J.C. Penney, a department store with 840 retail outlets in 49 states, filed for bankruptcy this month, 118 years after it was founded. The company hopes to reorganize, but 242 of its stores are closing for good. The company, hit hard by the coronavirus shutdown, won rent relief as it tries to stay afloat, but thousands of employees have lost their jobs, investors have lost millions, and consumers in many poor areas will lose valued retail outlets.
But the pain only went so far, and it certainly didn’t reach the executive suite. Just prior to filing for bankruptcy, J.C. Penney paid its chief executive, Jill Soltau, $4.5 million, while the chief financial officer and the head of human services each got $1 million in bonuses.
As the New York Times reported this week, J.C. Penney is far from alone. Whiting Petroleum, which sought bankruptcy protection in April, paid its CEO $6.4 million. Similar payouts went to executives at Hertz and Chesapeake Energy.
This may be legal but it’s hard to view it as ethical. The companies say the CEOs are not to blame for the coronavirus’s devastation of the economy, and the stock options that make up a big part of the executives’ compensation package are now worthless. True, but does that merit payouts of millions when workers are losing jobs and investors are getting shafted? Sure, these executives deserve something, but this is an obscene amount of money when so many other employees who aren’t to blame are getting nothing.
The coronavirus is the worst pandemic—producing the worst economic recession—in a century, but too many companies continue to operate as they always have or worse, taking advantage of government assistance when they don’t need it or forcing workers to risk their health or lose their jobs.
GM, for example, is citing the pandemic as justification for keeping $60 million in tax breaks it received from Ohio in 2009 on the basis of its promise to keep its huge Lordstown auto plant in business until at least 2028. GM closed the plant last year—well before the pandemic—but now says the economic downturn is justification for keeping the money. Let’s hope Ohio says no.
At the same time, scores of companies received an infusion of stimulus cash from the government when they didn’t need it, depriving desperate small businesses of the lifeline they were hoping for. Some companies that did get stimulus money returned it, but usually that happened only after public shaming (think Shake Shack).
This is not to say there aren’t a lot of companies doing the right thing. To name just a few, Loews gave its employees $80 million in bonuses for working through the crisis and is donating $25 million in grants to help minority businesses reopen. Verizon is donating $40 million to Covid-19 relief efforts. T-Mobile is donating 40,000 phone chargers to hospitals so isolated patients can stay in touch with loved ones. JBL is donating headphones to schools that need them for virtual classrooms.
Behaving ethically is good business and consumers do take notice of both the good and the bad, but too few companies seem to realize that.