Mitt Romney’s rivals this week intensified their attacks over business failures that happened on his watch at the investment firm Bain Capital. But even the successes touted by Romney’s campaign involved some painful decisions and layoffs.
Both the successes and the failures reveal the candidate’s faith in “creative destruction,” the notion that the new must relentlessly replace the old so that companies and the economy can become more efficient.
A super PAC supporting Newt Gingrich is airing ads in South Carolina attacking former Massachusetts governor Mitt Romney's record at the venture capital firm Bain Capital. (Jan. 11)
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The concept is gospel to many businesspeople. But its intersection with politics has created what may be a recurring line of attack against Romney’s record.
Romney’s approach is visible in the three big Bain investments he trumpets in his official biography as evidence that he knows how to create jobs. The companies — Staples, Sports Authority and Domino’s Pizza — are well-known consumer brands, and the campaign has gone so far as to say that Romney helped create 100,000 jobs through his work related to those businesses.
But like Romney’s work on all the businesses Bain invested in, the primary goal with these companies wasn’t job creation but making them more profitable and valuable. This meant embracing aspects of capitalism that have unsettled some Americans: laying off workers when necessary, expanding overseas to chase profits and paying top executives significantly more than employees on lower rungs.
Supporters of Romney rival Newt Gingrich released a video on Wednesday accusing the former private-equity financier of laying off workers and profiting from the results. Yet Romney has never shied away from proclaiming his belief that job cuts are sometimes necessary.
The rise of Staples is in fact a textbook example of “creative destruction.”
Staples became a runaway business success in the 1980s and 1990s because it offered companies a smarter way of purchasing supplies, saving them money. As Staples grew, smaller stationery stores were shuttered. These losses are not counted in Romney’s jobs figure.
The rise of the company, which entered the Fortune 500 in 1996, has mirrored broader trends in corporate America, in which many multinational firms now see more potential growth abroad than in this country.
Staples, too, is steadily expanding overseas. In 2006, revenue outside North America accounted for 13 percent of revenue. In 2010, the share was 21 percent.
And as Staples has grown, so has the pay earned by its chief executive, from $4.7 million in 2006 to $10.8 million in 2010. The company explains in its annual report how it sets pay, saying that it uses comparable firms, such as Amazon, Best Buy and Starbucks, as benchmarks.
Staples does not disclose the wages of its 89,000 employees, nor does it break out how many work as retail associates. According to the Bureau of Labor Statistics, the mean annual wage of a retail salesperson in the United States is $25,000 a year.
Staples has not been immune from tough choices about cutting workers. During the depths of the recent recession, it laid off about 140 employees, half of whom worked at the company’s headquarters in Framingham, Mass.
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