1. Firing the Best
As Circuit City winds up its financial affairs in bankruptcy court, it can look back on its firing of 3,400 of its most experienced store associates as the beginning of the end.
The Richmond, Va.-based company, which had 655 electronics retail stores throughout the United States, told the employees, who earned more than the "market-based salary range" for their positions, that they could reapply for jobs, but at lower pay.
It was a move that eliminated or alienated the company's most experienced and knowledgeable sales staff at a time they were needed the most.
2. Lying for the Boss
It's not nice to fool the SEC -- as two senior-level HR leaders of two California high-tech companies found out in the stock-options-backdating scandal.
Stephanie Jensen, former HR leader of Brocade Communications Systems in San Jose, Calif., was sentenced to four months in prison and fined $1.25 million for falsifying corporate records, while Nancy Tullos, former HR head of Broadcom Corp., pleaded guilty to a criminal charge of obstruction of justice for altering evidence of a new employee's hire date.
Tullos did not receive jail time in exchange for her cooperation in the criminal cases against other executives at the Irvine, Calif.-based company.
3. Victimizing Employees
When Republic Windows & Doors in Chicago shut the doors to its plant, laying off its workforce of about 250 -- giving them three days' notice and no severance -- it led to a sit-in reminiscent of the first days of the labor movement.
The demonstration drew national news coverage as well as public support by then-President Elect Barack Obama -- and eventually led to a $1.75 million settlement. The laid-off employees argued the company violated the WARN [Worker Adjustment and Retraining Notification] Act, which requires 60 days' notice of a mass layoff or plant closing.
The settlement was agreed to by executives of the now-shuttered company; the United Electrical Workers Union, which represents the employees; Bank of America, the company's former creditor, which put up $1.35 million as a loan to Republic; and JPMorgan Chase & Co., which pledged an additional $400,000 to be used solely for the laid-off workers.
4. Overpaying Under-Performing Executives
Lehman Bros. is only one of many examples of organizations paying huge bonuses to executives, while the organization languishes -- more than languishes in this case, as the 158-year-old investment bank became the country's largest bankruptcy, listing $613 billion in liabilities.
The bankruptcy occurred under the watch of Richard Fuld, who collected as much as $480 million in compensation during eight years at the bank. That figure -- calculated by Rep. Henry Waxman, D-Calif. -- is apparently disputed by Fuld, who points out he only took home $300 million during that time.
According to Bloomberg news, financial companies in New York paid cash bonuses of $18.4 billion in 2008, the sixth-most in history, even as they posted record losses. And, of course, some of those institutions are now being bailed out by taxpayers.
5. Creating an Employee-Recognition Nightmare
When a company asks for a hand-out, it's always a good idea for its leaders to understand that observers are going to be watching how it spends its money.
In the case of AIG, spending $440,000 on a resort retreat -- complete with $23,000 for spa services --for executives wasn't the best idea after a government bailout of $85 billion in taxpayer money. Although AIG cancelled a second planned luxury retreat, the message apparently didn't spread all that widely.
Wells Fargo -- which received $25 billion in the bailout -- only recently cancelled a two-week stay in Las Vegas for top performers, while other financial institutions on the government dole have seen criticism and outrage as their employee-recognition efforts are publicized.