Eddie Bauer Blues

There has been a flurry or recent new stories about a former employer of mine; Eddie Bauer. The shareholders rejected a sale of the company to private equity firms and the CEO abruptly, after the rejection of the sale, quit. The news of this brought a smile to my face followed by a moment of apprehension. I’m happy because the sale was just another example of inequities in the American economy, yet I’m fearful of the future of the company and friend I have that still work there.

The company, which has struggled as of late, was being sold for a bargain basement price. Yet, the executives and the board of directors did nothing to renegotiate or find a better buyer; they were in full support of the deal. This is to be expected; at least four of the company’s top executives were in line to make off with multi million dollar payouts if the sale had gone through. They had no motivation to look out for the shareholders or the impact to the thousands of employees, their incentive was just to make the sale go through so that they could just cash out and bedone with all the difficult work of trying to save the company.

What was more frustrating to me was that three of the top four executives on this multi-million dollar bonus list were all new to the company. The CEO, the CFO, and the head of legal were not responsible for what value the company had left. During their tenures they did nothing to build the brand, they were not responsible for the stock price (despite how meager it was, it had value because of the name Eddie Bauer). During their short tenures, the company did nothing but loose money. Yet, they were going to walk away with millions. If the rank and file can’t perform and are dismissed, do they leave with cushy packages that represent multiple years of salary and benefits? No. This is a huge double standard in the corporate world. Could you imagine getting a job where you were paid several hundred thousands of dollars a year and, after two years of failing miserably, you would get to quit with a 2 million dollar paycheck for your failure. No. Well, call the current Merchandise officer of the company, she’ll tell you all about it.

It was nice to see the shareholders stand up for a change and reject this deal that was not in their interest or in the employees favor. Eddie Bauer faces some troubles though. It’s has completely lost focus and has strayed so far from the Eddie’s mission when he started his store in downtown Seattle that I don’t know if it can ever recover. The retail space where Eddie used to stand is now saturated with the REIs, the North Face’s, and other outdoor apparel companies. Despite that Eddie Bauer invented the down coat, the badminton shuttle cock, and introduced the Labrador retriever to the northwest; the brand no longer has any more credibility among the outdoor enthusiast crowd. It’s a shame that the company that outfitted the first expedition by a North American team to Mt. Everest can’t even make a decent coat anymore. Whoever made the decision to chase the GAP, Inc crowd in the late 90’s should be forced to gather round and apologize at Eddie Bauer’s grave. I’m worried that without the capital investment, though, and someone to acquire the debt the executive acquired, that the company will soon have to shutter it’s doors. I fear for my former employees.

It's not that I am against executive pay per se. One of my law school peers who is older and, I'm assuming given that he hold several patents on Microsoft Excel, did very well at Microsoft before retiring, was teasing me that someday he would chide me for taking my million dollar payout. I told him that I didn't mind executive recieving large bonsues or getting paid million for the work they do. But, what I do mind is payouts that are completely disconnected from performance. Pay for performance is the mantra that executive live by, they refuse to pay employee unless they perform. Executive dismisse employee who don't perform up to their standard. And these employee dismissed by executive don't get "parachutes". So, I am merely against the double standard.

It's not that I am against executive pay, per se. One of my law school peers who is older ( and I'm assuming given that he hold several patents on Microsoft Excel, did very well at Microsoft before retiring) was teasing me that someday he would chide me for taking my million dollar payout because I was complaining so loudly about this incident. I told him that I didn't mind executives receiving large bonuses, or getting paid millions for the work they do. But, what I do mind is payouts that are completely disconnected from performance. Pay for performance is the mantra that executives preach everyday; they refuse to pay employees unless they perform. Executives often dismiss employees who don't perform up to their standards, and these dismissed employees don’t get similar "parachutes". So, I am merely against the double standard. This is merely a form of corporate welfare. It lives on because the people who have to decide such issues are the same people who benefit from such practices. I also don’t buy the “market forces” argument purported by people like Jack Welch to justify these types of compensation practices. Despite the underlying market forces that drive these decisions, it’s still morally wrong to offer millions to those who have failed, have had to lay off thousands, destroyed careers, and left a wake of destruction. That money should be reinvested in the company and employees. People shouldn’t comply with immoral practices and use the banner of “market forces” to absolve themselves. Okay – off soapbox.


Anyway, if you want to read about such things:

Stockholder Reject Sale
CEO Quits
Executives to Receive Payout if Sale Proceeds.