Bad Times at Borders

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In fiscal 2003 Josefowicz earned a salary of $710,000 a year, supplemented by bonuses ranging from $319,000 to $568,000, based on Borders profits and comparable-store sales. But he didn’t earn a bonus in fiscal 2005, because the company missed its profit targets. The executive officers got no stock options that year, either.

And so, at the beginning of 2006, Josefowicz announced his plans to “retire,” though he was only fifty-three. He was nominally still a consultant through early 2008, under a new contract that paid him $2.5 million over two years, but he appears to have played no role in the company since then. (Josefowicz didn’t respond to requests for comment.)

The company’s troubles now read like an encyclopedia of business duress. Its technology, once a strategic advantage, has fallen behind so badly that it hampers store workers and headquarters staff alike. “Computer systems are notoriously out of date, ineffective, and inefficient,” says one former IT staffer. Its competitors are bigger and better financed—Amazon alone currently is sitting on $1.5 billion. Between its own problems and the weak economy, some fear Borders could follow retailers like the Sharper Image and Linens ’n Things into bankruptcy.