Sears managers, executives get $9.2M in bonuses while thousands laid off
While 2,900 Sears Canada employees are losing their jobs, benefits and pension plans, the company’s CEO and senior managers are getting bonuses.
The managers are receiving retention bonuses over the next few months, under Sears Canada’s Key Employee Retention Plan (KERP). It was approved by the Ontario Superior Court this week.
According to court documents, KERP is designed to “create appropriate incentives for management to stay and focus on operation and to maximize value for all stakeholders.”
The retail chain will pay up to $9.2 million in retention bonuses to 43 executives and senior managers and 116 store general managers. The managers have to remain with the company for four months to get the full bonus.
For example, the CEO will be paid a retention bonus of $50,000 for two months in addition to his salary.
However, managers will receive an instalment of the bonuses after 45, 90 and 180 days, regardless of whether “key performance indicators have been met,” the documents said.
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Anil Verma with the Rotman School of Management said although this seems “perverse” it is typical to hand out bonuses to management when a store goes bankrupt.
“It’s so they can finish the job. They need the incentive to stay and not find other jobs,” he said.
“It’s like when a party is winding down and there is no one to clean up the mess. They need someone to clean up.”
Joel Shaffer, a spokesperson for Sears Canada said the point of the bonuses is to “support the best possible outcome for the business.”
“The lack of a KERP could contribute to worse outcomes,” Shaffer said.
2,900 employees out of a job
On June 22, Sears Canada said it was seeking court protection from its creditors and was planning to cut about 2,900 positions across Canada. The company also said it will be closing 59 locations as a result of its restructuring plan.
The terminated employees will not be getting any severance pay and will lose all benefits and pension plans.
Court documents show many examples of terminated employees who have written their concerns about the lay offs.
“I am one of the Sears employees having a termination without severance. I am 60 years old and have been employed 34.74 years by Sears Canada. I’ve always held a manager or assistant-manager position. The recent turn of events has seriously threatened the financial security and health of my family. The loss of severance is a significant loss.”
The husband of a Sears employee living with Alzheimer’s disease wrote about losing benefits:
“My wife is still employed by Sears but is on permanent disability, as she has end stages of Alzheimer’s. Now the store she worked at is closing. She is still considered an employee but with them closing the store how will that affect her and her benefits like long-term disability. If her benefits were lost I don’t know what I would do.”
Verma said although the retention bonuses are “normal” it still does not seem right when thousands of people are out of a job. He said there should be equity in this process, like giving bonuses to employees as well — not just the managers.
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