As many of you guys know, I love to brag about my college job at Toys R Us where I had the privilege of wearing the Geoffrey the Giraffe costume.
As Geoffrey, I marched in parades, visited sick kids in children's hospitals, and tagged along at Make-A-Wish shopping events. These experiences were amazing. After college, I stuck around working part-time on the weekends or during summer vacations for over a decade.
It wasn't all good times - you can probably imagine what Black Friday was like, but for the most part, it was a lot of fun. When the store I work at (and every store in the country) closes in a few weeks, a special part of my life will be gone.
It's the end of an era.
Let's talk about the store closure for a second:
When I heard that Toys R Us filed for bankruptcy in the spring, I shrugged my shoulders and blamed it on Amazon like most of the people I spoke with. Toys R Us had a policy outlined with severance for long-term employees, but there wasn't any money left for that.
Sure, it's sad, but what can be done about, right?
As I started reading about the bankruptcy, I began to understand that what I had been hearing wasn't the whole story and - actually, a lot could be done.
This story begins in 2005 when private equity firms from Wall Street: Bain Capital and Kohlberg Kravis Roberts (also known as KKR), along with Vornado Realty Trust acquired the financially struggling Toys R Us. The transaction was made with only one billion of their own dollars and over five billion in borrowed money in a leveraged buyout (source: thenation.com) - a precarious business move.
That debt was added to what the company already owed. According to a Bloomberg report, the company owed "more than $400 million a year in interest alone on its debts" (source: bloomberg.com).
|Colorado Springs Toys R Us store|
Fast forward to late 2017:
The company filed for chapter 11 bankruptcy stating that it needs to "revamp its long-term debt" (source: NYtimes.com). They closed a few stores and assured the 33,000 employees, including me, that everything will be okay.
Mid-March, Toys R Us files for Bankruptcy liquidation and announces that all stores will close (source: USAtoday.com) and no store employees will receive any severance pay, regardless of the policy. Currently, there is no law requiring the company to honor its severance pay policy.
In fact, not every state has to pay out earned sick time or vacation to employees either.
As a part-time employee who was sometimes off the schedule for months at a time, I don't expect severance. Some of my coworkers in Michigan and Colorado, however, have been with company thirty or forty years.
They definitely deserve something.
But here's the real kicker - one week before filing for bankruptcy, Toys R Us executives received a total of eight million dollars in bonuses (source: wnyc.org).
So, this is where we are right now: Toys R Us as a company exists no longer and cannot pay out severance. A class action lawsuit will likely be filed, but even if employees win, there may be no means to pay it out.
The individuals who could pay out severance are the same ones who raked in 470 million dollars with Toys R Us: the private equity firms: KKR and Bain Capital (source: CBSnews.com). Obviously, they have no interest or legal obligation to do so.
One way to make this happen is to bring them negative press and make the general public aware of their wrongdoings.
This weekend, I joined over 70 other Toys R Us employees from around the country at a rally in a Union City, New Jersey store with a group called Rise Up Retail.
They took turns sharing their heartbreaking stories and made the local news.
I met some seriously incredible people.
|image from wnyc.org|
On Monday morning, we took a "Tour of Greed" down Wall Street in New York City, New York, marching with balloons, signs, and a graveyard set up.
Our first stop was in front of Toys R Us CEO David Brandon's 15 million dollar penthouse, whose salary was 11.25 million dollars last year (source: Washingtonpost.com).
Then we visited the office buildings that house KKR, Bain Capital, and Vornado.
We chanted, shared speeches using a megaphone and brought along a paper copy of the petition requesting severance pay signed by over 70,000 people.
This march made national news.
|Sarah N. Woodhams sharing her story with a reporter|
Here's why this story is important, even if you don't work for Toys R Us:
this will happen again if we don't prevent it.
According to Forbes.com, retail is the most common profession in America and private equity firm buyouts are becoming a fast-growing trend. The majority of large retailer companies who've filed for bankruptcy in the last two years were previously bought out by private equity firms (source: BusinessInsider.com).
|photo by Joanna Chambers|
Business Insider explains the shady money making process like this: "Part of how PE (private equity) firms make money is by stripping capital out of their portfolio companies via special dividends funded by "leveraged loans" leaving these companies in a very precarious condition."
Because the retail company is filing for bankruptcy, not the firms, they can empty a company and experience no financial fall out.
A Bloomberg article posted after the Chapter 11 filing stated, "KKR and Vornado, which are publicly traded, had previously written their investments in the company down to zero. As a result, the bankruptcy won’t affect their earnings going forward" (source: Bloomberg.com)
What can you do?
You can help change the laws by sharing this story and others like it.
Talk to your local politicians, like these employees did last week in New Jersey before the rally and Wall Street walk.
Ask them not to allow risky private equity firm buyouts on Wall Street.
Ask them to update the laws to require companies in bankruptcy to pay out employee severance before giving themselves multi-million dollar bonuses.
Ask them to change state laws, requiring all corporations to pay out earned sick pay and vacation time.
|image from New Jersey101.5|
Many of the articles cited in this post about private equity firms were published last year.
The information has been out there. Unfortunately, we just haven't been paying attention.
We need to read everything, and we have to speak out when something isn't right.
Your voice has power.
Use it to create change.
|photo by Michelle Perez|