Guillotine watch: The executives who bankrupted Toys R Us this year want $16M-$32M in bonuses for their performance


#1

Originally published at: https://boingboing.net/2017/11/30/merry-christmas-2.html


#2

If only I could get a bonus for when I introduce a bug into software at work, then this failing upward stuff would be fair.


#3

The stuff these buyout firms do should be illegal. They are just parasites that latch onto sickly companies and bleed them until they are dry.

The only remarkable part of the story here, though, is that the bankruptcy trustee is fighting the fees. I am reminded of the SCO bankruptcy, in which the company was still allowed to pay lawyers and advisors who had helped them in their quixotic drive to go after Linux customers for copyright violation, but the trustee wasn’t going to approve any payments to creditors such as Novell, which had won a judgement against them.


#4

Toy R Us was destined to fail because they bought the company that already had a huge amount of debt, with more debt. Their sales aren’t horrible, but no where near enough to pay back the debt.


#5

Vulture capitalists have destroyed so many chains that I preferred to shop at over the years. Mervyns, Casual Corner, K-Bee, Cub Foods…If I think about it a bit, other names will come to mind. While I don’t prefer to shop at ToysRUs, it is a damned convenient way to see a pretty big selection of available toys for those of us with younger kids.

@kiki - Yeah, this form of rent seeking should be illegal, but so should excessive executive pay. Neither will become so until such a time that the powers that be in the US stop pretending that money is speech.


#6

“Late stage capitalism” = “Looters gonna loot.”


#7

Will the court approve the bonuses? My reading of the tea leaves says it will.


#8

This is closer to leaving “logic mines” in the code that “explode” under certain circumstances/timings during performance to drop stock prices, allowing you to buy, or short sell for a profit.


#9

If I’m a Toys R Us stock holder, or junior debt holder – and these are the guys who can turn things around – dealing with $6-$7 billion in senior debt, $50MM in bonuses is nothing. They just had to borrow $1 billion for inventory. I want the best possible guys to work the problem, manage billions in debt, and hopefully restructure the company for the long term.

I have no idea if this team is the right team, but the last thing I want is to pay some guy who is willing to take on the job for $300,000/year. Because that guy will suck at his job.


#10

Won’t somebody speak for the poor CEO’s?

You know these bonus checks are chump change compared to what the Congress is set to give them, right? And their bonus doesn’t come out of your pocket - their tax cut does.


#11

My understanding is that just about every study that has looked at it shows little to no correlation between executive compensation and company performance.


#12

If the executives too the job (or stayed on at the job) because they were promised a bonus, then maybe they should get it. I was offered a big bonus once to stay on at a company that was shutting down to help with the shut down. I would have been pissed if at the end of that process I was denied my bonus.


#13

I say, give 'em each a pinwheel.


#14

I thought it was destined to sale because it sells everything at outrageously high prices and has only the mainstream schlock of toy selection.

You want the latest Ninjago lego set of 25 pieces priced at the reasonably low price of $249.99? Go to Toys R Us.
You want an amazing set of transformable and variable building blocks of 250 pieces for $24.99? go ANYWHERE but Toys R Us.

Want a craptastic Nikko 4x4 RC Buggy that runs on 28 AA batteries, is not water proof, and will break after 3 runs for only $199.99? Head on down to the Giraffe!!!
Want an amazing basher RC buggy that runs on a proper NiMH battery pack, has waterproof electronics, will handle any dirt, mud, snow, or sand you throw at it; and will last for years of fun for only $119.99? Head to your local RC hobby shop.

maybe that’s just me. We stopped going to TrU to shop for toys almost 10 years ago. /jaded


#15

I’ve earned bonuses too. That’s not the point. Were you ever given a bonus while you were bankrupting the company? That’s SOP in the private equity business.


#16

At my last big law job, in my last year, I probably billed clients ~$800,000; I feel they got a fair value for their service and I know my clients – through the partner – were happy to have me staff the projects. I was just a cog in a big finance project, and I assume the partners billed probably 2x that. So a $2.6MM pay day for a CEO managing this just doesn’t seem at all crazy to me.

That said, in looking a bit at the history, KKR, Bain and a real estate company bought out the existing shareholders at a multi-year high, so the only owners of the company are private folks who bought the whole thing for themselves and the shareholders got a pretty good deal for their shares. The current owners see this as a good way to try to fix the company and get a return on their investment.

Now, there may be a separate discussion to be had about LBOs in a general sense, or the contours of bankruptcy law, but the payout for these guys is a completely private matter, far as I can tell. No outside owner of the company is getting screwed, and if the alternative is the death of yet another retailer, I can’t see this deal as anything but an unalloyed good.


#17

This bankruptcy isn’t a liquidation, it’s a restructuring. GM did the same thing.


#18

I think the point is more how buying a company with debt, loading it up with more debt and flipping the assets is personally profitable for a few who go on to do it on repeat. They didn’t buy Toys R Us to bring the company back from the brink to begin with.


#19

That probably accounts for the meh sales, but if they weren’t so deep in debt they could still have been turning a profit with those sales.


#20

First off, the last people you want to a turn-around are the ones who drove it into the ground in the first place. That’s a non-starter. Second, the right people for restructuring are almost certainly not the same people for growth revitalization. Nope.

Third, this is nonsense. One of the best things you can do in this situation is get some different thinking in place. Even if you replace the entire C-suite with “even better” multi-$M CEO/CFO/CIO/CMO, etc, odds are good they went to the same set of B schools, similar experience, and belong to the same clubs. What has worked in other situations like this is to break the company down into smaller divisions and hire talented people with more practical experience in the more specific area. Don’t trust my word on this, go the the Harvard Business Journal.