Circuit City Stores Inc (NYSE: CC) waited until its CEO had destroyed 91% of its shareholder value before dumping Phil Schoonover. The Washington Post reports he made $6.5 million last year and there is no word on his severance package -- I wonder why. As I posted 18 months ago, Schoonover had a hair-brained scheme to save costs by firing his top 3,400 sales people. They took their customers to the competition and Circuit City's revenues and profits tumbled. Since that day in late March 2007, Schoonover's less than bright strategy helped take its stock from $18.53 to $1.70.

Schoonover's management move proved to be an excellent case study in what not to do. One of the most fundamental management concepts is that if you have good employees and treat them well, they will provide better service to your customers. And the happy customers will keep coming back. Conversely, if you treat employees badly, they will treat customers with contempt and you'll have to spend lots of money on marketing to bring in new customers who will just up and leave after their first unpleasant experience.

In January I received an unsubstantiated -- and ultimately false -- rumor that Schoonover was about to be replaced. What is so striking to me is that Schoonover got paid to make such an unprofitable move and then stuck around so long to oversee the resulting damage. Circuit City's new CEO, James Marcum, told BusinessWeek: "We believe that by fine-tuning our focus and strategies we will be able to leverage this history and build a stronger future for the company."

We'll see how well "leveraging this history" will work.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Circuit City securities.