Judge approves Borders' executive bonus plan with several conditions attached
A U.S. Bankruptcy Court judge today approved Ann Arbor-based Borders Group Inc.'s plan to distribute bonuses to its executives if the company hits certain benchmarks, including a successful emergence from bankruptcy.
Under the approved plan, the company's top executives are split into several groups — and each executive group's bonuses are tied to a list of conditions. One condition that was inserted into the plan ties the bonuses for "senior management" to their ability to return cash to publishers.
Also, bonuses are tied to the company's ability to successfully emerge from Chapter 11 or find a buyer that would continue operating the company.
For the top executives, "no payments will be made ... for any liquidation or any going out of business sales at the majority of the debtors’ stores, or any plan confirmation by cram down or otherwise, or approval of a sale, over the objection of the" unsecured creditors' committee, according to a court document.
One new condition of the bonuses: Some top executives' payouts are tied partly to the company's ability to secure $10 million in annual lease savings for the remaining stores over the next two years, or $10 million in other non-personnel cost reductions, according to the filing.
Borders argued that the bonus plan is appropriate because the top executives — many of whom have joined Borders within the last 18 months — are critical to the company's survival, and their departure for higher-paying jobs elsewhere would harm the company.
"We are pleased with the court's decision," a Borders spokeswoman told Dow Jones. "Borders has made significant progress during the first weeks of its reorganization, and retaining the managers of our core business and key operations is essential to continuing the progress underway for the benefit of all of the company's stakeholders, so that Borders can exit Chapter 11 in short order."