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Essay on The Reorganization of Kmart
For years, Kmart's financials had been lackluster, but until 2002, the company had never filed for bankruptcy. Sure, there had been rumors, but it had never actually happened.
Out of what looks like pure greed, former managers pushed Kmart into bankruptcy by draining the corporate coffers, in the process giving themselves extensive compensation packages and embarking on ill-advised price wars. The extent to which executives and managers went to conceal their ill-gotten financial gains is impressive. One newspaper report called it a two-year program of deceit, intimidation and unauthorized spending, in which former Kmart managers altered information submitted to the board of directors about a controversial $24 million loan program for key executives in December 2001, This indicates that their minds definitely were not on helping Kmart improve its market position. If they had been, Kmart would be better off for their leadership, not worse.
Employee whistleblowers could stay quiet no longer and began sending anonymous letters on Kmart letterhead about accounting irregularities and wrongdoing within the company to local media and government investigators. Those letters prompted the FBI, the U.S. Asttorney's office, and other government agencies, as well as Kmart itself, to cull through its corporate records for answers. (Marcia Layton Turner, 2003.)
According to the stewardship review that the company performed and reported in its bankruptcy reorganization plan in 2003, it appears that Kmart was financially stable, although not immensely profitable, when Chuck Conaway took over. But it was under his leadership that executives began exploiting the company for all that it was worth.
Jeffrey Boyer, a Conaway pick and Sears veteran, was CFO for just seven months, but pocketed more than $1 million in cash, bonuses, and severance on his departure. Mark Schwartz, the brash president Conaway instated, earned more than $2 million in fiscal 2000, of which he only worked about five months and received more than $1.2 million just for housing in 2001....
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