The New York Times has a story about how, even as many companies declare bankruptcy (sometimes because of the pandemic, sometimes because of issues that had nothing to do with the coronavirus), their boards are finding enough money to pay millions of dollars in bonuses to senior executives.
"The payments, which are made just before a bankruptcy filing, appear to be legal and have been made by several companies," the Times writes.
One example: "J.C. Penney, which is closing 154 stores, paid its chief executive, Jill Soltau, $4.5 million."
The Times writes that "in normal times, a large portion of executive compensation is paid out in stock-based awards that top officers earn over time. But the stock of a bankrupt company is most likely going to be wiped out or be worth little once a company resolves its bankruptcy or, in extreme cases, sells off its assets and goes out of business.
"As a result, boards have quickly changed how top officers are paid, giving them cash bonuses instead of stock-based awards. But paying cash up front can be a windfall for chief executives when the livelihood of employees is under threat."
- KC's View:
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The Times notes that "Ms. Soltau of J.C. Penney got a $4.5 million cash bonus before the retailer declared bankruptcy, much lower than the $8.2 million at which her 2019 incentive-based awards were initially valued."
Which is probably cold comfort to all the people being laid off by the company as stores are being closed.
This is the kind of thing that just makes me nuts. It reflects a leadership mindset that is exactly the opposite of the Marines' "Officers Eat Last" mantra.
