Join The Debate!

Chuck must have flunked Econ 101.

Obviously they are not unionized,but may be so very soon.And by the way,who "overpaid them"?Or did they pay themselves?Just let the marketplace work and you will get the greatest good for the greatest number.

Share the wealth

I am no fan of socialist liberals who think government control is the answer but what circuit city did was not in their long term best intrests. My neighbor who lost his job at circuit city is in the process of building a house. This decision which was made in some paneled board room is going to have a ripple effect throughout the community. One of the problems Home Depot is having is poor cusotmer service because shoppers can't get help when they need it. Why, HD treat workers as an expence and not an investment. They will invest millions in brick, mortar, computers and logistics but little in the human element. Before any of you accuse me of needing a refresher in Econ 101 I want to state I have a Masters in Economics from University of Oklahoma. Not exactly a Marxist bastion. I predict this move will cost Circuit City more than they save as the replacements realize their jobs are not any safer than their predecessors. One reason the military has a high retention rate despite the hazzardous duty is because it invests in the people and their families. Twenty plus years in the AF taught me that.

AMERICA’S REMAINING JOBS

How can our economy sustain the same standard of living with top jobs being in the service industry and not exporting products?

EC-The top jobs for Americans are neither valuable for the country nor achievable for the majority of the nation. Research conducted by Money Magazine and Salary.com showed the 20 best jobs for young Americans belong solely to the service industry, in a servant economy .

What’s wrong with the service industry? The service industry creates an intangible product that is therefore non-tradable and unbeneficial for our country. Service companies sell just that: a service (example: giving each other hair cuts). Since this is not a physical product, the U.S. cannot sell it to competing nations. The result is money passed around among Americans instead of money coming into the nation from countries that buy our products.

According to the study, staff nurse, personal trainer, and school teacher are among the top 20 jobs for young Americans in addition to several management and specialist positions. While they may be highly self-satisfying, 72 percent of Americans are not eligible for the nation’s top job titles. According to the U.S. Census Bureau, the national college graduation rate was 28 percent in 2006. So in addition to holding no national benefit, these jobs are highly unattainable for nearly three-quarters of the nation because most require a bachelor’s degree.

READ MORE http://www.controlcongress.com

Circuit City

I don't buy a lot of electronics, etc., but I'll avoid CC (Circuit City) as much as possible. I'd rather pay a little more to a company that shows a little more compassion to their employees.

And I haven't seen any mention of any pay cuts or replacements for the executives of CC. If pay cuts are necessary, it seems only reasonable that they should be in the board room as well.

Sawgunner, others miss key points

Let me get straight to it. The issues here are not "capitalism" or "socialim" but rather good versus bad management. I am specifically referring to Schoonover (sp?), Circuit's CEO.

1. Training cost. How much cost will be expended for the new employees to get trained and up to speed? Since I doubt many of the 3400 won't re-apply, new, inexperienced (and probably less competent)employees will take their place. What cost will be involved, in terms of training, mistakes, and customer dissatisfaction? Has Schoonover even considered these things?? Incredible.

2. Poor morale among the survivors. What loyalty will they now feel toward Circuit City, knowing they could be next?

3. Schoonover's outrageous compensation. Schoonover's job is to play "beat the number" of Wall Street Analysts. He made $8.5 MILLION last year, and got $1 MILLION dollar bonus for CC's $162 million dollar profit (which his employees helped contribute to, I might add. What did they get?). However, the last quarter, CC lost money, and Schoonover felt compelled to do something. So, the 3400 employee layoff was the solution.

Executive compensation has gotten TOTALLY out of control. You do NOT have true capitalism when the rich get richer and the poor get poorer. Executive compensation has become pure greed at the expense of the common worker. COUNTLESS examples could be cited. Capitalism is win-win, but there is clearly no win-win here. Schoonover is the winner, and employees are the loser.

Colson is right. Things have got to stop, and some kind of sanity must be restored in the corporate world.

Wow . . .

Ya know, it's a good thing corporations are still *private* and don't need to get public approval before making decisions like this.

Sure, to the outsider, and even the affected workers, I'm sure these practices may appear slimy. But the truth of the matter is that, *unless* you are a stockholder in Curcuit City, it's none of your d@mned business *how* they choose to run *their* business. It *it* THEIRS, after all (and not *yours*).

Save the power to boycott and/or publicly express repugnance, the public has no legitimate or proper authority to meddle or interfere. In the end, profitability will either prove *OR* DISprove the wisdom of this policy.

Fair to Who? How do you know?

Chuck has done great work in the faith. However, social comment and economics is not his theological strength. Sadly, most of AmeriKan churches have been infiltrated with Marxism and Gnosticism, so Chuck’s logic seems acceptable.

The Bible was written to the individual not the state. All through it, it says, you shall, you will, you shouldn’t, your duty is. It doesn’t say the states obligation is, the state must, etc.

In short the moral and charitable obligation is individual not corporate. The Good Samaritan didn’t call social services on his cell phone to pick up the dying man, rather he understood that God placed the man in his path because it is his individual responsibility. They dying man could see Jesus in the charity of the man. The two church leaders who passed him, certainly had temple funds for welfare, yet didn't see a need for this dying man.

Jesus also told the rich man to sell all he had and give to the poor. He did not tell him to put it in a trust account and go to the State and raise taxes on everybody so the State could create a welfare mindset, where the recipient knows he is being bought off for his vote and is angry that his vote doesn’t bring yet more money. Naturally some are content in the welfare mindset and worship the State as God.

CC is a corporation of shareholders whose life’s labor is stored in the shares of the stock probably held in their pension plan. Some of these folks, who have sacrificed their entire life to be responsible and save for a rainy day may make less than the clerks at CC and certainly less than most of management. Now the main question is who is to decide fair in the transaction between the stored labor of the shareholders and the labor to be expended by the clerks. In short do the shareholders and the clerks own their God given labor or do the minimum wage Nazis in DC own their labor or some insulated corporate chief own it. Also, is stored labor not as sacred as labor about to be expended by the clerks? If the clerk is buying shares in CC why should he loose laber when stored in the shares?

Who is to decide what is fair and fair to whom. Is it fair to the customers and fair to the shareholder’s if some corporate executive social engineer takes their money to pay for labor above the fair and going market rates? Is it fair to have the DC Nazis, many who have no clue what a fair wage is, to arbitrarily say, your stored labor is less valuable than labor to be purchased therefore the collective society deems it fair to steal some more of your money over and above the highest corporate taxes in the Western World we steal now.

In short the corporate executive nor the state is being moral when taking shareholder’s stored wealth and making social and moral comment with it. It is a morally corrupt concept to steal one man’s money claiming you are moral because you give it to another. Bastiat discusses this in That Which is Seen and That Which is Not Seen.

Stealing is immoral regardless of who you redistribute it to. The moral thing to do is pay labor the market rate and let each shareholder choose the best charity that God has placed on their heart with their stored labor dividends.

What Chuck presents is what Lenin presented years ago, known as false alternatives. To Chuck it is merely an alternative of pay the people rates above the market or be unfair. If we all continue to argue this alternative we are all lost.

What is CC’s real alternative? Their alternative is keep everybody and go bankrupt in about 3 years or so or take action now to try and stop the bleeding of the shareholder’s stored labor and use the extra time to find a market model that works and maybe save some jobs. In all the company labor issues, it is always, take all the shareholder’s labor and all the laborers jobs and loose everything, or cut some jobs and save the shareholder’s labor and some jobs. That is the real alternative.

I remember some 40+ years ago a very successful business man who bought out a number of troubled companies. His tactic was crude in science and effectiveness, but worked because the principle was so sound. On his first day of ownership Clayton Gengras would walk into the company headquarters and ask people to split into two groups and line up on each side of the hall. He’d then say this half is fired. Clearly, he lost people he needed and kept some bums, but he immediately stopped the bloodletting giving himself some more time to figure out how to turn it around. He turned around every bankrupted company saving half of the jobs rather than none of the jobs and some shareholder's stored labor.

Marxism has always been steeped in false alternatives, a tactic created by Lenin, and when you don’t know the true alternatives you can easily be swayed. CC’s problem is that the Internet, BB, Wal-Mart, etc. are starting to really hurt from above and below and they can do something about it today while they have some money left or they can urinate away the shareholder’s stored labor and seek bankruptcy in a few years. Those are the real alternatives. Management can listen to consumers or ignore them at their own peril.

Now, why doesn’t CC offer the folks a pay decrease option? The answer is folks don’t take pay decreases, they merely steal what they now think the are owed because the company is “abusing” them, as determined by a Marxist mindset of labor today, that they are “owed”, and/or they become nasty sales people with a chip on their shoulder. Better these folks, who obviously are talented, merely move up the ladder elsewhere, where the market place will reward their talents. In short they have developed skills greater than the slot they are in.

As a former retail executive, I can

unequivocably say that this move will COST Circuit City money instead of save it. Any executive or board member who knew of and approved of this move should be immediately fired - they are too stupid for their job. I had thought that this type of archaic thinking was extinct. Where Circuit City will lose money will be on the declining sales as a result of their worsened customer service which is an inevitability with the lower wage, less trained workers that are being put in place. Circuit City thinks so little of the customer and their customer service that they think that it is a cost to them instead of a benefit. Customers have neither the time, nor the inclination to put up with fewer, new, less-informed, higher-turnover workers. I say fewer workers because the lower-paid, less skilled workers are also the least stable workers, also. I've seen this played out before, usually by old-school type management. What happens next is that Circuit City begins to lose market share. They will try to offset with reduced prices which will not improve their market share but will damage their margins. Finally, this current crop of bozo management will be fired, but the damage will probably be irreversible at this point and the company will either try to sell themselves or go into bankruptcy. For any stock market investor out there, short this stock! It'll be money in the bank!

Competition

Circuit City doesn't operate in a market vacuum. As several here have demonstrated, voicing their determination to shop elsewhere -- there's an elsewhere to shop.

Markets operate about the same regardless of the product. Owners and those in corporate hierarchies have to be aware of what the competition is doing, including business practices as well as prices and amenities for customers.

The market itself will sort this one out. Other posters point out that employee morale will sag at Circuit City. Word will get out about its wage practices. In a competitive labor market, these things will make it harder for Circuit City to attract and keep good employees -- unless they improve compensation.

If Circuit City has the option to make this wage "alignment" stick, it will be because no one can get a similar job anywhere for better wages. That's not evidence of a conspiracy among electronics retailers -- it's evidence of the relative value of labor in that business to the market. Blame WalMart if you like.

Actually, this kind of wage-averaging goes on all the time in most low-skill service businesses. Circuit City's action got media attention because of how they're handling it: as a concentrated, across-the-board measure, complete with a big announcement. That was not terribly bright. Their community relations director should be replaced.

Disappointing

I'm skeptical as to whether Chuck writes all his own columns. Sometimes he is just so far off the mark.

If any business were to compensate employees in excess of their financial benefit to the business, then theoretically it would eventually go bankrupt and all employees would lose their jobs.

Management screwup!

Employees will not regard the job as a livelyhood.
As a starter job it will attract youthful screwups who don't care about the Company.
Rapid turnover will keep personnel in a constant state of training and errors will be the rule rather than exception.
After wasting money training some kid, a supervisor will say one unkind word and hear the famous quote;
"Take This Job And Shove IT!"

No way to run a business but it is not my business!

Sawgunner and SizzleLean

... have effectively made the point that Circuit City's summary action is a bad business practice, and is likely to be punished by the market.

That's why I don't think the government needs to intervene. The government is incapable of intervening in a manner that produces only the intended, proximate result. Government intervention in the market invariably does the following:

1. Makes products and services cost more than they would without intervention.

2. Reduces variety and options in supply.

3. Props up business sectors that are no longer economically viable.

Government has no other effect on markets.

Service Master Has Business Flaws

I worked for Trugreen-Chemlawn in Redmond, WA. Pesticide applicators were not paid overtime. Instead, they were paid a weekly base rate plus a "commission" for extra work above the base rate. (These were hourly employees, not sales people). So, typically, employees of servicemaster worked 50 hour plus workweeks, and usually mandatory Saturdays, as well.

Service Master is a limited partnership, according to IRS rules. As such, they only paid about a 5% Federal income tax, compared to 30% for most other Corporations. In the end, business is only about money.

The not so Goodwill

I recently applied to the local Goodwill Store and saw the ad posted at Washington State Worksource for a lift Driver in Donations. Pay offer range was from $9.75-12.00 an hour. Time went by and finally the new Manager came into worksource to conduct interviews.
I was offered a job in Donations.
When I finally arrived for work this morning and asked what rate of pay I would recieve, since I had not been quoted a figure, I was told, "Everybody in Donations makes minimum wage." In Washington State, that is $7.35 an hour.
And I am a prior Goodwill worker and had a good job record.
So much for this company's efforts to help the poor.

Which worker has more rights?

We continue to argue false alternatives. By everybody’s admission CC’s service stinks. Obviously CC is over paying employees because they are still there. Therefore the solution is for CC to pay less for the poor service it is buying. Somebody mentioned Wal-Mart has identical service and I suggest that would provide CC a good wage scale. The good news is that CC has had several improved years and is recognizing the problems they face while they are on top.

What has been argued in this thread is that one group of workers has a right to the labor of other workers. Money is a store of labor. The CC employee provides labor for the week and CC gives him green papers that represents somebody else’s stored labor, (the shareholders). CC employee’s labor is no more sacred than is the investor’s labor.

Your parents work some 40 or 50 years and decide to take about 5-10 years of labor stored in savings, also known as your inheritance, and provide it in a venture called CC so it can pay employees. Why should Bubba who has nothing at risk, have a claim on your parents labor that has much at risk? Why is Bubba’s labor more valuable because he stores it in a new plasma TV, Air Jordans, a new car, sharp clothes etc. and your parents don’t buy new cars, TV’s or sharp clothes but store their labor in a CC delivery truck, Bubba’s payroll check, inventory, etc.. I believe your parents labor is actually more sacred.

So why are more and more businesses moving offshore? Well because one group of workers is tired of being abused by the other group of workers. Bubba has little at risk and your parents have their life’s labor at risk, yet we want more laws to permit Bubba to get more than his fair market claim on your inheritence.

Individualism or Part of a Team?

Companies today are often restrained by law and the politically correct mindsets that have determined that all employees must be treated the same. Seniority is meaningless. Productivity counts for zilch. Ability plus experience, worthless. Everyone must perform as a team in the most pure sense and accordingly be paid the same for the same work. Loyalty might get you a pat on the back or the head. If anyone should be too outstanding they may be considered a threat to someone's job. We can't have that!

Individualism is actively discouraged. Excellence cannot be achieved or expected this way. And exceptionalism, you can forget it. If one should find himself on the lower rungs of any corporation his only real option is to get the credentials that qualify him for higher service and go for the gusto. Gone are the days of starting in the mail room and thirty to forty years later sitting in the board room of the same company you started with.

There was a time when many companies as a matter of policy, and the successful executives that ran them, encouraged individuals to achvieve higher standards and goals and well rewarded those who did. No one held anyone back. Those successful members of the orginization were always pulling the younger ones up and helping them to polish their skills. Those days seems to have so quickley faded.

There was a time when a high school education could well qualify one with the initiative to be the local bank president by age 40-45. Too many require credentials, an education, of which, really only amounts to getting your ticket punched. It makes for very shallow and hollow administrators and executives.

As for those who have achieved rung on the socio-economic ladder by regurgitating the answers for exams and received the honors, diplomas, and degrees granted for such, is it any wonder when they consider the lower tier employees as only just another cost center?

GEM

Workers, Owners, Executives & Customers

Schoonover fails to understand that retailing is a service business -- especially the bricks and mortar part of it. In bricks & mortar retailing, personal service is just about the only reason to walk in the door -- because the online sales guys can virtually always beat you on mere price. (And even online sales depend on the services of the designers who can engineer well functioning web-pages, backed by competent logistics guys who can get the product out the door.)

Note to Mr. Schoonover: Service is provided by servers. And better service is provided by servers who know their business and have some enthusiasm for their jobs. (Uh. Duh!)

Trashing the cadre of service employees will very predictably crater service at Circuit City. Which will shortly thereafter crater customer patronage. Which craters Sales. And Profits. And finally Stockholder Value.

Now, it is the stockholders' company. And they should be allowed to run it anyway they please. But one suspects that the stockholders had no effective say-so in this mismanaged fiasco.

What this illustrates is that customers and workers both might be better off, if informed stockholders had greater power to strangle the entrenched managers who parasitically suck the life's blood out of a retailing concept that once looked like a promising investment. (Ah, the foolish pursuit of promise!)

Since, practically, the stockholders lack that power, Mr. Schoonover will retire rich. And they will retire, if not poor, certainly poorer.

Moral standards

Thank you Chuck for the article. The point seems to be that if corporations do not act on a moral plane they will make immoral decisions which inevitablly lead to bad business decisions. When I worked in factories one made it very clear they did'nt give a whit about my well being. The other actually valued my contribution and with that got my loyalty, hard work and they paid me twice as much as the other place did. Thank God for pricipaled business people.

Nickled and Dimed

Barbara Ehrenreich wrote a fun and sad book called Nickled and Dimed. A great read, even if you don't share here liberal political views.

http://www.barbaraehrenreich.com/nickelanddimed.htm