There are several lessons to be learned from the demise of Sears Canada. Linda McQuaig writes that one of the biggest is that the legal principle of "limited liability" leaves loyal employees in the lurch:
Whatever competitive pressures Sears Canada faced along with other big retailers, its controlling shareholders almost certainly made the company’s demise more likely with their decision to pay out more than $2.7 billion in dividends since 2005 to themselves and other shareholders.
Those dividends went heavily to its largest shareholder, Sears Holding, controlled by [Eddie] Lampert, according to Bloomberg and the Globe and Mail.
Forbes currently estimates Lampert’s wealth at $1.65 billion U.S., and describes the source of his fortune as “Sears, self made.”
Sears Canada might well have survived if some of the $2.7 billion paid out in dividends had been redirected into updating and redesigning its more than 130 stores to attract a new generation of shoppers.
If the company felt unable to compete, it could have, at least, set aside enough money to pay its employees severance and fully fund the company pension plan.
Instead, it left some 12,000 workers without severance and a shortfall of $270 million in its pension fund, leaving 18,000 retirees uncertain about collecting future benefits.
There was a time when employers were held legally responsible for what bankruptcy did to their employees:
Wealthy capitalists used to be personally responsible for unpaid wages when their businesses went under. But capitalists fought hard in the late 19th and early 20th century to win the right to limit their liability.
At first they won only a partial limit, but over the years U.S. and Canadian courts have extended that limit.
The change was fiercely resisted on the grounds that it would leave vulnerable employees in dire situations — like the situations faced today by thousands of Sears ex-workers.
But for decades, government and the legal system has been tilted in favour of capital. Employees supposedly got what trickled down to them. And, over the years, what trickled down slowed down.
It's time to re-balance the interests of labour.
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14 comments:
I just finished reading the McQuaig article, Owen. It is interesting to see the true neoliberal complexion of governments in all of this. Despite much public lamentation, except for a present push by the NDP and the Bloc via private members' bills, there seems little political appetite to amend bankruptcy laws so that pensioners become secured creditors.
Creative destruction. The masters of the universe figured out long ago how to make the mob version of the bust up legal and very very profitable.
I read that CARP -- the Canadian Association of Retired Persons -- is lobbying to change the law, Lorne. We'll see if their membership scares any of the parties -- particularly the Liberals.
They've been making the world safe for capital for a long time, Steve. We'll get a lesson in how to lobby political parties.
.. probably time to start naming & shaming all of those that are skating off with the Sears money.. and why should they have any legal concerns? They're 'entitled' non ? Reminds me of the Big Energy machinations to fold aspects of their drilling ops and tailings ponds & leave Albertans or British Columbians with the toxins, seeping wells, methane plumes ie what will likely never be mitigated, cleaned up, sealed or restored.
That is how 'the game' is played.. its a financial shell game called 'Sellout'. And after species & habitat are extirpated, the citizenry robbed blind, the land, sky waters depoiled forever.. the subsidized multinationals relocate to their villas or new locales, their yachts etc.. and donate to or host the likes of Rona Ambrose & rodeo boy, Justin Trudeau - family & nannies or any other willing n able 'public servant' a la Nigel Wright or the esteemed bagman Brian Mulroney, Excrament Levant or toxic losers like Paul Godfrey.. Its a social circle above all.. the rest (governance) is just political pattycake posing, musical chairs cabinet shuffles & sheer window dressing - Potemkin Villages R Us
As always.. merci beaucoup for your well reasoned, sage & timely posts & hosting
Perhaps I look at this issue too simply, Owen. When you do business with a lawyer, for whatever, reason, and you hand that lawyer money that will ultimately be delivered in accordance with the agreement between lawyer and client, said money must be deposited in what is generally referred to as a "Trust" account. By law, the lawyer receiving these funds is not allowed to use said funds to prop up the business of running his law firm. Many lawyers have been caught doing just that and face the wrath of his/her respective law society.
Why, then, in heavens name are funds contributed to registered pension funds not covered by the same laws and conditions? And yet, companies in Canada (and the US - remember Enron and all that entailed) still continue to those funds that should be considered held in trust and therefore not touchable, to bolster and subsidize their company's bottom line even to the point of paying higher rewards to their executive as well as distribute this largesse to their shareholders if they exist.
Is there no politician in this vast country of ourselves that does NOT see a problem with this disgusting practice that puts every employee who participates in a registered pension plan at risk in their retirement years. Which, by the way, makes them some of our most vulnerable citizens. It's just not the current working middle class our current politicians should be concerned for -- it is also our RETIRING middle class that should also be considered
The moneyed network is alive and well, salamander. And you can bet your last dollar that they will pull out all the stops to avoid more liability.
The legal analogy is telling, Lulymay. And, as McQuaig writes, things used to be different. But political support comes at a cost.
The whole employee benefit industry is nothing but a scam, Owen. Unless the employees themselves have the ability to decide where such funds are 'invested' and the ability to transfer such funds to their own plans its just a corporate cash grab. IMHO if its not in your bank account in one form or another one should not expect it to be still there when needed.
Several years ago, in Ontario, there was a dispute between teachers and the province about who and how to manage the Teacher's Pension Plan, Rural. Originally, pension money went into government bonds. The dispute was about diversifying investments and who controlled those investments.
A strike settled the issue. When it comes to pension money, capital likes to hold its investments close.
Yes it is time for reform, a restructuring of priorities under our bankruptcy and insolvency legislation. Secured creditors have huge advantages over employees and ordinary suppliers. They can compel the company to regularly furnish current financial data. They have a chance to monitor and re-evaluate their risks and revise their dealings accordingly.
Pension funds are at a lot of risk these days. How much of their holdings winds up invested in potentially perilous assets such as fossil energy? What happens to their beneficiaries if the carbon bubble bursts?
I have no confidence that any Liberal or Conservative government will take the action needed to fix this. Take a look at the Isle of Man/KPMG tax evasion scam. Do you think KPMG has lost its intimate ties with the Liberal government? Hardly.
The folks who control large pools of capital are very good at managing risk, Mound. They'll use their political connections to ensure their advantages. Ordinary folks don't control large pools of capital.
Knock on wood the managers of the Teachers pension fund have been brilliant. I think the same can be said of the SI fund. However one bad apple and its all Nortel.
It can be done, Steve. It all depends on how the retirement plan is structured and who controls the investments.
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