Tuesday, April 2, 2019

Sears Executives receive $25 Million in Bonuses as Workers are laid Off (Oct-Dec 2018)

Ethics Case Controversy 

   In October of 2018 Sears Holdings announced their plans to award 25 Million Dollars in Bonuses to Sears top executives and senior level employees.  Sears Holdings is the parent company of Kmart and Sears, it was founded by Richard Warren Sears and Alvah Curtis Roebuck in 1893.  Today with over 140,000 employees (January 2017) it is one of the largest retailers in the world..  In effect of this and not properly adapting, Sears lost a severe amount of sales and was on near brink of closing.  Sears was forced to fire 50,000 employees and closed 142 stores.

   In order to save the company from its massive debt, Judge Robert Drain authorized a deal to allow Sears to file for Chapter 11 bankruptcy.  This type of bankruptcy allows a corporation to reorganize its business affairs, debts, and assets.  It will allow a company to stay alive and operating when they were about to go out of business.  Chapter 11 bankruptcy allowed Sears to free up 25 Million Dollars.

   This left former Sears employees who were fired outraged.  NBC News describes Ondrea Patrick’s, a Sears laid off worker, explains her reaction to being fired.  “Those top people and (Sears CEO Eddie Lampert) are having a wonderful Christmas,” Patrick, 36, told NBC News. “They got $25 million in bonuses. Me? I’m late on my bills. The electric company is threatening to shut me off. And I don’t have anything left to spend on the kids this Christmas.”  She explains how it infuriates her how she will have to rely on an unemployment check and executives will be given a hefty bonus. Shelia Brewer is another example of a Sears employee who was fired.  Shelia Brewer worked at a Sears for 17 years until she was fired in September (before bankruptcy was declared).  Brewer was promised eight weeks of severance.  Instead, she received a letter saying here severance payments were stopped due to the bankruptcy.  She explains how this came at a very hard time in her life and she needed that money.  Sears claimed there was no money to pay severances, however there was enough money to pay executives bonuses.           


   The Sears controversy has a few key stakeholders involved.  These stakeholders include former Sears employees, Sears executives receiving the bonus, current sears employees, and customers.  Former Sears employees like Ondrea Patrick and Shelia Brewer were fired without given any kind of severance pay.  Sears executives including former CEO Eddie Lampert were given a 25 Million Dollar bonus as incentive to not leave the company and stay along.  Current employees were left with the uncertainty of how solidified their job status was going forward.  Finally, potential customers may be less interested in shopping at Sears if they do not agree with how they handled this controversy.  All these Stakeholders have interest and effect in this controversy that was discussed above.


   Individualism states, the only goal of a business is to profit, so the only obligation that a business has is to maximize profit for stakeholders.  This ethic viewpoint was created by Milton Friedman, he believed the obligation of a business is to simply maximize profits for stockholders within the law.  Any money spent on employees, the community, the environment is wrong and essentially stealing.  This would be taking away from the only goal which is to maximize profits for the stockholders within the law.  Friedman once said "The key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation... and his primary responsibility is to them" (Business Ethics, Desjardins).  This quote means, a manager is loyal to the owners, and any decision they make should be in the owner’s best interest, not anyone else.  From an Individualistic perspective, this case would be viewed as unethical because Sears actions were not to maximize profits.  While closing many stores would be considered ethical by Individualism, giving the freed up money to executives is where this controversy becomes unethical.  These executives who were rewarded are the same people who were in charge and led the company to bankruptcy.


Ondrea Patrick and her family
   Utilitarianism is maximizing happiness in yourself, others and in fact all living beings.  A Utilitarian believes happiness or pleasure are the only things that truly matter and are of intrinsic value.  When looking at this view from a business standpoint, all decisions must be made by looking at what is in the best interest of all parties.  A utilitarian would view this case as unethical because Sears fired thousands of employees and left them without severance pay.  These former employees were left extremely unhappy because they do not have a job anymore.  Also, Sears filed for Chapter 11 Bankruptcy which allowed the company to free up millions of dollars. Instead of using this money to keep employees from being fired, give fired employees severance, or put in a new plan to turn around the company.  Sears chose to reward the executives who led the company to bankruptcy.  This only led to further make former employees unhappy.  Although the executives were happy by receiving the 25 Million Dollars in bonuses, are these really the people Sears wants to lead the company.


   Kantianism is to "act only in those ways in which the maxim of our acts could be made a universal law" (Desjardins, 38).  Kantianism believes in things being morally okay, it does not have to be good but it must be morally permissible.  One must respect people and their needs, they must be motivated by good will.  A Kantianism viewpoint would say this case is unethical because Sears is disrespecting their current and former employees by firing a good portion of them with no severance and then giving 25 Million Dollars in bonuses.  When a company closes stores and fires employees, it usually indicates the company has no money left to pay these employees.  However, in this case Sears had at least 25 Million Dollars of liquid money they could have used to keep employees and give severance to employees they were forced to fire.  Interviews from Ondrea Patrick and Shelia Brewer explain how former Sears employees feel extremely disrespected.  Both Patrick and Brewer were fired near Christmas and did not have enough money to buy their families gifts.  However, the executives in charge, who led the company to bankruptcy, were rewarded with a hefty bonus.  This situation breaks the formula of humanity because Sears treated their employees as means by just firing them and giving bonuses to the executives.

Virtue Theory

   Virtue Theory focuses on four characteristics that must be met in order for a business’s actions to be deemed ethical.  The four characteristics of Virtue Theory are courage, honesty, temperance/self-control, and justice/fairness.  The courage characteristic is risk-taking and willingness to take a stand for the right ideas and actions.  The honesty characteristic is in agreements, hiring and treatment of employees, customers and other companies.  The temperance characteristic is “reasonable expectations and desires” (Soloman 34).  The justice characteristic is hard work, quality products, good ideas, and fair practices.  For a situation to be considered ethical by Virtue Theory, all these characteristics must be met and in this order.  However in the Sears case, these characteristics were not all met so the situation is deemed unethical by Virtue Theory.  Sears did not display courage during this case, they took the unrisky/easy way out by firing employees and using freed up cash to rewarding the executives that led the company to bankruptcy.  If sears would have stood up for what is right and used the 25 Million Dollars to put in a new plan to save the company, then Virtue Theory would deem them as having courage.  Sears did not display honesty during this case because they said and promised things to their employees that they did not fall through with.  Sears told employees like Shelia Brewer that when they were terminated they would receive a severance pay.  However, that severance was never payed because the company filed for bankruptcy.  Even though they told their employees this, Sears had an available 25 Million Dollars that they used to pay their top executives.  Sears did not display temperance/self-control during this case because they took the easy way out and rewarded the executives instead of looking for a new plan that can save the company.  Finally, Sears did not display the last characteristics of justice because generally there idea of spending 25 Million Dollars to keep the executives does not display hard work and it was not a good plan.  In effect of the Sears case failing every characteristic of Virtue Theory, it would be deemed unethical.

Justified Ethics Evaluation

   In my opinion Sears acted unethically and unmorally in this case by firing thousand and employees and giving a 25 Million Dollar bonus to its executives.  I understand in business times get tough and a corporation may need to fire a portion of its employees in order for the business to not go under. I also understand that Sears gave the executives 25 Million Dollars so they would not leave the company.  However, I felt it was unethical to give the people who led the company to bankruptcy a hefty bonus instead of using that money to fire less employees and also give the fired Sears employees some sort of severance package.  Sears had no regard for these employees who worked very hard and rewarded people who were truly at fault for the demise of the company.

Action Plan

   The current issue at hand is Sears closed hundreds of stores and fired thousands of employees when they did in fact have liquid cash.  They chose to give this liquid cash of 25 Million Dollars as bonuses to the top executives of the company.  The fired employees were left outraged that they were let go with no severance and the executives were rewarded with a bonus when they were directly in charge of the company when it was led to bankruptcy.  To solve this issue, Sears must first get rid of all the top executives in charge of the company. Sears must bring in executives who actually want to be there and who can adapt to new times.  Next, Sears must use that 25 Million Dollars to retain a portion of its employees it was planning on firing and offering a severance package to the employees it did fire.  The last step to resolve Sears issues is to change its business strategy.  Sears has been unable to keep up with changing times and Amazon has taken away its customers.  To solve this, Sears must focus on what Amazon lacks.  When someone is making an expensive purchase for a retail item (For example a Refrigerator or Washing Machine), they do not want to just buy it blindly on Amazon.  A large portion of people want to go and check out that item before they buy it.  Sears should appeal to these people by focusing on customer service so employees can answer any questions.

   Sears new Mission Statement will be: Our mission is to enhance the customer with the knowledge and power to find the perfect appliances for their needs.  A set of Core values that Sears will implement are Customer Satisfaction, Honesty, self-improvement, and Teamwork.  Customer Satisfaction is the number one goal, if the customer is happy and feels they were given the best information possible to make a great decision on appliance.  Then that is all that we care about.  Honesty reflects our company culture, we mean what we say and we do what we say.  The next core value is Self-Improvement, from top to bottom everyone in Sears is always looking to improve and be better.  The last Core value is Teamwork, the best way to help the customers is for our employees to have great teamwork and communication skills to give them the best experience. In order for the company to flourish after the controversy, a set of protocols will be established during any kind of hiring, firing, and promoting process.  Sears will implant a set of standards for what they are looking in an employee.  These will be the guidelines for any hiring, firing, or promotion.  In order to fix Sears image with the public, they will come out with a statement explaining the 25 Million Dollars that was going to be given to the executives is now being used to keep a portion of the fired employees employed, and the rest will be given out to as severance to employees that are fired.  Next, Sears will introduce its new executives and their plan to focus on Customer Service and empowering customers to make the perfect purchases. This plan will promote business profits and productivity because it focuses on what Sears’s competitor Amazon lacks.  When a customer is making an important and expensive purchase for an appliance, they will want to go in, check out the product, and absorb as much information as possible.  If this plan is followed through the profits and productivity will increase. 

- Josh Schultz
Works Cited
Cain, Áine. “Sears Is Catching Heat for Dedicating over $25 Million to Exec Bonuses While Reportedly Cutting off Severance for Laid-off Store Workers.” Business Insider, Business Insider, 17 Dec. 2018, www.businessinsider.com/sears-exec-bonuses-reactions-2018-12.
Calfas, Jennifer. “Laid-off Sears Workers Fume as Execs Get $25 Million in Bonuses.” 20 Jobs That Will Be Replaced by Technology, 20 Jan. 2018, www.msn.com/en-us/money/companies/laid-off-sears-workers-fume-as-execs-get-dollar25-million-in-bonuses/ar-BBRb18U.
Isidore, Chris. “Bankrupt Sears Wants to Give Executives $25 Million in Bonuses.” CNN, Cable News Network, 16 Nov. 2018, www.cnn.com/2018/11/16/business/sears-executive-bonuses/index.html.
Siemaszko, Corky. “While Sears Execs Get $25 Million in Bonuses, Laid-off Workers Struggle during Christmastime.” NBCNews.com, NBCUniversal News Group, 18 Dec. 2018, www.nbcnews.com/news/us-news/while-sears-executives-get-25-million-bonuses-laid-workers-struggle-n949446.
Zumbach, Lauren. “Sears Slashed More than 50,000 Jobs Last Year.” Chicago Tribune, Chicago Tribune, 23 Mar. 2018, www.chicagotribune.com/business/ct-biz-sears-employee-cuts-store-closures-0324-story.html.

Salazar, Heather. The Business Ethics Case Manual: The Authoritative Step-by-Step Guide to Understanding and Improving the Ethics of Any Business. Print.

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