We’ve raked the management of Circuit City Stores over the coals in the past, because of the way they have treated their employees, and for what seems to us, to be some of the worst business decisions in the history of the World.
Circuit City Stores announced on Monday that board member James Marcum has replaced Philip Schoonover as CEO (see “Circuit City CEO Gets Unplugged“, Businessweek, September 22). They did not say whether Mr. Schoonover plans on reapplying for his former job in ten weeks, at a market-based salary.
As they say, “what goes around, comes around”.
It would be no surprise if the Board finally staged a mutiny (although published reports indicate that Mr. Schoonover tendered his resignation). The scooner Schoonover has been on the rocks since Circuit City announced in March, 2007 that they were firing 3400 employees immediately, because they earned too much. Those employees were told that they could reapply for their former jobs in ten weeks, at a market-based (meaning lower) salary, but there was no guarantee a job would be available for them. We do not know if any of those employees were stupid enough to reapply for employment at Circuit City, or if any that might have done so were eventually rehired. We’re sure those 3400 former Circuit City employees feel just awful for Mr. Schoonover.
Now, in addition to the strong headwinds that Circuit City is encountering because of the U.S. economic slump, and stiff competition from retailers such as Best Buy, they also have the benefit of consumer backlash towards a company that would treat their employees as poorly as they have. And it’s not just the mass layoff that we’ve just mentioned. Look at Circuit City’s wikipedia page, and read about some of the court cases they’ve been involved in, particularly regarding their employment practices.
It’s truly amazing that their ship, while listing heavily, is still afloat.
Circuit City has searched the seven seas looking for a suitor, but has been unsuccessful. Would YOU buy a company with as much bad karma or as much red ink as Circuit City ? But hey, there’s so much bailout money coming out of Washington these days, maybe they’ll tack a Circuit City rescue plan onto the $70 billion financial system bailout plan they’re debating right now.
To say that Mr. Marcum has his work cut out for him is an understatement. But then, perhaps his plan, assuming he has one, is not to rebuild the company. Mr. Marcum was elected to the Board in June, having been nominated by Circuit City shareholder Mark Wattles. Wattles has indicated in the past that he wants to find a buyer for Circuit City. It would certainly make sense to think that Mr. Marcum’s role will be that of caretaker, while they continue to look for a buyer.
We’ve mentioned previously that the best thing Circuit City could do to stem their losses is to liquidate the company. With dire predictions for this Christmas season for the nation’s retailers, as well as a bleak outlook for the economy in general, it doesn’t seem to make a whole lot of sense for a company in the sad shape that Circuit City finds itself to drag things out any longer.
– Routing By Rumor