4 ms·

What kinds of regulation can the government pass to make it illegal for vulture capitalists to raid companies like this?

AnimalMuppet 8y ago
Why should it be illegal? If Sears has more value being shut down than kept running, why shouldn't it be shut down?
- amyjess 8y ago
  Because this kind of raiding is harmful to society.
  - mikestew 8y ago
    How is it harmful? Sears was an empty shell long before the raiders showed up. They'd pissed away brand goodwill for years. 1993, they shut down their catalog operation. A year later, Amazon is founded. That long air-horn sound? Yeah, that's the boat you just missed, Sears. I could go on, but for all his faults Lampert is an unpleasant symptom of an untreated disease Sears has had for a while, not the disease itself.
    - philjohn 8y ago
      Because it allows you to get out of paying things like pension liabilities, or suppliers.
      - mikestew 8y ago
        Sears was headed toward bankruptcy with or without private equity. My question is specifically addressed at the harm of private equity picking the bones of what is already some pretty sorry looking roadkill. Those pensions and suppliers weren't going to get paid no matter who owned Sears, not at the rate they were going before Lampert showed up.
    - jstarfish 8y ago
      You're not wrong about its protracted demise, but people still paid money to get on the Sears boat based on good faith that the previous captains may have sucked, but the current one wasn't hellbent on ramming it into an iceberg, collecting the insurance money and leaving the passengers and crew to drown in his wake. The little people whose pensions and funds are either wholly or partially dependent on Sears are hurt by such malfeasance. That's not what the CEO of a company is supposed to do. It's unethical (for what little that means anymore). You might as well question how an IVF doctor implanting his own sperm in unsuspecting patients is harmful-- they wanted to get pregnant, right? I haven't read it, but I doubt that plan was enumerated in the Sears prospectus when Lampert took the helm. Letting such behavior go unchecked undermines faith in the economy-- the growth of which is fueled by peoples' ignorance of everything being out to fleece them.
- chipotle_coyote 8y ago
  While this doesn't answer your question directly, there's a good case to be made that Sears lost a lot of its value due to the way its current owners have run the company. Brick-and-mortar retail is obviously a tough business to be in these days even under the best of circumstances, but Lampert arguably made Sears's circumstances much, much worse than they needed to be. I won't rehash all the arguments about that here -- you can look them up yourself if you're interested -- but he did a lot of things that seem to be shortsighted and stupid. To answer your question more directly, I think a more abstract case could be made that this is a failure of vision endemic to the way we currently implement capitalism: the whole value of running a company long-term -- to shareholders, employees, and customers -- may be greater, on a sufficient time scale, than the value of stripping the company for parts, but you can get a higher short-term return on investment by stripping and re-investing the income somewhere else, letting the full economic costs of the company's collapse (which, again, go beyond the cost to the shareholders) fall on others. I don't think this is good for society in the long run. I also don't think it's somehow required by merciless capitalist logic. However, I'm not sure how one can craft regulation to "solve" this without a high risk of creating more problems than one avoids. Sears may not deserve what's happened to it, but that doesn't mean it deserves to be saved, either, especially in its current state. It's easy to imagine well-intentioned laws creating zombie businesses rather than shielding salvageable ones.
- wvenable 8y ago
  Except it didn't -- the raid makes one very small group of investors a lot of money at the expense of literally everyone else.
- darkarmani 8y ago
  Self-dealing? It pretty much looks like asset laundering to get the assets free of the debt.
  - AnimalMuppet 8y ago
    If Sears sold some assets to Lampert's holding company for less than they were worth, there are probably laws against that (though proving it in court may be a different matter). But if Lampert's holding company was the high bidder, why shouldn't they buy the assets?
howard941 8y ago
Dollar-for-dollar clawbacks by the Fed pension guarantee fund of the vultures' bounty + tripling the fraudulent conveyance lookback period, for starters.
- toomuchtodo 8y ago
  Allow the Pension Guarantee Corp to put distressed concerns into receivership as if they were a first priority debt owners (secured creditors essentially). Pensions get paid out first, whatever is left can go to debt holders (with equity being wiped out).
refurb 8y ago
You’d like to make poor business decisions a crime?

AnimalMuppet 8y ago

Why should it be illegal? If Sears has more value being shut down than kept running, why shouldn't it be shut down?

amyjess 8y ago
Because this kind of raiding is harmful to society.
- mikestew 8y ago
  How is it harmful? Sears was an empty shell long before the raiders showed up. They'd pissed away brand goodwill for years. 1993, they shut down their catalog operation. A year later, Amazon is founded. That long air-horn sound? Yeah, that's the boat you just missed, Sears. I could go on, but for all his faults Lampert is an unpleasant symptom of an untreated disease Sears has had for a while, not the disease itself.
  - philjohn 8y ago
    Because it allows you to get out of paying things like pension liabilities, or suppliers.
    - mikestew 8y ago
      Sears was headed toward bankruptcy with or without private equity. My question is specifically addressed at the harm of private equity picking the bones of what is already some pretty sorry looking roadkill. Those pensions and suppliers weren't going to get paid no matter who owned Sears, not at the rate they were going before Lampert showed up.
  - jstarfish 8y ago
    You're not wrong about its protracted demise, but people still paid money to get on the Sears boat based on good faith that the previous captains may have sucked, but the current one wasn't hellbent on ramming it into an iceberg, collecting the insurance money and leaving the passengers and crew to drown in his wake. The little people whose pensions and funds are either wholly or partially dependent on Sears are hurt by such malfeasance. That's not what the CEO of a company is supposed to do. It's unethical (for what little that means anymore). You might as well question how an IVF doctor implanting his own sperm in unsuspecting patients is harmful-- they wanted to get pregnant, right? I haven't read it, but I doubt that plan was enumerated in the Sears prospectus when Lampert took the helm. Letting such behavior go unchecked undermines faith in the economy-- the growth of which is fueled by peoples' ignorance of everything being out to fleece them.
chipotle_coyote 8y ago
While this doesn't answer your question directly, there's a good case to be made that Sears lost a lot of its value due to the way its current owners have run the company. Brick-and-mortar retail is obviously a tough business to be in these days even under the best of circumstances, but Lampert arguably made Sears's circumstances much, much worse than they needed to be. I won't rehash all the arguments about that here -- you can look them up yourself if you're interested -- but he did a lot of things that seem to be shortsighted and stupid. To answer your question more directly, I think a more abstract case could be made that this is a failure of vision endemic to the way we currently implement capitalism: the whole value of running a company long-term -- to shareholders, employees, and customers -- may be greater, on a sufficient time scale, than the value of stripping the company for parts, but you can get a higher short-term return on investment by stripping and re-investing the income somewhere else, letting the full economic costs of the company's collapse (which, again, go beyond the cost to the shareholders) fall on others. I don't think this is good for society in the long run. I also don't think it's somehow required by merciless capitalist logic. However, I'm not sure how one can craft regulation to "solve" this without a high risk of creating more problems than one avoids. Sears may not deserve what's happened to it, but that doesn't mean it deserves to be saved, either, especially in its current state. It's easy to imagine well-intentioned laws creating zombie businesses rather than shielding salvageable ones.
wvenable 8y ago
Except it didn't -- the raid makes one very small group of investors a lot of money at the expense of literally everyone else.
darkarmani 8y ago
Self-dealing? It pretty much looks like asset laundering to get the assets free of the debt.
- AnimalMuppet 8y ago
  If Sears sold some assets to Lampert's holding company for less than they were worth, there are probably laws against that (though proving it in court may be a different matter). But if Lampert's holding company was the high bidder, why shouldn't they buy the assets?

howard941 8y ago

Dollar-for-dollar clawbacks by the Fed pension guarantee fund of the vultures' bounty + tripling the fraudulent conveyance lookback period, for starters.

toomuchtodo 8y ago
Allow the Pension Guarantee Corp to put distressed concerns into receivership as if they were a first priority debt owners (secured creditors essentially). Pensions get paid out first, whatever is left can go to debt holders (with equity being wiped out).

refurb 8y ago

You’d like to make poor business decisions a crime?