Senior executives at Toys R Us (TRU) US, including CEO David Brandon, have left the ship sinking, weeks before the remaining stores will officially close.
Chief financial officer Michael Short, general counsel James Young and controller Charles Knight joined Brandon and exited the business on Monday, leaving a mere 300 employees left to bring the wind-down to a close.
This move is considered very unusual, bankruptcy lawyer Richard Weltman told The New York Post.
Meanwhile, for the approximately 30,000 employees at TRU US, the demise of the big-box toy retailer will not only leave them jobless, but strapped for cash.
The employees are not set to receive a severance package at the end of their tenure, despite the TRU private-equity firm owners garnering a whopping US$470 million from the closure.
“Private equity funds and corporate executives shouldn’t profit by bankrupting a company and throwing people out of work. This corporate greed is hurting me and my family — and it’s unacceptable,” Colleen Kleven, a TRU employee said.
In 2005 private equity firms Bain Capital, KKR and real-estate investment trust Vornado acquired TRU. Since then the company became laden with US$5 billion worth of debt – eventually forcing it to the recent bankruptcy.
“I love my job so much, and it hurts that these private equity companies don’t care about running a toy business — they just want the profit, no matter the cost,” Kleven said.
Kleven started a petition to rally the company to pay the employees severance and it already has 50,000 signatures. Even if the workers don't receive a severance package, they want to prevent a similar situation from happening in the future.
By lobbying lawmakers, the TRU employees want to see new legislation tax private-equity and hedge-fund profits as well as regulate leveraged buy-outs.
“There are thousands of retail employees now working at companies owned by Wall Street and private equity firms, and this kind of financial instability in the sector makes it hard for workers to have sustainable careers," Carrie Gleason, a director at the Centre for Popular Democracy told Bloomberg. “We’re organising to ensure there’s some accountability for owners who aren’t necessarily running the businesses in good faith."
Mixed reports are circulating about whether the top executives have received any bonuses. A March article published by Detroit Free Press claims that CEO David Brandon received a US$11.25 million compensation package which included US$2.8 million in retention bonuses, paid five days before the bankruptcy filing. However, recent reports suggest a somewhat silver lining for the employees, reporting that the top executives at TRU will not be receiving the US$2.8 million in bonuses (each) that was approved by the bankruptcy court in September 2017 as TRU did not reach the financial targets to trigger a payout.