Lucky you—this Friday newsletter has not one but two news quizzes. What do the following companies have in common?
- JCPenney
- Chesapeake Energy
- Hertz
- Chuck E. Cheese parent CEC Entertainment
- Neiman Marcus Group
- Whiting Petroleum
If you guessed “all filed for bankruptcy,” you’re almost right. All of those companies paid execs bonuses riiiight before flipping to Chapter 11.
- According to Bloomberg,
19 of the roughly 100 companies that have filed for bankruptcy during
the pandemic have also committed to paying out executive bonuses.
Zoom out:
Dropping dimes on the c-suite just before bankruptcy isn’t
unprecedented. But as you’re probably sick of hearing, a lot of other
things happening now...are. The historic economic crisis currently
gripping the U.S. has some analysts questioning the timing of those
payouts.
The case for bankruptcy bonuses:
Proponents say the idea is to hold on to leaders who can maintain
stability through a turbulent time. Ian Keas, principal at executive
compensation consulting firm Pearl Meyer, told Bloomberg, “Board members
want the people that know the business.”
The case against: When
someone spills a jar of M&M's, you don’t let them keep their candy
manager job—meaning bankruptcy doesn’t bode well for an exec’s track
record. It looks especially bad when the bankrupt company let 10,000
North America employees go in the not-too-distant past, as Hertz did.
It’s also a sneaky legal move
Distributing
bonuses just before a bankruptcy filing means that money can’t be used
to pay back creditors. They can try challenging, but it’s tricky and
expensive.
Perhaps a sign of things to come: A DOJ lawyer told Neiman Marcus it could only pay its CEO and other top execs bonuses if they can prove they increased earnings.
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I AM A REPUBLICAN BORN AND BRED
IN AMERICA .I BELIEVE IN EQUALITY AND JUSTICE AND THE CONSTITUTION OF THE UNITED STATES.I SERVED IN THE UNITED STATES AIR FORCE
MAJORED IN GEOLOGY AND MUSIC AND WENT TO ANGELO STATE IN SAN ANGELO, TEXAS
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