Editorial: No bonuses should go to proven losers
If you dropped a bomb on a business and destroyed it, you would be charged, tried and sent to prison.
If you happen to be an executive with phenomenally poor judgment, you expect to get paid millions of dollars.
A proposed bonus plan filed by Furniture Brands International in bankruptcy court last Wednesday would give up to $3.4 million to seven top officers, and $2.17 million to 48 others, “if” they manage to lead the company out of bankruptcy.
Pardon us, but we think this is a rigged game. There already are two buyers lined up, one of which developed its plan together with Furniture Brands.
Furniture Brands says achieving the maximum bonus “will require significant efforts” by its top executives, but we don’t buy it for a minute. We will not be shocked if the target to achieve the maximum comes out somewhere around where the offer by Oaktree Capital Management already is.
In any case, under what system of logic would the same crowd of clowns and losers who drove the company into bankruptcy be deserving of any bonuses? This is a company that lost money for six consecutive years, has seen its revenue cut in half and was well down the road to money-losing year No. 7 when the cash ran out.
Analysts say Furniture Brands’ labels, including Broyhill and Thomasville, have lost market share (and, thus, value) because of mismanagement.
Pamela N. Danziger, president of marketing consulting firm Unity Marketing, recently wrote that the source of the company’s problems is that executives “kept doing business in the same old way, while everything else around them changed, most especially the furniture customer’s diminished taste for traditional styles sold in traditional furniture stores at list prices. The company got deeply into debt borrowing against the false assumption that once the recession eased, their old customers would come back to their brands. But that was a bad bet, since more aggressive, customer-attuned and innovative home furnishings companies changed with the times. Competitors like Restoration Hardware, which Furniture Brands didn’t even have to think about five years ago, has now emerged as a powerhouse since the recession.
“To me it is sad to see a once-great company with great brands go down the tubes mainly because they failed to respond to customer changes happening right under their noses, but that they failed to recognize.”
Got that? Furniture Brands went “down the tubes” because its top executives were blind to “customer changes happening right under their noses,” and this is the group that thinks it deserves bonuses? These are the people that the company desperately needs to retain? Why? What do they bring to the game? If Furniture Brands were a football team, these executives would be the players who fumble the ball in every game, and the CEO would be the coach who always calls the wrong play.
Budd Bugatch, an analyst at Raymond James in St. Petersburg, Fla., wrote in a report last week that Furniture Brands leadership compares unfavorably even against predecessor company Interco, which filed for bankruptcy protection in 1991:
“The stewardship of the current regime, however, was far worse in our view,” he wrote. “The cadence of change it attempted to orchestrate was destructive, not just disruptive.”
We agree with David Nicklaus, a business columnist at the Post-Dispatch in St. Louis, where Furniture Brands is based. Nicklaus wrote in a column this past weekend:
“It would be nice to see a judge stand up for transparency, and maybe even question the retention argument. Do creditors really need to retain the folks who ran the company off the rails in the first place?”