The Post ran a good follow-up story today, telling readers about Circuit City's latest business problems. It seems that its sales of big ticket items have plummeted. Undoubtedly part of the decline is attributable to a general weakening of the economy. But part of the falloff is likely attributable to factors specific to Circuit City, like its decision to fire 3,400 more senior sales clerks and replace them with lower paid new hires. Circuit City basically advertised to the country that you should not go to Circuit City if you want to talk to a sales clerk that knows anything about the products they are selling. Since one of the main reasons that people go to stores, rather than buy electronic items over the Internet, is to talk to someone who is knowledgeable about the products, the mass firings took away one of Circuit City's main selling points. While it may be too early to make any final judgments, it will be interesting to see what happens to Circuit City's CEO. Those who say that the huge salaries earned by CEOs are justifed, argue that the returns that a good CEO brings to shareholders dwarf their salary. In this case, a CEO made a decision that not only had a very bad impact on the lives of 3,400 employees, but also may have cost the stockholders lots of money. (It is unlikely that any of the 3,400 fired workers would have made such a foolish decision, if they ran the company.) It will be interesting to see what happens to Circuit City's CEO, and how much money he walks away with, if its current sales path continues. Let's hope the Post stays with the story.
--Dean Baker
