American Firms Shower Executives with Big Bonuses Ahead of Bankruptcy Filing

Neiman Marcus drew scrutiny this week on a plan it proposed after filing for bankruptcy to pay additional bonuses to executives. The company declined to comment.

Hertz - which recently terminated more than 14,000 workers - paid senior executives bonuses of $1.5 million days before its May 22 bankruptcy, in part to recognize the uncertainty they faced from the pandemic’s impact on travel, the company said in a filing.

Whiting Petroleum Corp bestowed $14.6 million in extra compensation to executives days before its April 1 bankruptcy.

Shale pioneer Chesapeake Energy Corp awarded $25 million to executives and lower-level employees in May, about eight weeks before filing bankruptcy.

Both cited fallout from the pandemic and a Saudi-Russian oil price war, which they said rendered their incentive plans ineffective.

Reuters reviewed financial disclosures and court records from 45 companies that filed for bankruptcy between March 11, the day the World Health Organization declared Covid-19 a pandemic, and July 15.

Using a database provided by BankruptcyData, a division of New Generation Research Inc, Reuters reviewed companies with publicly traded stock or debt and more than $50 million in liabilities.

Such bonuses have long spurred objections that companies are enriching executives while cutting jobs, stiffing creditors and wiping out stock investors.

In March, creditors sued former Toys 'R' Us executives and directors, accusing them of misdeeds that included paying management bonuses days before its 2017 bankruptcy.

The retailer liquidated in 2018, terminating more than 31,000 people.