The real looters aren't protesters
The real looters aren't protesters
They're corporate executives paying themselves big bonuses while firing workers
The uprising sweeping the nation following George Floyd’s murder at the hands of Minneapolis police has been largely peaceful. Scattered rioting and looting — much of which has targeted multinational corporations with generous insurance policies — has been the focus of a disproportionate amount of media coverage, though the actual harm done is negligible. Even fears of mass protests resulting in a COVID-19 spike have proven to be unfounded.
But if bloodthirsty editors and producers are looking for some juicy looting, they needn’t look any further than at what’s currently being done by corporate executives. Unlike spray painting concrete buildings and breaking windows, corporate executive looting will almost certainly wreak lasting macroeconomic havoc. Here are seven companies that are simultaneously paying their own executives six-figure and seven-figure bonuses while firing, furloughing, or otherwise endangering the job security of their workers.
(This post is based on a Twitter thread by Gravity Payments CEO Dan Price, who famously cut his own pay from $1 million to $70,000 so he could raise employees’ salaries to $70,000.)
1. Hertz
According to the Wall Street Journal, Hertz Global Holdings made sure to pay out $16M in bonuses to senior executives days before filing for bankruptcy in May. Hertz CEO Paul Stone got $700,000, and CFO Jamere Jackson got $600,000. Meanwhile, 16,000 Hertz employees are now jobless as a result of the bankruptcy.
2. JCPenney
The pandemic took a toll on retailers, and JCPenney was no exception. The apparel company is “teetering on bankruptcy” after failing to make a loan payment, but still found enough money to pay CEO Jill Soltau a $4.5 million bonus as part of $6.5 million package of “retention bonuses” approved by the company’s board. The store’s approximately 85,000 employees weren’t so lucky — most of them were furloughed at the end of March.
3. Chuck E. Cheese
CEC Entertainment — the private equity owner of the Chuck E. Cheese children’s party venue that has 527 locations in 47 states— is already nearly $1 billion in debt, yet CEO David McKillips is getting a $1.3 million bonus. Most of its 15,000 employees, save for a few general managers, have been furloughed.
4. Chesapeake Energy
Oklahoma City-based utility company Chesapeake Energy has accumulated an astonishing $9 billion in debt — much of which is likely attributed to oil prices tanking during the pandemic — and Reuters is reporting that Chesapeake is discussing the possibility of bankruptcy after the company’s stock dropped by 91% this year. While the company did cut 2020 executive pay by anywhere from 28% to 34%, it’s still paying out $25 million to top executives. Nearly 10% of Cheapeake’s 2,300 employees have been laid off, and that number will likely claim if the company goes through with bankruptcy.
5. Frontier Communications
There’s no worse offender on this list than Frontier Communications. The Connecticut-based telecommunications giant is paying over $37 million in bonuses to senior executives in the midst of bankruptcy. Bloomberg reports that up to $21 million of that money is made up of “performance” bonuses for executives of the company that has more than $17 billion in debt, and whose stock is currently hovering around $0.12 per share. It’s unclear as of yet how the bankruptcy will affect Frontier Communications’ 18,000-member workforce, though the judge overseeing the restructuring has approved a $2 million “key employee retention plan.” That’s around 5% of the money approved for executive retention and performance bonuses.
6. Whiting Petroleum
Roughly a month after the World Health Organization declared the Coronavirus as an official pandemic, North Dakota shale producer Whiting Petroleum filed for bankruptcy. Days before doing so, Whiting’s board paid out $14.6 million in bonuses for top executives. CEO Brad Holly is getting $6.4 million of that for himself. Last year, Whiting fired a third of its workers, and more layoffs could be looming for its approximately 500 employees.
7. Borden
Dallas-based Dairy manufacturer Borden is bankrupt and roughly a quarter billion dollars in debt, mostly to its private equity parent company. Still, the company is paying $4 million in retention bonuses to top executives while the sword of Damocles hangs over the head of its approximately 3,300 employees.
There are plenty of other examples of other companies firing or furloughing workers despite being millions (and sometimes billions) of dollars in debt, going through bankruptcy, and still lavishing top executives with millions in bonuses. Dan Price’s thread includes Chapparal Energy, Extraction Oil & Gas, Philadelphia Energy Solutions, Fairway Markets, and even Purdue Pharma — the notorious manufacturer of OxyContin which went bankrupt last year but still paid its executives $35 million in bonuses.
Price grimly noted that the reason this pattern exists in the corporate world is that there’s nothing illegal about paying out these bonuses before a bankruptcy, and executives at the helm during a bankruptcy oddly have the best job security.
Corporate looting, along with a variety of other measures squeezing the working class, is pushing America further toward a major economic meltdown this fall.
The ironically named CARES Act — in which Americans were given a meager $1200 to survive on in March — will expire at the end of July. That means landlords can evict tenants who aren’t current on rent, small businesses will no longer be able to get federal loans to keep their doors open, and the extra $600 per week unemployed Americans were getting to supplement unemployment compensation will dry up.
As I wrote last month in Barron’s, cutting that extra $600 now would be a body blow to the economy, as that amounts to billions of dollars currently circulating in local economies that would suddenly cease. The Economic Policy Institute estimates that for every dollar spent on unemployment insurance, there’s a multiplier effect leading to a 1.64% increase in GDP. Thanks to people having unemployment checks to spend, a surge in the retail sector led to 2.7 million Americans who were initially laid off being rehired. Cutting off that money now would throw millions more out of work.
We’re already in a full-blown recession, with unemployment at its highest in decades. The economy is on the brink of depression, and corporate executive looting could push it over the edge.