For those of us above the 49th, watching Target stores go down the porcelain facility was an exercise in schadenfreude, taking pleasure in the misfortunes of others. Target bought up a lot of the old Zellers real estate, changed the livery to the ubiquitous red and white splat then sat back to wait for the drooling parka-clad throngs to bust down the doors screaming “Shut Up, and Take My Money!”.
It didn’t quite work out that way.
Target Canada came off as a “special” cousin to Zeller’s or maybe K-Mart’s addle-minded Uncle Gordie. Target drooled a little, smelled funny and didn’t have actual stock in the stores that people wanted to buy and prices that were competitive. Canadian consumers tried Target once, perhaps twice, then vowed never to go back. By January 15th, Target Canada announced the closure of all 133 stores, tossing about 17,000 employees into the ditch with a hearty “Thanks for working at Target!”
Now coming to light are a couple of outrages that are being perpetrated on the cadaver. Former CEO Gregg Steinhafer got a golden parachute that was bigger than the severance issued to the now-former employees of Target Canada. Steinhafer was fired by the way, not ‘resigning to pursue other opportunities’ or ‘spending time with family’: He was s-canned, but like most CEO’s had negotiated a deal with the Target Board that unless he was found on the Washington Mall at noon hour, drunk, disheveled and engaging in an unnatural act with a live penguin, he’d get his piece of pie.
The second outrage is one of insolvency jiggery-pokery. A Toronto-based market research firm was told to switch its invoice for $232,328 from Target USA, who hired them, to Target Canada, a few days before Target Canada pulled the yellow handle. When Target Canada did the deed, that invoice, now residing with an insolvent company might be worth $50,000, maybe, maybe not. Essentially, Target knew they were going under and tried to bury as much as they could in Canada, to maximize their going-out-of-business profits through the liquidation process.
We’ve got two beefs here. By definition a Board of Directors is charged with ensuring the company is being run in a way that is prudent and profitable for shareholders and to provide a group of savvy multi-disciplinary advisors to the corporation to ensure prudence and profitability to the shareholders: Not the employees, not the suppliers, not the kid who collects the shopping carts after school every afternoon. Fine, that’s the capitalist system we work under. It sucks sometimes, but that’s what we’ve got as rules of engagement.
Where most Board of Directors fall over is in their sheep-like mentality of not questioning anything. A well-suited, pricey-per-diem Compensation Consultant tells the Board that the CEO must be paid a grotesque amount of money “to attract the right candidates” for the position. Yes, CEO is a good-paying gig and most CEO’s don’t last long, so the candidates negotiate big money and big perks up front. The candidate is not incentivized to play the long game, as all the goodies come home on Day 1, not Day 995 of their gig. The Board nods sagely dazzled by the haircut and the cufflinks and the CEO gets his or her payday, so even if caught up to the bristles in a penguin, the CEO still gets a mammoth payout.
The second beef is boning the suppliers. Businesses of any kind run on third-party companies that provide things to the business to conduct their operations. The amount of credit from a supplier is a conscious wager by the supplier that the company is going to be paid for what they’re providing. It does not matter if it’s 40 footer full of green garden hoses, or the contract for the guy to push the floor cleaning machine around the store, the supplier is trusting the company to pay their bills on time, in full, for services or goods provided. Those suppliers need that money to pay the minimum wage to the guy behind the floor cleaner, or the Xiolang Tractor Painting and Garden Hose Manufacturing Cooperative #22 in Baoding, China, who shipped over the container full of garden hoses. And the shipping company and the trucking company and the warehouse people and the printers and packagers and so on down the line. Everyone gets boned.
What the Board isn’t doing is making sure that the company is doing what is the Right Thing to Do.
Henry Ford, the noted rapacious capitalist and owner of the Ford Motor Company back in the day, did it very simply. He paid his people very well for the time, and priced his goods at such a point that his employees could actually afford the products they were making on the earliest assembly lines. This is called Enlightened Self-Interest. Ford knew that his folks on the line would bust their guts to do the best possible work, for a really good wage, so they could buy a car. That created an instant market of 12,000 employees who were potential customers.
Ford also played the capitalist card well. When the Steel Combine in the US decided to up the prices on the raw material for the cars that Ford was making, Ford essentially said “Screw you, I’ll make my own damn steel” Then he did it. The River Rouge Complex in Detroit was the result. Ford brought in the ore on his own ships, to his own steel mill, to make his own steel that they smelted, forged and stamped on site to make the cars coming off the other end of the assembly line. Our long-lamented 1987 5.0 Mustang was made at the Dearborn Assembly Plant with copious amounts of River Rouge steel and glass.
So what about the Board of Target? They’re getting theirs, collecting their per-diems and ‘creating value for shareholders’ at least as measured by this month. Are the doing the Right Thing? Not by a long shot. The Board, like most Boards, are sheep. Nobody is rocking the boat, asking pointed questions like “What the hell are we paying this clown for?”, “How will this be good for us in two/three/five years?” or “Is this the Right Thing To Do?”
For that, they should be ashamed.