The sudden wave of retail bankruptcies this year have been startling for shoppers and analysts alike. Whether they’re electing to pursue online-only retail strategies or shutting up shop completely, the “retail apocalypse” may have finally descended upon us. With Sears announcing its Chapter 11 bankruptcy to restructure, President Trump has come out publicly claiming that Sears “has been dying for years” due to mismanagement (which is ironic, as the US Secretary of Treasury, Steven Mnuchin, was also on Sears’ board of directors).

Sears was once the USA’s largest employer – the Walmart or Amazon of yesteryear. Toys R’ Us was once the Mecca for children’s toys. How are such high-profile retail outlets succumbing at such an alarming rate? Are shoppers simply moving online? Although ecommerce is an easy scapegoat for many retailers, it is likely not the main culprit. The evidence points to something deeper – systemic flaws within the culture of these retail monoliths that leave them no ability to adapt or re-invent their businesses, short-sighted management with little strategic planning, and huge debt levels from unmotivated private equity owners. “If you are going to run your business like most businesses, it is only reasonable to expect that you will end up like most businesses” – most likely out of business within five years.

This leaves us one question: where does the responsibly lie? Could the boards of these organizations have ultimately prevented these performance failures?

As we’ve seen, in their current state, it is too easy for boards of directors to overlook deep-rooted performance issues. This point is something Mac Van Wielingen has drawn on multiple times in his work – that the board needs to take a more active, vigilant approach to guiding the performance of their companies, escaping the gravitational pull that leads to“most directors [playing] a role akin to spectators…versus real players in the game, sharing in the responsibilities for outcomes.”

Author

Viewpoint Research Team