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Economy
In reply to the discussion: STOCK MARKET WATCH -- Friday, 7 December 2012 [View all]Demeter
(85,373 posts)12. In Trouble and Paying Out CALL IT LOOTING, WSJ, BECAUSE THAT'S WHAT IT IS
http://online.wsj.com/article/SB10001424127887323830404578145182000348430.html?mod=dist_smartbrief
Financially Sick Firms Often Grant Bonuses in Months Before Bankruptcy Filing...Hostess Brands Inc. is closing after a recent standoff with its striking bakers union. But relations between the Twinkie maker and workers were poisoned months ago amid disclosures that Hostess executives received pay raises not long before seeking bankruptcy protection.
Financially ailing companies such as Hostess Brands often pay bonuses and other compensation to executives and private-equity owners before filing for bankruptcy protection...Hostess's bankruptcy judge said during a hearing Thursday that the payments "will definitely be looked at" as he approved the company's request to start liquidating and lay off more than 18,000 employees.
Hostess was exploring a potential bankruptcy filing in July 2011 when its board voted to boost the salary of its chief executive and others, according to creditors. Five months later, it filed for Chapter 11, its second bankruptcy filing in a decade. In April, creditors, including union representatives, cried foul: They alleged that Hostess made an end run around a federal law that restricts paying bonuses in bankruptcy cases before a judge could scrutinize them. Hostess later rolled back the salaries amid employee protests. Hostess's board approved the raises "long before" deciding on bankruptcy, rewarding executives for extra work, the company said. Financially ailing companies often pay bonuses and other compensation to executives, directors and private-equity owners in the months before filing for bankruptcy protection. Federal law restricts "retention" bonuses paid to such "insiders" after a bankruptcy case is filed but not before.
Bonuses paid in and around bankruptcy often draw fire from creditors and employees angered by executives getting extra compensation while cutting jobs and benefits, and leaving investors with losses.
To avoid running afoul of limits on bonuses that reward executives for sticking around during bankruptcy, companies craft incentive plans that compensate managers for meeting certain performance targets. But another way they can steer clear of the law's restrictions is by paying bonuses before filing for Chapter 11. There are ways for creditors to fight payments made before a bankruptcy case is filed, but legal hurdles, expense and time often discourage such litigation to claw them back...Companies often say they are using their best business judgment when paying bonuses to executives who are working overtime to keep operations afloat. A firm's fate often isn't known when bonuses are paid, and companies argue they must motivate some executives to stay lest they suffer exoduses that further destabilize troubled situations. "There are good people in troubled situations who are clearly going to be more recruitable than others," said Peter Crist, chairman of executive-search firm Crist|Kolder Associates, but "if you give yourself a bonus and the outcome two weeks later was bankruptcy, that's not good."
More than 1,600 insidersexecutives and others controlling a companyreceived bonuses, salaries, fees and other compensation totaling more than $1.3 billion in the months before their companies filed for Chapter 11, according to a Wall Street Journal analysis of more than 80 bankruptcy cases over the past five years.
MORE, IF YOU CAN STOMACH IT...
Financially Sick Firms Often Grant Bonuses in Months Before Bankruptcy Filing...Hostess Brands Inc. is closing after a recent standoff with its striking bakers union. But relations between the Twinkie maker and workers were poisoned months ago amid disclosures that Hostess executives received pay raises not long before seeking bankruptcy protection.
Financially ailing companies such as Hostess Brands often pay bonuses and other compensation to executives and private-equity owners before filing for bankruptcy protection...Hostess's bankruptcy judge said during a hearing Thursday that the payments "will definitely be looked at" as he approved the company's request to start liquidating and lay off more than 18,000 employees.
Hostess was exploring a potential bankruptcy filing in July 2011 when its board voted to boost the salary of its chief executive and others, according to creditors. Five months later, it filed for Chapter 11, its second bankruptcy filing in a decade. In April, creditors, including union representatives, cried foul: They alleged that Hostess made an end run around a federal law that restricts paying bonuses in bankruptcy cases before a judge could scrutinize them. Hostess later rolled back the salaries amid employee protests. Hostess's board approved the raises "long before" deciding on bankruptcy, rewarding executives for extra work, the company said. Financially ailing companies often pay bonuses and other compensation to executives, directors and private-equity owners in the months before filing for bankruptcy protection. Federal law restricts "retention" bonuses paid to such "insiders" after a bankruptcy case is filed but not before.
Bonuses paid in and around bankruptcy often draw fire from creditors and employees angered by executives getting extra compensation while cutting jobs and benefits, and leaving investors with losses.
To avoid running afoul of limits on bonuses that reward executives for sticking around during bankruptcy, companies craft incentive plans that compensate managers for meeting certain performance targets. But another way they can steer clear of the law's restrictions is by paying bonuses before filing for Chapter 11. There are ways for creditors to fight payments made before a bankruptcy case is filed, but legal hurdles, expense and time often discourage such litigation to claw them back...Companies often say they are using their best business judgment when paying bonuses to executives who are working overtime to keep operations afloat. A firm's fate often isn't known when bonuses are paid, and companies argue they must motivate some executives to stay lest they suffer exoduses that further destabilize troubled situations. "There are good people in troubled situations who are clearly going to be more recruitable than others," said Peter Crist, chairman of executive-search firm Crist|Kolder Associates, but "if you give yourself a bonus and the outcome two weeks later was bankruptcy, that's not good."
More than 1,600 insidersexecutives and others controlling a companyreceived bonuses, salaries, fees and other compensation totaling more than $1.3 billion in the months before their companies filed for Chapter 11, according to a Wall Street Journal analysis of more than 80 bankruptcy cases over the past five years.
MORE, IF YOU CAN STOMACH IT...
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