Oct 25, 2004
Kmart just replaced its CEO, Julian Day. During Day's reign, Kmart's sales dropped from 36 billion dollars in 2001 to 23 billion in 2003.
Despite what seems like a dismal performance, Day will leave the job over 110 million dollars richer. He holds stock options currently worth 105 million dollars. He received one million dollars in salary for 2004 and will get an additional cash payment of two million dollars. He stands to receive another 1.5 million in long-term performance awards. On top of that he will receive a bonus for 2004 that has yet to be announced.
So why such a big golden parachute?
In fact, Day was rewarded for doing exactly what the bosses wanted him to do. He cut 66,000 workers from Kmart's payroll and closed at least 600 stores.
The stores were not closed because they were not producing. Many of these stores were among the company's most profitable. Kmart simply sold the stores to raise cash, letting it pile up almost three billion dollars in cash. And, instead of investing the cash in its remaining stores, it is putting the money in securities and other financial-services businesses.
It does not matter that communities are left without stores, that workers lost their jobs, nor that retirees who had money in Kmart stock lost their savings when Kmart declared its old stock worthless.
What matters for Kmart executives is what always matters most for capitalists. Their aim is not to produce and sell things that people need or to provide jobs. Their goal is to find the quickest way to turn a profit. These days, financial wheeling and dealing fit the bill.