Retirees Complain About Sears Plan
Retirees Complain About Sears Plan
May. 15, 1998
CHICAGO (AP) _ Retiree shareholders plan to continue to public protests against Sears, Roebuck and Co. until the retailer rescinds its decision to slash life insurance benefits.
An unusually adversarial annual meeting Thursday indicated the honeymoon is over for chief executive Arthur Martinez, who took the helm in 1995 and was regarded as a wunderkind who brought Sears, Roebuck & Co. back from the brink of collapse.
In the past year, he has grappled with an illegal credit collection process and sharply rising bad debt in its credit card division. But the show of force by retiree shareholders _ who once praised his efforts to boost Sears' Wall Street standing _ appeared a greater insult.
``Arthur, we are not going to go away,'' many in the audience chanted, followed by a sustained round of applause.
``You have to take it personally,'' Martinez told reporters after a rancorous question-and-answer session in which he was challenged on everything from his ethics to his decision to buy suits from retailers other than Sears.
But he was adamant that he will stand by his decision announced in September to reduce all retiree life insurance policies to $5,000 over 10 years, while entirely cutting benefits for current employees.
``The choice that we made is the right one, and I wouldn't have looked at it any other way,'' Martinez said. ``There is no intention to reverse this decision.''
Sears contends the company was liable for $1.9 billion if all the retiree policies were exercised, and says it now has reduced that risk to $500 million by slashing the death benefit.
The average retiree had a $17,000 whole life policy through the company, although some policies were for as much as $100,000.
There are 133,000 Sears retirees and about 84,000 were affected by the change, a spokeswoman said.
Martinez pointed out Sears worked with MetLife to offer coverage at previous levels, regardless of health histories, if retirees wanted to pay for it.
Retirees have formed a group called the National Association of Sears Retirees. They contend Sears used the life insurance ``lifetime'' benefit as a recruiting tool to lure people into the retail business.
Employees paid part of the premiums during their careers because they were guaranteed a paid-up, whole-life insurance policy upon retirement, they say.
``Different values,'' said Kenneth Johnson of Lake Forest, Ill., ``I guess this is what this is all about. We do feel that it was a promise.''
Martinez also said during the meeting that several Sears employees in its legal and credit card departments had been fired and other employees reprimanded in the wake of its investigation into the credit collection embarrassment.
Sears last year admitted it improperly or illegally collected debts from customers who had filed for bankruptcy dating back to 1985 by failing to get judicial approval for repayment agreements.
Sears agreed to pay a $158 million settlement to 190,000 of its customers in the case and another $20 million to settle for shareholder lawsuits. Martinez would not provide further details of the firings, but said those terminated should have known the Sears practice was illegal despite bad advice from outside counsel.
The retailer still is under federal investigation for the illegal practice despite the settlements. Martinez last year appointed a former assistant U.S. attorney in Chicago as chief compliance officer to ensure federal and state regulations are met.