Hertz, the global car rental giant that filed for Chapter 11 bankruptcy on 22 May, which we have been reporting on in the Trends Journal, celebrated their failure by giving $16.2 million in cash bonuses to top employees. CEO Paul Stone pocketed $700,000 and Jamere Jackson, CFO, collected $600,000.
Hertz is not the only company that rewarded its leaders just before seeking court protection… it’s an ongoing trend.
Retailer J.C. Penney paid $10 million to top executives just before going belly up.
Five top officers at Whiting Petroleum, the largest U.S. independent oil producer to go bust in the recent oil price collapse, shared $14.5 million in cash days ahead of the company’s bankruptcy filing. Chesapeake Energy, another victim of the oil price debacle, earmarked $25 million in bonuses for its executive cadre.
The payments are considered “retention bonuses,” which are incentives to keep top executives from leaving a company while it is in trouble.
Bankruptcy laws prevent companies from paying retention bonuses after bankruptcy has been filed, so the companies paid the bonuses before going to bankruptcy court.
Executives’ incentives usually are based on a company’s stock value and financial performance, but the economic lockdown and subsequent crash has rendered those metrics meaningless. The bonuses give companies an alternate way to hold onto leaders whom a company’s board wants to retain.
PUBLISHER’S NOTE: It’s the same old story: corporate executives and leveraged buyout artists get rich when companies fail while workers are lucky to get a last paycheck before they’re pushed out the door.
This is an ongoing trend. When Toys ‘R’ Us – saddled with debt after Bain Capital, KKR & Co., and Vornado Realty Trust took the retailer private – went bust in 2017, top executives got $21 million in bonuses.
