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.
The plan was scaled back after objections by the U.S. government and the company's unsecured creditors. It is also tied to several conditions that must be met before the bonuses are distributed.
Dow Jones and Associated Press reported that the bonuses could be worth up from $6.6 million. That figure was $8.3 million under Borders' original proposal.
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."
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
drewk
Sun, Apr 24, 2011 : 4:02 p.m.
Of course, if nobody shops at Borders anymore than these exec's wont get paid their "bonuses". I have now stopped shopping there.
AA
Sun, Apr 24, 2011 : 2:23 p.m.
Going bankrupt but maintaining bonuses.
Cash
Sat, Apr 23, 2011 : 10:21 p.m.
While ex-employees who worked so hard lose their homes, and suffer the humiliation of begging for a job, these snakes pull out millions. This my friends is what is wrong with America.
1bit
Sat, Apr 23, 2011 : 2:13 p.m.
"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." The company has to survive in order for any of these bonuses to be paid. If these executives can save the company (and associated jobs), which will be a very tall order, then they will deserve their bonuses. The $6.6 million will be divided among 42 employees. Yes, that's still a lot of money but not that much in the grand scheme of multi-million dollar companies. Don't like it? Well, that's how bankruptcy works.
debling
Sat, Apr 23, 2011 : 1:49 p.m.
This is exactly why executive compensation should be determined by the "stockholders" not the "board of directors". Senior executives and Directors have been in cahoots for as long at business has been around. Executives in charge of the finances of any company will always try to sieve as much money as they can for themselves using the old "because we are so important" line and they seem to get away with it always. No wonder a few % of Americans own most of the nations wealth. If I were voting, no Borders executive would receive a bonus until the company is well on the way to making profit. No bonus should ever exceed 40% of a base salary and stock options should never be offered as rewards.
towny
Sat, Apr 23, 2011 : 12:04 p.m.
What a bunch of low life crooks Borders must have for executives. You wonder how they got into bankruptcy and financial problems with this type of executives. Will never shop there again even if they do survive.
Huron74
Sat, Apr 23, 2011 : 4:20 a.m.
Wow. These bonuses may be legal but they sure aren't right. I can't believe their creditors are too happy about these payouts when Borders can't pay its rents and other obligations. I
Orangecrush2000
Sat, Apr 23, 2011 : 2:43 a.m.
Why do these people get so much money when whole families lose most or all of their livelihood? This money could've funded the lives of dozens of laid off Borders employees for years. The judge had a chance to stand up to this and didn't do so. It's mind-boggling.
snoopdog
Sat, Apr 23, 2011 : 2:33 a.m.
Not that my family's 500 bucks a year means much but I am done with Border's if they are going to spend this kind of money on "draft dodge" lawyers to get out of paying their creditors and suppliers. This entire bankrupcy thing "stinks". They should be put out of business and hard assets should be sold to at least give creditors nickels or dimes on their dollars of investment rather than getting nothing. Good Day
MyOpinion
Sat, Apr 23, 2011 : 2:22 a.m.
Even though these folks were not part of Borders' downfall, I'm betting on one of the two: (1)some of them have been part of the CEO merry-go-round at other companies; or (b) they are part of the turnaround industry where their salaries are determined by others in on the game, like the bankruptcy lawyers and helpers that Borders has hired.
Caferacer
Sat, Apr 23, 2011 : 12:55 a.m.
This is disgusting greed at its best. This is what I hate about corporate America. Can them all and find some smart, passionate business people and Borders could be great again!
Karen St John
Sat, Apr 23, 2011 : 12:43 a.m.
How sad that our permutation of capitalism now rewards incompetence, rather than entrepreneurial brilliance and hard work. Perspiration becomes petulance, and inspire is now insipidness.
Cash
Sat, Apr 23, 2011 : 10:17 p.m.
Karen, you said it!
Karen St John
Sat, Apr 23, 2011 : 12:38 a.m.
I think the $6million should at least in part be spent on the recently laid off co-workers who didn't make the bad decisions which brought Borders to this point. Plus, they should cover their vendors.
Speechless
Sat, Apr 23, 2011 : 12:05 a.m.
nbelievable... But not too surprising, I guess. Still, Borders execs should be grateful to be paid anything better than minimum wage. Of course these execs might be concerned that Borders has finally run out of golden parachutes and thus feel some urgency to exploit other means to divert additional cash flow from the failing company in 'compensation' for their time of 'service.'
A2Realilty
Fri, Apr 22, 2011 : 11:10 p.m.
I think bonuses for these executives is ridiculous. If they hired on 18 months ago and weren't aware of Border's issues then that's terrible due diligence on their part. If these executives can find a higher paying job in this economy then they should go take it. I think bonuses should only be considered when every outstanding bill is paid. NOT when their vendors are getting stiffed so the executives can prosper.