Toys ‘R’ Us Closures

Though Toys ‘R’ Us has recently announced bankruptcy and closures of its stores, a business ethics situation has arisen related to the compensation packages given by the company to its executives. As Held (2017) points out, “a bankruptcy judge has granted struggling retailer Toys R Us permission to pay millions of dollars in bonuses to executives after the company argued it was necessary to motivate its top brass during the critical holiday shopping season.” The problem, as Judy Robbins of the Justice Department’s U.S. Trustee Program has shown, is one of accountability. Ethically speaking, the bankruptcy court’s allowance of this goes against all sense of ethics and how a corporation should be expected to govern itself and be accountable to shareholders. But it also goes against the Bankruptcy Code as Robbins notes: “It defies logic and wisdom, not to mention the Bankruptcy Code, that a bankrupt company would now propose further multi-million dollar bonuses for the senior leadership of a company that began the year with employee layoffs and concludes it in the midst of the holiday season in bankruptcy” (Held, 2017). The ethical issue at stake with Toys ‘R’ Us giving millions to its executives is that while the company closes its stores and lays off thousands of employees across the States it has the temerity to reward and “motivate” its executives with big, fat bonuses—all while shareholders and lower level workers are shafted and left with little to nothing for their loyalty to the company.

Business ethics is not something that is just for show in the 21st century but something that actually has an impact on communities. The idea of corporate social responsibility is one that has gained popularity over the years because it puts companies on a pedestal, which is rightly so, because corporations serve the interests of so many stakeholders that they deserve to have the spotlight shown on them—and they also have a duty to do what is right by the communities that they serve. Were it not for the communities in which the corporations are situated, the corporations would not be in operation. Business is not a zero sum game but rather a process by which something that benefits the community is provided by workers who have the skill and ability to provide the good or service. In so doing, both community and business depend on one another. A corporation that takes advantage of stakeholders so that a handful of executives at the top of the pyramid benefit while all those below them are left in the cold, that corporation can be seen as unethical. Accountability is an ethic that companies must possess in order to be viewed as good for the community.

For a corporation to be ethical in terms of demonstrating corporate social responsibility it should engage in practices that promote the “social, environmental and economic environment in which” the business operates (Castka, Bamber, Sharp, 2005, p. vii). Toys ‘R’ Us is violating the responsibility of promoting the economic environment of its stakeholders as well as the social environment by rewarding its executives with such significant bonuses at a time when the company is going under and its workers are losing their jobs. When a store is closing, its executives should not be given immense packages: the incentive that should motivate them should be the fact that they are accountable to stakeholders—to shareholders, to the community, to employees, to families, to the courts, and to the world. If a bonus at the end of the year is the only thing that can get them to do their jobs—whatever that might be—one must question why it is these individuals are there in the first place. What appears to be the case is that corporations like Toys ‘R’ Us are simply engaging in a type of money funneling in which the executives of these businesses all hire one another with the agreement that they will reward one another for their loyalty to the “club” and not ask any questions about how funds are used or hold anyone publicly accountable for taking such a big disproportionate piece of the pie while others suffer. The selfish nature of the issue is what should enrage stakeholders. It is unethical and demands justice.

Every executive of every business should be accountable to the public if it is a public company that is being headed. Schyns and Schilling (2013) find that if leaders do not hold themselves accountable to their followers, the entire organization will suffer because morale will dip and stakeholders will no longer feel a reason to be loyal or dedicated to the company. This sign of Toys ‘R’ Us providing big bonuses to its executives at a time when the company is going bankrupt indicates that the company’s leaders have been out of touch with its followers for a while. When a company is going under and those at the top care only about getting as much out of the sinking company as they can before it all goes down, it shows that they never cared about the organization or the company’s stakeholders in the first place. Indeed, the problem that is being seen now with Toys ‘R’ Us is that the ethical principle of accountability has long been absent from the organization.

In conclusion, as Toys ‘R’ Us closes its stores and puts more people out of work while declaring bankruptcy, its executives will enjoy a huge financial lift as though it has been a job well done. The reality is that the company has failed and yet those who should have helped to save the company are now taking off with what is left of the earnings so that they at least can have a happy new year. It is no way for a publicly held company to conduct itself ethically.

References

Castka, P., Bamber, C., Sharp, J. (2005). Implementing Effective Corporate Social Responsibility and Corporate Governance: A Framework. UK: British Standards Institution.

Held, A. (2017). Struggling Toys R Us plans to pay executives millions in bonuses. Retrieved from https://www.npr.org/sections/thetwo-way/2017/12/07/569088557/struggling-toys-r-us-plans-to-pay-executives-millions-in-bonuses

Schyns, B., Schilling, J. (2013). How bad are the effects of bad leaders? A meta-analysis of destructive leadership and its outcomes. The Leadership Quarterly, 24: 138-158.