Another Front in the Battle Against Working People

A couple of months ago The Curmudgeon wrote about the death of the Toys R Us chain.  As he noted at the time, while business hasn’t been great for years, it also wasn’t bad enough, in and of itself, to cause the company to go under.  The primary reason for Toys’ failure was that it had been purchased by venture capitalists – in this case, Bain Capital and the firm of Kohlberg Kravis Roberts – that borrowed so much money against the company’s assets to finance the purchase that it was the cost of repaying those loans from this leveraged buy-out, rather than lack of sales, that caused the company’s demise.  And why a leveraged buy-out?  Simple:  instead of using their own money, the venture capitalists used the resources of the company they bought to pay for their purchase.

It’s as backwards as a farmer eating his seed corn rather than planting it.

Now, it turns out that the venture capitalists who own the company, and who led it down the tubes, have a final parting gift for the people who are working for the company during its final days.

The Philadelphia Inquirer explains.

Toys R Us isn’t paying severance to its 30,000 workers who will lose their jobs as the retailer shuts down, even though it doled out millions in executive bonuses a week before it filed for bankruptcy. 

 Those “executive bonuses”?  The Inquirer resumes the story.

 Last year, Toys R Us awarded executives $8 million in bonuses a week before filing for bankruptcy. A few months later, the company got approval from a bankruptcy judge to pay up to $21 million in additional bonuses to executives if they met certain performance goals. (That money was never awarded because the company’s performance fell short.) Chief executive Dave Brandon received $11.25 million in compensation last year.

So there we have it:  the executives who helped lead the company on its fast track to oblivion got millions in bonuses for their incompetence while the people who depend on their barely-more-than-minimum-wage salaries for incidentals like food and rent and to pay doctors’ bills get…nada?

 Yes, that’s how it goes in the business world today: the rich get bonuses and the working people get the shaft.

And the likelihood of that only increases when venture capitalists are involved.

 

 

 

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