Huge bonuses awarded to executives of bailed-out US companies

Since the start of the pandemic, major companies including Hertz Global, JCPenney and Neiman Marcus have paid millions of dollars to their executives just before filing for Chapter 11 bankruptcy, according to court documents and regulatory filings obtained by the Washington Post.

In total, at least 18 companies, many of which were bailed out with taxpayer money under the CARES Act, have paid more than $135 million to executives while incurring $79 billion in debt to owners, suppliers and other creditors. Experts say the timing of the payments was calculated to circumvent a 2005 law banning such actions by companies that are under bankruptcy protection.

While these companies awarded their executives between $600,000, as in the case of retailer New York & Co., and Chesapeake Energy’s $25 million, they laid off tens of thousands of workers, who earned on average less than $29,000 per year.

One of the dismissed workers interviewed by the To post was Utobia Horbuckle, a grandmother who worked in the offices of the family-owned Chuck E. Cheese restaurant chain near Dallas. His part-time job barely allowed him to afford a motel room. She was saving up to move into a one-bedroom apartment with her daughter and three grandchildren.

Her hopes were dashed after she was fired from her job at $12.50 an hour on March 17 and fired six months later, along with dozens of her colleagues. Chuck E. Cheese’s parent company had filed for bankruptcy with $2 billion in debt.

Chief executive David McKillips, who had been with the company for less than five months, received $1.3 million, part of nearly $3 million in bonuses he shared with other senior executives. Parent company CEC Entertainment told the To post the bonuses were a means of retaining employees “while providing them with financial stability”.

Hornbuckle reportedly said, “Of course it drives me crazy. But it’s the way of the world now. Big corporations do whatever they want, and the rest of us – peons, little people – fall off our feet.

She and her daughter, who works at a daycare, pay $268 a month for their motel room and rely on food stamps to make ends meet. She continues to apply for jobs, her additional unemployment benefit of $600 a week having long since expired.

Many companies gave bonuses to their CEOs just days before declaring bankruptcy. Oil & Gas Extraction paid $6.7 million in retention bonuses a week before it filed for bankruptcy in June, while laying off more than 120 employees, or about 40% of its total workforce.

JCPenney awarded its four top executives $7.5 million just five days before declaring Chapter 11 bankruptcy. The retail chain hasn’t made an annual profit for nearly a decade and is struggling with over $8 billion in debt. The company is now beginning to close nearly 150 stores and lay off thousands of workers.

Car rental company Hertz argued in bankruptcy court that its bonuses were intended to ‘encourage’ executives to stay while the company reorganized. In its Chapter 11 filing in May, the company asked the court for permission to pay out an additional $14.6 million in bonuses, on top of the $16.2 million already paid out before declaring bankruptcy.

The judge denied Hertz’s request and called it “offensive”, but then approved a lower payment of $8.2 million on the condition that the company meet “certain financial goals”. Hertz has more than $24 billion in debt and has already laid off a third of its workforce, or more than 11,000 employees.

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