“How did you go bankrupt? Gradually, then suddenly.”
—The Sun Also Rises, Ernest Hemingway
For years, Kmart's financials had been lackluster, but until 2002, the company had never filed for bankruptcy. Sure, there had been rumors, but it had never actually happened. Why now? What caused the company's prospects to become so bleak that bankruptcy protection was the only answer? Some say the answer is Chuck Conaway, who began his tenure as CEO in 2000, and his “frat boy” management team.
Out of what looks like pure greed, former managers pushed Kmart into bankruptcy by draining the corporate coffers, in the process giving themselves extensive compensation packages and embarking on ill-advised price wars. The extent to which executives and managers went to conceal their ill-gotten financial gains is impressive. One newspaper report called it a “two-year program of deceit, intimidation and unauthorized spending, ” 1 in which “former Kmart managers altered information submitted to the board of directors about a controversial $24 million loan program for key executives in December 2001, ”1 This indicates that their minds definitely were not on helping Kmart improve its market position. If they had been, Kmart would be better off for their leadership, not worse.
Finally, employee whistleblowers could stay quiet no longer and began sending anonymous letters on Kmart letterhead