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To play the devil's advocate for a moment: Why is this a bad thing? The investors and CEO profited from Sears failing and (presumably) in this free market economy that money can therefore be better invested in non-failing companies. Otherwise it would've just been lost.

Let me be clear though that I absolutely do not agree with the above. But the reason why I'm proposing such a rhetorical question is because how do you stop this? How can you convince people that what they did was legally and ethically wrong? They intentionally ran the company into the ground to increase the short term profits so they could parachute away with a nice bonus at the cost of the lower level employees.

But if we want to stop this behavior then we need a way to codify it in law. A way to prevent the slash-and-burn style of CEO or investor management.




>Why is this a bad thing? The investors and CEO profited from Sears failing and (presumably) in this free market economy that money can therefore be better invested in non-failing companies. Otherwise it would've just been lost.

Sears isn't failing because the business wasn't sound. Sears is failing because Lampert decided to neglect the business and use the balance sheet to play financial games that destroyed the business once 2007 hit - and once it was time to actually make money, they had been sorely left behind. The company that invented the catalog and was shipping things from warehouses before it was cool didn't take the time to build a proper web platform. Sears was mismanaged and I'm even skeptical Lamport profited at all from the endeavor.

If some hedgefund took over Samsung and decided to divert all resources to invest in Dogecoin, and subsequently lost all of Samsung's money, I'd struggle real hard to call it anything other than a "bad thing".


Sears shut down the mail order operation in 1993. I don’t think Lambert had anything to do with that.

It’s not clear to me he’s actually been making money off the fiasco either. Wikipedia: “ In March 2012, Lampert was No. 367 on the Forbes world wealthiest people list with a net worth of $3.1 billion.[12] By August, 2016, Lampert had fallen to No. 810 on the list, with a net worth of $2.2 billion.[1]”

Maybe he would have been better off selling off sears for parts and putting the cash in an index fund...


I'm under the impression him and his group became controlling shareholders of Sears and asset stripped it. That is technically legal but Sears sued him for infringing on the other shareholder's rights during the process. https://en.wikipedia.org/wiki/Asset_stripping Lampert is also part of the group offering the lifeline loan. So he helped drain the company and is now going to profit from the loan to keep them alive.


Or he’ll lose his money on the loan too. That $500 million will all go down the drain if the company doesn’t have a turnaround. A loan is giving someone else money and you only profit if they pay you back in full with interest after all.

I saw a different article criticizing him for basically throwing his money away trying to keep Sears going... http://money.com/money/5498143/eddie-lampert-trying-to-save-...

> While Lampert hasn’t suffered like his employees, Sears’ decline has cost him: Since taking over as CEO in 2013, he’s lost almost half his fortune – once as large as $3.1 billion. During his peak before the financial crisis, Lampert managed over $15 billion at his hedge-fund. As his bet on Sears soured over the years, more and more investors abandoned him. By the end of 2017, ESL managed only $1.3 billion, according to filings with the Securities and Exchange Commission.


>Sears shut down the mail order operation in 1993. I don’t think Lambert had anything to do with that.

Are you sure about that? The Sears mailorder pickup location near here just closed down within the last 5 years. The town I used to live in had a Sears mail order pickup location that was still open at least 10 years ago.


The catalog was eliminated in 1993 https://www.nytimes.com/1993/01/26/business/sears-eliminatin...

I’m not sure what the pickup location you’re referencing would have been for. And if you’re picking it up from a store, that’s not exactly a ship to home service anyway.


The catalog was like the phone book. They still had a significant e-commerce operation. My dad ordered a lawn tractor from them in the late 90s.

It was a big deal because they used LTL freight and many of the areas where they were located didn’t have good UPS or Fedex coverage.


Along with the sibling comment: my hometown of 5,000 people had a Sears mailorder pickup/warranty location only close within the last 10 years or so.

My family had the catalogue come to our house well into the late 90’s/early 2000’s.


Sears was taken over by KMart in an LBO after they emerged from bankruptcy. They were pretty much fucked once that happened as KMart wasn’t exactly a well oiled machine.

It hasn’t been the old sears, Roebuck company for many years.


But not unique at all : Kodak, Nokia.


This is different as those were companies left flat footed due to their massive bloat and inability to change. Sears was systematically raided for money to buy back shares, and other schemes to benefit Eddie Lampert. He is doing this with Autozone too. And has done it with other companies. It saddles the company with debt and lack of investment.


The narrative around Nokia’s “demise” is kind of a half-truth. Of course Nokia would have preferred to keep being wildly successful in the mobile phone business, but their other business lines were largely still successful. I think there’s a perception that Microsoft bought everything but the name when they bought the phone division, but that’s simply not true: Microsoft bought the only major division of Nokia that was losing money! They remain one of the biggest networking equipment manufacturers in the world, with over 100,000 employees.

tl;dr: I don’t think they’re very comparable to Kodak. :)


> How can you convince people that what they did was legally and ethically wrong? They intentionally ran the company into the ground to increase the short term profits so they could parachute away with a nice bonus at the cost of the lower level employees.

I feel like you've answered your own question immediately after asking it. As a sibling commenter said, you can't convince someone this is legally wrong because it isn't, but any ethical system that places personal wealth creation over the well-being other humans isn't one I can respect.


> How can you convince people that what they did was legally and ethically wrong?

Well if it's not illegal (as is the case currently) it's silly to convince them it's legally wrong.

Regarding ethics, in theory (I do not consider this a realistic solution) you could advocate for corporate reform and start pushing more B-Corps onto the world. It's worked wonders for Patagonia, but they are definitely an exceptional example.

Fundamentally the problem is a dichotomy - value creation versus value extraction. Do we want to make value extraction illegal? I hope someone will respond telling me why that is a terrible idea, but it actually sounds like the sort of morals-first law that might be good for everyone except parasitic investors. And I mean...why do we want more parasitic investors?


I think it's fair to make the case that something should be legally wrong, hence why I mentioned it. Something can be legally wrong but not ethically wrong and vice versa, and the best way to fix the problem is to address both at the same time.

And I think the rationalization would be that investors create more value through ensuring efficient value extraction which then flows back into the economy. But overall I think you're right in that we should discourage value extraction because of how it leads to running businesses to favor yourself or your investors rather than the business itself.

The contrast is that what's good for investors isn't always good for the business and vice versa. Right now I don't think there's strong enough checks on investors, since even in the case of failures they often come out ahead.


Not sure I've I'm even playing Devil's Advocate here...but at least one factor is fed-pump cycles. Lots of cheap money around looking for any return.

If money was expensive, there would be less deals at the margin. And presumably, fewer Silicon valley-unicorn-hype firms that continue to loose money.


It will be brutal when it comes time to pay the piper.




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