It's Time

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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Another Canary In The Coal Mine

Everyone these days focuses on the middle class as the engine which drives the economy. However, Susan Delacourt writes, the shuttering of Sears stores across the country tells the story of what has happened to the Canadian middle class:

Retail analysts have been warning for some time now that e-commerce is threatening the very nature of shopping.

Those same analysts are saying, however, that you can’t draw a straight line between the rise of digital shopping and the downfall of the big stores like Sears or Zellers.

“The bigger thing is the shrinking of the middle class,” Barry Nabatian, market research director of Shore-Tanner Associates, told Ottawa’s local CBC Radio morning show this week. 

Neo-liberal economists, like Joseph Schumpeter, call it "creative destruction." But there's nothing creative about it:

The current troubles in the Canadian retail business have at least three dimensions, fallout-wise. When things go badly, we have to worry about the people who work in the stores, the people who shopped in the stores, and, as a Star story pointed out this week, all the businesses that supply the shops, too.

“The list of suppliers left in the lurch by the Sears Canada insolvency reads like a who’s who of retail and it circles the globe,” the Star’s Francine Kopun wrote, describing the tens, sometimes hundreds of thousands of dollars Sears owes to a vast array of businesses whose products fed into the once-great store empire.

That's a lot of destruction. The death of Sears is another canary in the coal mine. There have been several since the financial meltdown ten years ago. But the powers that be don't appear to be paying attention.

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Vulture Capitalism

Sears -- both here and in the United States -- is on its deathbed. These are not easy days for retailers. Companies like Amazon have changed the rules. But, Alan Freeman writes, if you want to know the real reason Sears is about to go under, take a good look at Eddie Lampert:

Lampert is no small-time guy. A hedge fund billionaire, he hit number 67 in the Forbes List of the 400 Richest Americans. His 288-foot super-yacht (named The Fountainhead after the novel by Ayn Rand, goddess of the libertarian right) is reportedly valued at US$130 million. In 2012, as Sears in the U.S. was reporting a US$2.4 billion loss, Eddie bought himself a US$40 million mansion on Indian Creek Island in Florida.

Lampert owns 45 per cent of Sears Canada. Sears Holdings, also controlled by Lampert, owns another 12 per cent. The stock is now essentially worthless.

In the meantime, thousands of retail workers at Sears Canada — who worked for decades for modest wages in the expectation of severance pay if they lost their jobs, and a defined-benefit pension when they retired — now find they aren’t getting a cent in severance and risk seeing their pensions reduced significantly. (Sears Canada has sought court protection from its creditors in the hope of reviving the business or selling it off. Neither prospect seems likely. It probably will end up in liquidation.)

The U.S. parent, Lampert-controlled Sears Holdings, is in only slightly better shape. It announced in March that “substantial doubt exists related to the company’s ability to continue as a going concern.” It too has been selling off assets for years as customers flee its stores and the company continues to add to its losses.

One of Sears' former CEO's -- Mark Cohen -- has Lampert's number. He now teaches at Columbia University's business school. Lampert, he says,

“seemed to think he was smarter than anyone in the retail business but he had no idea how to run the company from Day 1. One thing I teach is that core competencies are the basis for success or failure. Lampert had no experience in retail and no management competency whatsoever.”

Sears will go the way of Simpsons and Eaton's. Their employees are up the creek. But you can bet that Lampert will try to sail his yacht in any puddle he finds before him. And, who knows, one day he may become President of the United States.That seems to be what happens to vulture capitalists these days.

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