to the filing they gave their executives generous bonuses and pay raises. Even worse they convinced the bankruptcy court to retain executives and give them large retention bonuses to wind down the company. Their idea of winding down the company was to shut down production and fill what orders they had in hand and rather than liquidating the remaining inventory and raw materials at fire sale prices to all comers they crushed what was left and sent it to the dump.

arby63's picture

My $12.50/hr. employees are virtually brain dead. They want no challenge. No responsibility. No future. 

 

That's why there are a few who will get paid a little to see it through. 

arby63's picture

I have employees who deserve nothing more than a swift kick in the ass. Period. 

Your sarcasm unfortunately doesn't have a good connection with Sears. 

sessinpo's picture

Sounds like management needs a swift kick in the ass for keeping those employees. Let me guess, they're union?

Son of Loki's picture

The little peeples.

They can always petition their Boy King, True-Doh.

 

Global Lizard Justin Trudeau Snubs Alberta on Canada Day- A Response from an Albertan


https://www.youtube.com/watch?v=XhiXSfbMwSc

gregga777's picture

"Sears argues that the hefty paydays are necessary to keep the management team from jumping ship as the company restructures."

 

Let 'em jump.  Better yet, let 'em jump from the top of the old Sears Tower in Chicago.  

Sears in Canada, AND eventually in the United States, are going to be liquidating everything.  They don't need a management team.  They need an auction house to sell off everything.  

The employees should be the ones to determine how much the management team gets.  I think that their answer would be, "YOU GET NOTHING!" for leading the company into oblivion.  

Sears everywhere one day will only be remembered by their collective tombstone on the CONporate Boot Hill cemetary.

Mr. Universe's picture

DING! DING! Yes folks coming to a mall near you soon, a vacant former Sears Store. They are dead and they know it, this was just wringing every last drop of blood money out of the Sears Turnip. Now someone tell me again how the corporatocracy isn't in charge?

arby63's picture

You're correct. They do. Let's just not make this huge assumption that these "management" types are making some huge sum of money. My god, we're building a lynch mob mentality. These foks are probably making $60K vs. the hourly folks who (if full time) are making $40K.

Geez.

waspwench's picture

Sears is not being restructured.   The upper management is asset stripping.   They will take everything with them when they jump ship.   There will be nothing left.   Sears execs. have been in this mode for several years now and the process is nearing the end.   That said, what is anyone with a brain (apart from the asset strippers) doing still working at sears? 

sessinpo's picture

Let's get to the point - Lampert.

Wile-E-Coyote's picture

Rope and lamp posts come to mind.

Offthebeach's picture

Are you riding to Sears rescue?  Sending them money?  Buying shares?  What do you care if a antique, badly run retailer, one of thousands goes tits up?  

There are too many retailers chasing too few customers.  Sooner Sears goes, the better.

Maghreb's picture

To busy funding settlements on the West Bank and the Gatestone foundation to pay their workers.......

arby63's picture

Grinding that axe to what audience? 

Sonny Brakes's picture

Yes, they are going down, but part of the reason retail is going down is that they can no longer find truck drivers to drive for them at the prices they are offering, but they have just enough to pay the very people responsible for this debacle before they make a break for the exits when they have their final bust-out.

Mr. Universe's picture

Yet the USPS subsidizes Amazon deliveries to the tune of $1.46 per package delivered by them.

https://www.wsj.com/articles/why-the-post-office-gives-amazon-special-de...

Sonny Brakes's picture

Never underestimate the gullibility of the American taxpaying public. 

arby63's picture

So where do you shop then? Amazon? Once they put everyone out of business (which is soon) then you will wait 6 months for a pair of socks---with no choice.

 

Sonny Brakes's picture

300 hundred million people on the planet can't even afford shoes. I know, bad example.

Offthebeach's picture

And here in New England, in the winter, every fat ass, lulu pant welfare twat is shuffling out of her sectiin 8 baby momma crib in flip flops or slippers to get some smokes or lotto tickets to waddle back to an afternoon of Jerry Springer.

yarpos's picture

plucked out the air I guess,  seems very low

ElTerco's picture

Only 300 million? Times must be good.

SmokeyBlonde's picture

B&M Retailers were F'ing with people long before Amazon ... poor quality, poor selection, poor service provided in an area requiring body armour and a tact team back-up ... Amazon took advantage of the idocy of Retailers, Mall Management, etc etc etc.

Unless one is 300+ pound LB LGBTQXYZ on the government dole or a high-level bankster or trust-fund baby, retail has been dead for at least a decade.

Bezo's may be evil, but he is just taking advantage of a situation created way back when Amazon was just selling music and books.

 

YourAverageJoe's picture

I'd be taking my severance out the door...little by little...till I finally got the axe.

With the Craftsman tools I'd be accumulating, I'd become a mechanic.

MANvsMACHINE's picture

Joe,

You are way above average.

Sincerely,

The Management

PS: No severance for you.

StagStopa's picture

Yaj: fuckin a. Screw these pukes everytime you got the chance.

XBroker1's picture

I'd imagine a LOT of stuff is already walking out the door, severance or no severance.

skipweston's picture

Sears Canada plans to dole out big bonuses to senior management while the retailer trudges through a painful restructuring, even as thousands of laid-off workers aren't being paid promised severance. This sounds familiar?

INITECH management has hired two consultants for restructuring/downsizing. The Bob's will determine which of our jobs is justified and the rest of us will be Fired. "Office Space"

arby63's picture

If you are hourly below $20/hour then what exactly do you expect? 7,000 golden parachutes for each of you? WTF?

Fartboxbuffet's picture

Its the jooooo way

Laughing.Man's picture

A forgone conclusion whenever I read about a bankruptcy of a corporation.

actionjacksonbrownie's picture

Is this the kind of "stupid shit" that J. Dimon was yapping about?

 

Didn't think so...

silverer's picture

I think Sears management should double the bonuses and pay for top execs. Teach the Canadians a lesson in where not to ever spend your money again. That would be in any store that sells over 2mm a year gross. Stick with Mom and Pop.

giorgioorwell's picture

ZH seems to be confused as of late, continuing worship at the altar of Ayn Rand style corporatism and the School of Mises, and then faking shock and dismay when workers get nothing...can't have it both ways, morons. 

pparalegal's picture

Man do you have that one wrong. Research politically connected leaders and socialized crony capitalism. Right out of Atlas Shrugged if you had actually read it.

giorgioorwell's picture

Yes, I read it, along with The Fountainhead, when I was an impressionable 19 year old, #1 there's no such thing as capitalism without crony capitalism and politically connected leaders.  The idea that there is, is as much as a fantasy as Marx's utopian proleteriat vision, and #2 the bigger piece of cognitive dissonance here is that ZH cares a shred for workers, which is what headlines like this one imply.  

arby63's picture

You've been a crony capitalist. Perhaps you didn't recognize it but I ensure you that you were. Did you mow lawn for your neighbor? Work at the local ice cream stand your cousin managed Handed out bowling shoes at the local alley where your sister worked? Maybe your uncle owned it?

I call bullshit. 

yarpos's picture

you have problems with context and scale

VZ58's picture

Crony captialism inevitably follows when morons like you elect bigger and bigger government to get more free stuff for themselves. You obviously never ran a small business and read the Cliffs Notes version of Rand's books.