티스토리 뷰
On eve of bankruptcy, U.S. corporations shower execs with bonuses.
Nearly a 3rd of quite forty giant firms
seeking U.S. bankruptcy protection
throughout the coronavirus
pandemic awarded bonuses
to executives at
intervals a month of
filing their cases, according to
a Reuters analysis of
securities filings and court records.
Under a 2005 bankruptcy law,
firms are illegal, with
few exceptions, from paying
executives retention bonuses whereas
in bankruptcy. however the companies
appropriated on a loophole by
granting payouts before filing.
Six of the fourteen firms
that approved bonuses at
intervals a month of
their filings cited business
challenges executives long-faced
throughout the pandemic in
justifying the compensation.
Even additional corporations paid
bonuses within the half-year
amount before their bankruptcies.
32 of the forty five firms
We examined approved or
paid bonuses at intervals
six months of filing.
Nearly 0.5 approved payouts
at intervals 2 months.
Eight firms, together with J.C.
Penney Co INC and Hertz
world Holdings INC, approved
bonuses as few as 5 days before
seeking bankruptcy protection.
Hi-Crush INC, a provider
of sand for oil-and-gas
fracking, paid govt bonuses
2 days before its July
twelve filing.
J.C. Penney - forced to
quickly shut its 846
shops and furlough regarding
seventy eight,000 of its
eighty five,000 workers because
the pandemic unfold - approved
nearly $10 million in payouts
simply before its could fifteen
filing. On weekday, the
corporate aforementioned it might
for good shut one52
stores and lay off 1,000
workers.
The company declined to comment
for this story however said
in an earlier statement that
the bonuses aimed to retain
a “talented management team” that
had created progress on a
turnaround before the pandemic.
The other corporations declined
to comment or failed to respond.
In filings, several said economic
turmoil had rendered traditional
compensation plans obsolete or
that executives obtaining bonuses
had forfeit different compensation.
Luxury distributor Neiman Marcus
group in March quickly closed
all of its sixty seven
stores and in april
furloughed quite eleven,000 workers.
The corporate paid $4 million
in bonuses to Chairman and
Chief govt Geoffroy van
Raemdonck in February and
quite $4 million to different
executives within the weeks before
its could seven bankruptcy filing,
court records show.
Neiman Marcus Drew scrutiny
in the week on an idea it
planned when filing for bankruptcy
to pay extra bonuses to executives.
The corporate declined to comment.
Hertz - that recently terminated
quite fourteen,000 staff -
paid senior executives bonuses of
$1.5 million days before
its could twenty two bankruptcy,
partially to acknowledge the
uncertainty they faced from
the pandemic’s impact on travel,
the corporate said during a filing.
Whiting petroleum house given
$14.6 million in further
compensation to executives days
before its April one bankruptcy.
shale pioneer Chesapeake Energy
house awarded $25 million to
executives and lower-level
workers in could, regarding
eight weeks before filing
bankruptcy. Each cited fallout
from the pandemic and a
Saudi-Russian oil price battle,
that they said rendered
their incentive plans ineffective.
Reuters reviewed monetary disclosures
and court records from
forty five corporations
that filed for bankruptcy
between March eleven, the
day the planet Health Organization
declared COVID 19 an
endemic, and July fifteen. employing
a info provided by BankruptcyData,
a division of recent Generation
analysis INC, Reuters reviewed
corporations with publically trade
stock or debt and quite $50 million
in liabilities.
Such bonuses have long spurred
objections that corporations are enriching
executives whereas cutting jobs,
stiffing creditors and wiping
out stock investors. In March, creditors
sued former Toys ‘R’ U.S. executives
and administrators, accusing them of
misdeeds that enclosed paying management
bonuses days before its 2017 bankruptcy.
The retail merchant liquidated in 2018,
terminating quite thirty one,000 people.
A attorney for the executives
and administrators aforesaid the bonuses
were even, given the additional work
and stress on management,
which Toys ‘R’ U.S. had hoped
to stay in business when restructuring.
In June, legislature Democrats skilled
the pandemic-induced wave of
bankruptcies by introducing legislation
that will strengthen creditors’ rights
to claw back bonuses. The bill -
the most recent iteration of
a proposal that has long
did not gain traction
- faces slim prospects during
a Republican-controlled Senate,
a Democratic aide said.
Firms paying pre bankruptcy
bonuses understand they might
face scrutiny in court on compensation
planned when their filings,
aforesaid Clifford J. White III,
director of the U.S. Trustee
Program, a Department of Justice
division charged with watching
bankruptcy proceedings. however the
trustees haven't any power
to halt bonuses paid even
days before a company’s bankruptcy
filing, he said, permitting
companies to “escape the
transparency and court review.”
DODGING BONUS RESTRICTIONS
The 2005 legislation needed
executives and different company
insiders to possess a competitory
job provide in hand before
receiving retention bonuses
throughout bankruptcy,among different
restrictions. That forced failing companies
to devise new ways to pay the bonuses,
per some restructuring consultants.
After the 2008 monetary crisis,
corporations usually planned bonuses
in bankruptcy court, casting
them as incentive plans
with goals executives should meet.
Judges largely approved the plans,
ruling that the performance
benchmarks place the compensation
beyond the scope of the
restrictions on retention bonuses.
The plans, however, sparked objections
from Department of Justice monitors
who called them retention
bonuses in disguise, usually with
simple milestones.
Eventually, corporations found they
may avoid scrutiny altogether
by approving bonuses before
bankruptcy filings. Dozens of
corporations have approved such
payouts within the last 5 years,
aforesaid Brian Cumberland, an
executive compensation knowledgeable at
consulting company Alvarez & Marsal
who advises corporations undergoing
monetary restructurings.
Companies argue the bonuses are
crucial to holding executives whose
departures may torpedo their
businesses, ultimately
going away less cash
for creditors and workers.
Now, some corporations are
bolstering those arguments by
competitory that their business wouldn't
have cratered while not
the economic turmoil
of the pandemic.
The pre-bankruptcy payouts are
required, corporations say,
as a result of potential
stock awards are no-count
and it might be not
possible for executives to
fulfill business targets that
were crafted before the
slump. The bonuses guarantee stability
in leadership that's required
to carry faltering operations
along, the companies contend.
Some specialists argue the
bonuses are hard to justify
for executives who could
have few higher job
choices in an slump.
“With double digit state,
it’s a wierd time
to be paying out retention
bonuses,” said Adam Levitin,
a academician specializing in
bankruptcy at Georgetown University’s
graduate school.
dddddddddddddddddddd
CLOSED STORES, huge BONUSES
J.C. Penney has not denote
an annual profit since
2010 because it has
struggled to grapple with
the shift to on-line searching
and competition from discount
retailers. The 118-year-old chain,
at varied points, utilized quite
two hundred,000 individuals and
operated one,600 stores, figures
that have since been cut quite
On May 10, J.C. Penney’s
board approved compensation changes
that paid prime executives,
as well as chief executive
officer Jill Soltau, nearly $10
million. On May 13, Soltau
received a $1.7 million long run
incentive payment and a
$4.5 million retention bonus,
court filings show.
The annual pay of the
company’s median worker, a
part time hourly employee,
was $11,482 in 2019,
a corporation filing shows.
J.C. Penney filed for bankruptcy
2 days when paying Soltau’s bonuses.
At a hearing consequent day,
a creditors’ attorney argued
the payouts were designed
to thwart court review. The
payouts were regular “so
that they didn’t got to
place it ahead of you,”
said the attorney, Kristopher
Hansen, addressing U.S. Bankruptcy
decide David Jones.
Jones - who is additionally overseeing
the Whiting petroleum, Chesapeake
Energy and Neiman Marcus cases
- told Reuters that such
bonuses are “always a concern”
in bankruptcy cases. “That
said, the adversarial method
demands that parties place
the problem before me
before I will take action,”
he added, accentuation
he was speaking of general
dynamics applicable to any case. “
A comment created in passing
by a attorney isn't sufficient .”
In its statement earlier this
year, J.C. Penney aforesaid
the bonuses were
among a series of “tough,
prudent decisions” taken to
safeguard the firm’s future.
Dennis marten - a investor
who aforesaid he once worked
at a J.C. Penney store -
disagrees. He has appeared at
court hearings pleading for
an investigation of the company’s
leadership.
“Shame on her for having
the gall to urge that cash,”
he said of Soltau.