The Strategist

Bloomberg: Top managers of US bankrupt companies received $131M in bonuses

07/15/2020 - 10:14

Top managers of 19 of the nearly 100 American companies that launched bankruptcy procedures this year were determined to pay bonuses totaling $ 131 million.

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This information is provided by Bloomberg, based on the newspaper’s own calculations. In some companies, bonus payment plans were announced a few weeks before bankruptcy, and in some - even a few days after bankruptcy.

Among the bankrupt companies that allocated large payments to their top managers, the agency mentions JC Penney department store chain: $ 10 million has been allocated for bonuses to management; $ 25 million – in oil and gas company Chesapeake Energy; $ 1.5 million – in Hertz Global car rental network. The companies say they need these payments to retain a team of managers who will restructure the business. As Bloomberg notes, “payments are assigned to people who were at the helm when the business went down.” “We consider this practice offensive against the backdrop of job cuts and company closures,” Julie Farb, representative of AFL-CIO, said in an interview with the agency.

Under US law, company creditors and the US Trustee Department of Justice, which oversees the Bankruptcy Department in the Department of Justice, can challenge these payments to senior executives. This is possible if the decision on payments was made already during the bankruptcy procedure. US Trustee spokesman Peter Carr notes that his agency has already objected to giving about ten bonus packages to top managers of bankrupt companies, but in practice, blocking such payments is rarely successful.