October 28, 2020
Wall Street Journal: Bonuses before bankruptcy: Companies doled out millions to executives before filing for Chapter 11
By Abha Bhattarai and Daniela Santamariña
The coronavirus recession tipped dozens of troubled companies into bankruptcy, setting off a rush of store closures, furloughs and layoffs. But several major brands, including Hertz Global, J.C. Penney and Neiman Marcus, doled out millions in executive bonuses just before filing for Chapter 11 protection, according to a Washington Post analysis of regulatory filings and court documents.
Since the pandemic took hold in March, at least 18 large companies have rewarded executives with six- and seven-figure payouts before asking bankruptcy courts to shield them from landlords, suppliers and other creditors while they restructured, the Post review found. They collectively meted out more than $135 million, documents show, while listing $79 billion in debts.
“Somebody has to run the company, and the thinking is that it’s better to have someone who knows the organization,” said Dayna Harris, a partner at executive compensation consulting firm Farient Advisors. “If the company is able to go through reorganization, then investors still get something at the end and some employees still have a job left. If you go to liquidation, then everybody’s done.”