Gymboree — a retail outlet geared toward parents of young children — filed bankruptcy in January, making it the second bankruptcy the company filed in as many years.
But while top executives were given millions in bonuses, a planned severance package for employees was cancelled without warning. That’s according to a new report in The Intercept, in which journalist David Dayen interviewed a worker who left Old Navy for Gymboree specifically because of the company’s severance policy.
Dayen interviewed Mera Chung, who was vice president of design at Crazy 8 — a brand of Gymboree — who was informed by both the company’s CEO and its director of human resources that the company would be invoking Article VII of its severance agreement. This section states that the severance package for the roughly 10,000 or so clerks at hundreds of Gymboree locations can be cancelled “at any time in any respect” after a majority vote from the company’s board of directors. Chung was among 400 employees at Gymboree’s San Francisco headquarters who were impacted by that decision, according to The Intercept.
But while those thousands of workers lost their severance, the eight people on Gymboree’s executive leadership team got golden parachutes coincidentally worth the exact same amount as the severance checks workers would have gotten. On top of that, those payments were kept secret from the workers. When Chung asked HR director Bridget Shickedanz — one of the eight golden parachute recipients — about the payments, Schickedanz responded that the question was “not appropriate” and that she wouldn’t give her an answer.
A few weeks earlier, [Chung] had learned about a confidential deal between the board and eight members of Gymboree’s executive leadership team. According to Chung, those executives received paper checks with a “retention bonus” equal in value to their severance payouts. The board, which includes representatives from hedge funds and private equity firms, told the executives to deposit the checks immediately. Bankruptcy experts often call this type of payment a “disguised severance.”
Chung heard this firsthand from one of the bonus recipients. Chung had an equivalent title to most of the members who she was told received the bonuses, but she was left out. She would later tell the bankruptcy trustee in a letter that she watched as four of those bonus recipients jetted off to the Sundance Film Festival, just days after Gymboree declared bankruptcy.
Gymboree is just the latest company to shaft its workers while lavishing top executives with golden parachutes. As Grit Post previously reported, courts allowed retail giant Sears to give out $25 million to its executives while workers were left on their own to fight for severance pay. And the private equity firm that brought on Toys ‘R’ Us’s bankruptcy paid itself $500 million while laying off the chain’s 33,000 workers, and denying them severance pay.
Tom Cahill is a contributor for Grit Post who covers political and economic news. He lives in Bend, Oregon. Send him an email at tom DOT v DOT cahill AT gmail DOT com.