OUR VIEW: Furniture Brands leaders rewarded for incompetence
Your kid is a C student. You offer her an incentive of $50 to improve
her grades. Next report card she brings home Ds. You give her $50.
That’s no longer an incentive. It’s paying for incompetence.
How does that make sense?
It makes about as much sense as Furniture Brands International Inc., in the midst of bankruptcy, wanting to give its top executives big bonuses.
FBI, which owns iconic furniture lines, including Thomasville, Drexel Heritage and Broyhill, asked a federal judge this week to allow it to pay more than $5 million in bonuses to 55 employees, with up to $3.4 million of that going to top officers, if the company successfully sells its assets at auction.
The company said that filing for Chapter 11 bankruptcy can lead to retention problems.
Why spend so much to hold on to the leaders who failed? Are those managers the only people who could sell off the company?
It appears rewarding leader incompetence is a theme here. The company hasn’t made a profit in six years, and last year lost $47 million.
Still, FBI paid Chairman and CEO Ralph Scozzafava bonuses worth $541,000, boosting his total pay for 2012 to $1.98 million.
So, Scozzafava’s income jumped while he led the company in a $47 million loss.
They’re rewarding loss instead of gains.
Raymond James analyst Budd Bugatch has been critical of FBI’s management over the years. David Nicklaus of the St. Louis Dispatch quoted him in a recent report saying Furniture Brands’ “approach and execution was flawed, particularly as peers posted improving results.”
Andrew Brod, senior research fellow at the Center for Business & Economic Research at the University of North Carolina at Greensboro, told us, “I don’t know what it is about FBI’s internal structure that’s led it to be so consistently weak over the years ― weak profit reports and quarter after quarter, year after year where it was delivering weak results until it delisted itself from the New York Stock Exchange. It’s been in trouble for some time.”
Times have been hard. The furniture industry has been hit hard. But others are surviving and some even thriving.
Maybe some of their successes can be credited to strong leadership and not providing incentives to someone who brings home a failing grade.