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Sears' huge pension liabilities was cited as one of the main reasons that prevented any possible re-structuring that could have saved the company when it was de

Sears' huge pension liabilities was cited as one of the main reasons that prevented any possible re-structuring that could have saved the company when it was declining and heading to bankruptcy... I mean, let's be realistic here. For how long was Sears in this pitiful state?... Getting all that real estate + semi-established brand was a private equity's wet dream, yet nobody ever contemplated that option. And now that Sears is bankrupt, their pension fund is going into default and passed to the government who will need to fulfill those obligations (thankfully the pension benefit guaranty is not funded with tax revenues). Of course, I'm not blaming Sears retirees. They deserve their pensions as much as any other person. But the reality is that corporate America learned this lesson a while ago and Sears is just one of many examples. Is not about pleasing shareholders and fucking up employees as this article claims. It's a problem of business viability and long-term expectations. Wanna increase salaries and stock grants? Sure, do it. Two quarters later Wall Street will fuck you up because your new shiny compensation model just shaved the company revenue. And guess what, they will punish you at much larger magnitude than your declining revenue. So that 5% of lost revenue is going to cost you 20% or 30% of market value, and now all those stock grants are 30% less valuable. So your great initiative just put you in a negative spiral. And now your employees will be pissed, and the press will come and write an article claiming that your once frugal company is now a money firepit and that morale is low, completely forgetting their initial narrative on how you used to fuck over your employees.

tinktank 8y ago
Yup, if you're interested in a recent example look at Mellanox vs Starboard capital. We need to break out of the vice-grip Wall Street has on public companies. The Long Term Stock Exchange is one such initiative but I think co-operatives are another way that should be popularized further. Problem is, it becomes really hard to capitalize without Wall Street money.
- kopo 8y ago
  Wall Street money is just the money of 1%. The 1% need to get on board.
  - callalex 8y ago
    As well as every pension/retirement fund of the rest of us...
    - kopo 8y ago
      These are "Passive" investors. Wall Street doesn't care about them. Reality reflects it.
      - mruts 8y ago
        That's just not true at all. Everyone's money goes into the same pot. And "passive" investments are essentially just crowd-sourced active investments.
        kopo 8y ago
        For every dollar passive investors produce in the market active investors produce 22. Who do you think is paid more attention too?
        pnutjam 8y ago
        I'd love to see a citation for that, including fees siphoned off.
        mruts 8y ago
        Are you saying that the total market value of active investments is 22x that of passive investments? Or are you saying that net returns of active investors are 22x higher than that of passive ones? Or are you saying that the total returns of active management is 22x that of passive returns? None of those three things are true.
- Novashi 8y ago
  I think Wall Street would just tell you that you shouldn't have gone public. There's not going to be a breaking of vice-grips -- sudden and monumental actions -- because the banks would tank the economy just to get political leverage by threatening average Americans' asset values. Then they put the vice grips back on. If you want to do something about that, it's going to take a while. FWIW capitalism has a lot of things wrong with it in the information age, but if you want to start blowing up major foundations, don't expect the interested parties to take it lying down and give you a fair fight.
makotech222 8y ago
This is true; the only way to survive in modern capitalism is to REALLY fuck workers over so much that they can't even survive while working at your company, let alone after they retire. Fuck this economy so damn much.
- TheDong 8y ago
  You say, as you post on a website where the average user gets paid 6 figures+, works for a capitalist company (most of which aren't screwing over many workers), and could retire at 35 and live a comfortable life off the money saved up by working in tech.
  - jshorty 8y ago
    Bullshit, and your claim doesn't reveal any inherent hypocrisy in this person's complaint.
  - makotech222 8y ago
    While turning a blind eye to the massive exploitation that occurs all around the world which allows them to pull in 6 figs.
- tomcam 8y ago
  Question without an agenda here, honest: what would you replace it with?
  - CydeWeys 8y ago
    How about what works well for many European countries? A more progressive taxation scheme (i.e. the opposite of what Trump's done) combined with a more generous social safety net (e.g. public healthcare). The US is facing wealth inequality right now almost on par with the gilded age, which resulted in serious social upheaval. Other than the gilded age, and especially for a long period in the last century, wealth equality has much better then than it is now. We could go back to that at least, for starters. But ever since Reaganomics we've been seeing more and more wealth accumulating to those who already have it. Democrats get elected and aren't able to make headway against it (or don't try very hard), but when Republicans get elected they make it worse (look at the Bush and Trump tax cuts).
chrisseaton 8y ago
> thankfully the pension benefit guaranty is not funded with tax revenues Who funds it then?
- whoisjuan 8y ago
  Sponsors insurance premiums, revenue generating assets or flipped assets, factoring and general income investments.
- Tsubasachan 8y ago
  The US has a one trillion budget deficit. Do the math.
- lotsofpulp 8y ago
  Technically,the PBGC charges insurance premiums to the pension plans it insured (non taxpayer funded ones). Realistically, ther is no way the PBGC is sufficient to act as a backstop, so it is up to the federal US government to determine how much to pitch in when shit hits the fan.
mlthoughts2018 8y ago
I don’t necessarily disagree with many of your points, but I think drawing attention to the end of Sears’ lifecycle is an unfair thing. Someday Amazon too will have an end of life, and employees and shareholders will get fucked over then too. The article also draws attention to how workers benefited _in good times_ at Sears, not near the end. And this is where the comparison is most meaningful, where Amazon is more questionable.
- Bricejm 8y ago
  Agreed. I worked at Sears in college (~15 years ago) loading dock/warehouse. It was a great job at the time. Good pay, plenty of hours, and generally good managers. The downfall of Sears had very little to do with wages, but Amazon crushing all brick and mortar stores. We were dependent on foot traffic, and sales flyers in the Sunday paper - things that don't do much today.
  - Tsubasachan 8y ago
    True. Amazon, and ecommerce in general, took off because they beat old retail in prices and inventory. I can buy a pair of shoes right now and have it delivered for free in 12 hours. The margins web stores operate on are razor thin. Efficiency is king.
  - technofiend 8y ago
    IMHO Sears would have an opportunity now if they hadn't sold off their brands. Cobranding (for instance) Anker products as Craftsman would have me buying it there instead of Amazon for one reason: commingled inventory and fakes.
    - jpindar 8y ago
      They had SO MUCH customer loyalty from Craftsman, I can't believe anyone would throw that all away.
      - abakker 8y ago
thisisit 8y ago
> It's a problem of business viability and long-term expectations. Agreed. But then I am surprised about the whole Wall Street para. People don't like surprises. So a company has to always set expectations correctly, to both employees as well as the markets. If a company is open how the initiative is going to affect revenues there wont be that huge loss of market value.
Aloha 8y ago
If a company choose to not prefund its pension when times are good, they can't complain about it when times are bad.
- sgt101 8y ago
  Astonishingly in the UK it's actually illegal for companies to do this.
  - occamrazor 8y ago
    In Switzerland too, with some exceptions for public entities. Still, many pension fund use very optimistic interest rates in their estimates.
  - pnutjam 8y ago
    Only in the U.S. can managers pretend pensions are a give away and not part of the wage.
rhizome 8y ago
Sears' huge pension liabilities was cited as one of the main reasons that prevented any possible re-structuring that could have saved the company when it was declining and heading to bankruptcy This was before or after it had been stripped of assets?
xg15 8y ago
> Wanna increase salaries and stock grants? Sure, do it. Two quarters later Wall Street will fuck you up because your new shiny compensation model just shaved the company revenue. ... So that 5% of lost revenue is going to cost you 20% or 30% of market value, and now all those stock grants are 30% less valuable. So your great initiative just put you in a negative spiral. This basically, is what people mean when they say "fuck the system". It's not about some particular greedy bosses or managers or even shareholders. It's that the whole economy is apparently now structured in a way that businesses don't seem to have a choice. (Or at least the managers believe they don't have a choice).
- chongli 8y ago
  businesses don't seem to have a choice Sure they do. There are plenty of smart, prudent retirement plans for companies to offer to their employees that don't involve crippling liabilities down the road. Defined contribution pensions, tax free retirement accounts, dollar-for-dollar matching (up to a limit) etc. Defined benefit pensions were a bad idea born of a "I'll be retired before then so let's kick the can down the road" mentality.
  - CydeWeys 8y ago
    Or even just direct contributions to retirement plans for all employees, no matching required. E.g. a company contributing $500 per month into the employee's 401k. My last company did something similar, but it was tied to salary and it was annual (prorated). I think a better case can be made for doing it monthly, so you don't need to bother with prorating, and also to do constant amounts for all employees rather than tie it to salary. My current employer defaults employees to 10% and does dollar-for-dollar matching, but there's people who opt out because they want (possibly even need) all of their salary now, and thus they don't get any contributions in their plan. Yet these are precisely the people who would most need the contributions, because they're least likely to save up money in other vehicles!
    - dantheman 8y ago
      I like the plans where the first 7% is granted, and the last 3% is a match -- it helps everyone, and encourages personal contributions.
sgt101 8y ago
Which is why legal measures to force distribution, openness and shared ownership between stakeholders are essential. Otherwise eventually looters force liabilities onto taxpayers. Human liabilities, or material ones. For capitalism to work it needs rules, transparency and infrastructure. Our choice is simple : Brazil or Norway.
Mvandenbergh 8y ago
In many countries, it is illegal to under-fund your pension scheme for a significant length of time which avoids this problem. At any given time you can close the scheme and switch people to DB without a massive liability overhang that you need to close. Eddie Lampert whined extensively about how hard the pension problem was making things for him. In a sense that is trivially true - extensive liabilities make it harder to run a profitable company - but it wouldn't have been an issue if they had been properly funding their pension liability all-along.
- gaius 8y ago
  In many countries, it is illegal to under-fund your pension scheme In the U.K. Gordon Brown made it illegal to over-fund a pension, leading many companies to have to take “contribution holidays” when markets were buoyant. Surprise surprise, when markets went down not only were the plans underfunded, there was no spare cash to make up the shortage. One of the many blunders of the worst Chancellor in living memory.
lucideer 8y ago
> Is not about pleasing shareholders and fucking up employees as this article claims. It's a problem of business viability and long-term expectations. Perhaps. Or it could be about competing in a marketplace where pleasing shareholders and fucking up employees makes you more competitive. The problem is not that Sears treated its employees well, rather that its competitors are allowed not to.
otikik 8y ago
I agree with you in that that's how things would go nowadays, but maybe we should scrutinize more what Wall Street is contributing to, instead of taking it as "something that happens and there's nothing we can do about it".
jimbokun 8y ago
> Wanna increase salaries and stock grants? Sure, do it. Two quarters later Wall Street will fuck you up because your new shiny compensation model just shaved the company revenue. And guess what, they will punish you at much larger magnitude than your declining revenue. So that 5% of lost revenue is going to cost you 20% or 30% of market value, and now all those stock grants are 30% less valuable. So your great initiative just put you in a negative spiral. And now your employees will be pissed, and the press will come and write an article claiming that your once frugal company is now a money firepit and that morale is low, completely forgetting their initial narrative on how you used to fuck over your employees. This, in a nutshell, is why capitalism is fundamentally incompatible with human flourishing. Because of the process you just described, the only possibility is an end state with a very small number of capital holders prospering and grinding the rest under their boot.
simonebrunozzi 8y ago
Important note: at Sears, different departments fought against each other for years - essentially a dozen of small businesses with the overhead of a large corporation. No way it could have ended well. That's the main reason why Sears went this way.

tinktank 8y ago

Yup, if you're interested in a recent example look at Mellanox vs Starboard capital. We need to break out of the vice-grip Wall Street has on public companies. The Long Term Stock Exchange is one such initiative but I think co-operatives are another way that should be popularized further. Problem is, it becomes really hard to capitalize without Wall Street money.

kopo 8y ago
Wall Street money is just the money of 1%. The 1% need to get on board.
- callalex 8y ago
  As well as every pension/retirement fund of the rest of us...
  - kopo 8y ago
    These are "Passive" investors. Wall Street doesn't care about them. Reality reflects it.
    - mruts 8y ago
      That's just not true at all. Everyone's money goes into the same pot. And "passive" investments are essentially just crowd-sourced active investments.
      - kopo 8y ago
        For every dollar passive investors produce in the market active investors produce 22. Who do you think is paid more attention too?
        pnutjam 8y ago
        I'd love to see a citation for that, including fees siphoned off.
        mruts 8y ago
        Are you saying that the total market value of active investments is 22x that of passive investments? Or are you saying that net returns of active investors are 22x higher than that of passive ones? Or are you saying that the total returns of active management is 22x that of passive returns? None of those three things are true.
Novashi 8y ago
I think Wall Street would just tell you that you shouldn't have gone public. There's not going to be a breaking of vice-grips -- sudden and monumental actions -- because the banks would tank the economy just to get political leverage by threatening average Americans' asset values. Then they put the vice grips back on. If you want to do something about that, it's going to take a while. FWIW capitalism has a lot of things wrong with it in the information age, but if you want to start blowing up major foundations, don't expect the interested parties to take it lying down and give you a fair fight.

makotech222 8y ago

This is true; the only way to survive in modern capitalism is to REALLY fuck workers over so much that they can't even survive while working at your company, let alone after they retire. Fuck this economy so damn much.

TheDong 8y ago
You say, as you post on a website where the average user gets paid 6 figures+, works for a capitalist company (most of which aren't screwing over many workers), and could retire at 35 and live a comfortable life off the money saved up by working in tech.
- jshorty 8y ago
  Bullshit, and your claim doesn't reveal any inherent hypocrisy in this person's complaint.
- makotech222 8y ago
  While turning a blind eye to the massive exploitation that occurs all around the world which allows them to pull in 6 figs.
tomcam 8y ago
Question without an agenda here, honest: what would you replace it with?
- CydeWeys 8y ago
  How about what works well for many European countries? A more progressive taxation scheme (i.e. the opposite of what Trump's done) combined with a more generous social safety net (e.g. public healthcare). The US is facing wealth inequality right now almost on par with the gilded age, which resulted in serious social upheaval. Other than the gilded age, and especially for a long period in the last century, wealth equality has much better then than it is now. We could go back to that at least, for starters. But ever since Reaganomics we've been seeing more and more wealth accumulating to those who already have it. Democrats get elected and aren't able to make headway against it (or don't try very hard), but when Republicans get elected they make it worse (look at the Bush and Trump tax cuts).

chrisseaton 8y ago

> thankfully the pension benefit guaranty is not funded with tax revenues Who funds it then?

whoisjuan 8y ago
Sponsors insurance premiums, revenue generating assets or flipped assets, factoring and general income investments.
Tsubasachan 8y ago
The US has a one trillion budget deficit. Do the math.
lotsofpulp 8y ago
Technically,the PBGC charges insurance premiums to the pension plans it insured (non taxpayer funded ones). Realistically, ther is no way the PBGC is sufficient to act as a backstop, so it is up to the federal US government to determine how much to pitch in when shit hits the fan.

mlthoughts2018 8y ago

I don’t necessarily disagree with many of your points, but I think drawing attention to the end of Sears’ lifecycle is an unfair thing. Someday Amazon too will have an end of life, and employees and shareholders will get fucked over then too. The article also draws attention to how workers benefited _in good times_ at Sears, not near the end. And this is where the comparison is most meaningful, where Amazon is more questionable.

Bricejm 8y ago
Agreed. I worked at Sears in college (~15 years ago) loading dock/warehouse. It was a great job at the time. Good pay, plenty of hours, and generally good managers. The downfall of Sears had very little to do with wages, but Amazon crushing all brick and mortar stores. We were dependent on foot traffic, and sales flyers in the Sunday paper - things that don't do much today.
- Tsubasachan 8y ago
  True. Amazon, and ecommerce in general, took off because they beat old retail in prices and inventory. I can buy a pair of shoes right now and have it delivered for free in 12 hours. The margins web stores operate on are razor thin. Efficiency is king.
- technofiend 8y ago
  IMHO Sears would have an opportunity now if they hadn't sold off their brands. Cobranding (for instance) Anker products as Craftsman would have me buying it there instead of Amazon for one reason: commingled inventory and fakes.
  - jpindar 8y ago
    They had SO MUCH customer loyalty from Craftsman, I can't believe anyone would throw that all away.
    - abakker 8y ago

thisisit 8y ago

> It's a problem of business viability and long-term expectations. Agreed. But then I am surprised about the whole Wall Street para. People don't like surprises. So a company has to always set expectations correctly, to both employees as well as the markets. If a company is open how the initiative is going to affect revenues there wont be that huge loss of market value.

Aloha 8y ago

If a company choose to not prefund its pension when times are good, they can't complain about it when times are bad.

sgt101 8y ago
Astonishingly in the UK it's actually illegal for companies to do this.
- occamrazor 8y ago
  In Switzerland too, with some exceptions for public entities. Still, many pension fund use very optimistic interest rates in their estimates.
- pnutjam 8y ago
  Only in the U.S. can managers pretend pensions are a give away and not part of the wage.

rhizome 8y ago

xg15 8y ago

> Wanna increase salaries and stock grants? Sure, do it. Two quarters later Wall Street will fuck you up because your new shiny compensation model just shaved the company revenue. ... So that 5% of lost revenue is going to cost you 20% or 30% of market value, and now all those stock grants are 30% less valuable. So your great initiative just put you in a negative spiral. This basically, is what people mean when they say "fuck the system". It's not about some particular greedy bosses or managers or even shareholders. It's that the whole economy is apparently now structured in a way that businesses don't seem to have a choice. (Or at least the managers believe they don't have a choice).

chongli 8y ago
businesses don't seem to have a choice Sure they do. There are plenty of smart, prudent retirement plans for companies to offer to their employees that don't involve crippling liabilities down the road. Defined contribution pensions, tax free retirement accounts, dollar-for-dollar matching (up to a limit) etc. Defined benefit pensions were a bad idea born of a "I'll be retired before then so let's kick the can down the road" mentality.
- CydeWeys 8y ago
  Or even just direct contributions to retirement plans for all employees, no matching required. E.g. a company contributing $500 per month into the employee's 401k. My last company did something similar, but it was tied to salary and it was annual (prorated). I think a better case can be made for doing it monthly, so you don't need to bother with prorating, and also to do constant amounts for all employees rather than tie it to salary. My current employer defaults employees to 10% and does dollar-for-dollar matching, but there's people who opt out because they want (possibly even need) all of their salary now, and thus they don't get any contributions in their plan. Yet these are precisely the people who would most need the contributions, because they're least likely to save up money in other vehicles!
  - dantheman 8y ago
    I like the plans where the first 7% is granted, and the last 3% is a match -- it helps everyone, and encourages personal contributions.

sgt101 8y ago

Which is why legal measures to force distribution, openness and shared ownership between stakeholders are essential. Otherwise eventually looters force liabilities onto taxpayers. Human liabilities, or material ones. For capitalism to work it needs rules, transparency and infrastructure. Our choice is simple : Brazil or Norway.

Mvandenbergh 8y ago

In many countries, it is illegal to under-fund your pension scheme for a significant length of time which avoids this problem. At any given time you can close the scheme and switch people to DB without a massive liability overhang that you need to close. Eddie Lampert whined extensively about how hard the pension problem was making things for him. In a sense that is trivially true - extensive liabilities make it harder to run a profitable company - but it wouldn't have been an issue if they had been properly funding their pension liability all-along.

gaius 8y ago
In many countries, it is illegal to under-fund your pension scheme In the U.K. Gordon Brown made it illegal to over-fund a pension, leading many companies to have to take “contribution holidays” when markets were buoyant. Surprise surprise, when markets went down not only were the plans underfunded, there was no spare cash to make up the shortage. One of the many blunders of the worst Chancellor in living memory.

lucideer 8y ago

> Is not about pleasing shareholders and fucking up employees as this article claims. It's a problem of business viability and long-term expectations. Perhaps. Or it could be about competing in a marketplace where pleasing shareholders and fucking up employees makes you more competitive. The problem is not that Sears treated its employees well, rather that its competitors are allowed not to.

otikik 8y ago

I agree with you in that that's how things would go nowadays, but maybe we should scrutinize more what Wall Street is contributing to, instead of taking it as "something that happens and there's nothing we can do about it".

jimbokun 8y ago

> Wanna increase salaries and stock grants? Sure, do it. Two quarters later Wall Street will fuck you up because your new shiny compensation model just shaved the company revenue. And guess what, they will punish you at much larger magnitude than your declining revenue. So that 5% of lost revenue is going to cost you 20% or 30% of market value, and now all those stock grants are 30% less valuable. So your great initiative just put you in a negative spiral. And now your employees will be pissed, and the press will come and write an article claiming that your once frugal company is now a money firepit and that morale is low, completely forgetting their initial narrative on how you used to fuck over your employees. This, in a nutshell, is why capitalism is fundamentally incompatible with human flourishing. Because of the process you just described, the only possibility is an end state with a very small number of capital holders prospering and grinding the rest under their boot.

simonebrunozzi 8y ago

Important note: at Sears, different departments fought against each other for years - essentially a dozen of small businesses with the overhead of a large corporation. No way it could have ended well. That's the main reason why Sears went this way.