Hertz is one of several bankrupt companies putting its executives in generous driver's seats. ... [+] (Photo by Cindy Ord/Getty Images)

Hertz, JC Penney JCP , Libbey, Borden, Chuck E. Cheese: All of these well-known American companies have two things in common. They all have filed or are expected to file for bankruptcy and they all paid out generous bonuses to some of their executives, usually right before they filed.

The disparity in pay scales between C-level officers and rank-and-file workers in American business has perhaps never been as wide as it now. Nor has it ever been more contentious an issue as it is now.

With government bail-outs and loans going to many American corporations at the same time they were laying off or furloughing hundreds of thousands of workers, providing six and seven-figure payouts to senior managers has risen to near the top of arguments that big business has gone too far.

These big companies will tell you these are necessary actions, retention bonuses designed to keep these executives onboard even as the company is going through hard times as theoretically at least they could jump ship and go to healthier companies.

Heres the statement one of the companies, JC Penney, put out to defend its actions: We are making tough, prudent decisions to protect the future of our company and navigate an uncertain environment, including taking necessary steps to retain our talented management team... Maintaining continuity of leadership is and will continue to be critical to the future of our companys long-term success. Our compensation program is in line with those of other companies in similar situations and is aligned with milestone-based performance goals to continue incentivizing our team to drive results.

Really?

These executives are often making multi-million dollar salaries plus additional compensation in the form of stock options and other perks. That should be motivation and incentivizing enough, one would think.

These are also often the very same people who led the company during the time it faltered and was forced to file for bankruptcy. Further, these bonuses come at a time when employees of these companies are being fired, their salaries reduced or being put on open-ended layoffs that may or may not end in their rehiring.

Finally, we have an unemployment rate despite government tweaking of the numbers that is approaching 20% and just about every company in the country is in the process of downsizing its workforce. Job opportunities for these executives being retained are not exactly stellar right now.

Yet this practice and yes, its legal and approved by largely rubber-stamp boards of directors continues unabated, worker outcries notwithstanding.

Here are some of the more recent examples:

JC Penney: Days before filing for bankruptcy after skipping a loan payment and then announcing it was closing more than a quarter of its stores with the resulting reduction in workforce, the company handed out $7.5 million in retention bonuses to four executives, including CEO Jill Soltou. She received $4.5 million after taking home close to $17 million in compensation last year.

Hertz: Right before it filed in late May, the company put aside $16.2 million for retention bonuses to 340 employees at director level and above, including $700,000 to its chief executive Paul Stone and additional six-figure payouts to its CFO and CMO. The news came as it announced it had terminated 10,000 employees.

Libbey: The well-known glassware company filed chapter 11 on June 1 after paying out about $3.1 million in bonuses to its executives, including just over $2 million to its CEO Mike Bauer (he got $900,000) and four other executives. At the same time, it suspended its 401(k) matching program for employees.

Chuck E. Cheese: Parent company CEC Entertainment, which has not filed for bankruptcy but is rumored to be considering it, paid retention bonuses to 28 employees, including $1.3 million to CEO David McKillips and $900,000 to its president, J. Roger Cardinale. The restaurant chains 610 units have been closed for months, its workers laid off.

Borden: The iconic dairy company was allowed to pay out about $2 million to a group of employees by the bankruptcy court in Delaware. Details on how many people received the payouts and the amounts were not readily available.

All of these companies go through extreme gyrations to include caveats on the bonuses having to do with the amount of time employees must continue to work and often stipulating that they are in lieu of other incentive payments under previous employment contracts.

However all of those contracts were drawn up before the pandemic and the resulting economic devastation to a wide swath of American business and the labor workforce. And many will argue that this is the way its usually been done. But theres nothing usual about these times, which is why business as usual just doesnt fly anymore.

Giving bonuses to company big-shots right before it files chapter 11 are especially abhorrent under pandemic layoff conditionsThis is one practice that shouldnt be retained any longer.

See original here:

Pre-Bankruptcy Retention Bonuses - At Hertz, Penney, Libbey, Others - Are Rampant - Forbes