Some companies don’t even try to argue that the executive pay was cut. At $ 6.4 million, the cash bonus paid to Whiting Petroleum CEO Bradley J. Holly is greater than the $ 5.5 million the company valued its full compensation for 2019.
And, of course, bonuses are much higher than what regular employees earn. Ms. Soltau was many times the $ 11,482 that the retailer’s average employee, a part-time worker, earned during the 2019 JC Penney fiscal year, according to a securities filing.
Do troubled companies link bonuses to targets in any way?
Cash bonuses have also led to the hiding, loosening, and elimination of tools that companies often use to link payment to performance, which many critics argue was already too weak. Companies still operate when they seek protection under Chapter 11 bankruptcy. And in theory, boards could require CEOs to achieve sales goals or achieve other goals.
And in some cases, some strings remain. Ms. Soltau has to pay a fifth of her bonus in cash if she doesn’t meet certain performance goals, and Mr. Lawler has to pay half of his. But JC Penney and Chesapeake did not disclose the goals in their value submissions and declined to answer questions about them.
Hertz and Whiting, the oil and gas company, did not link the cash bonds to performance targets. Whiting and Holly did not respond to requests for comment, but the company said in a securities presentation that the new bonuses “eliminate any possible misalignment of interests that would likely arise if existing performance metrics were retained and / or the new performance metrics. were established at a volatile and uncertain time. “
Could lawmakers do something about these bonds?
This is not the first time that executive pay in troubled companies has sparked a protest. Congress passed a law in 2005 aimed at curbing retention bonds paid during bankruptcy. Under the law, companies can pay incentive-based bonuses, but the legal cost of building such payments and obtaining their approval in bankruptcy court skyrocketed after 2005, according to research by Jared Ellias, a professor at Hastings College. from the University of California. the law.
Of course, Congress could change the bankruptcy law so that compensation payments made before filing can be returned, Ellias said. In addition, lawmakers could make it easier for creditors to file lawsuits against executives after the bankruptcy.