US Companies Award Execs with Bonuses Before Filing for Bankruptcy

US Companies Award Execs with Bonuses Before Filing for Bankruptcy

Published July 19th, 2020 - 08:00 GMT











Highlights





Under a 2005 bankruptcy law, companies are banned, with few exceptions, from paying executives retention bonuses while in bankruptcy. But the firms seized on a loophole by granting payouts before filing.







Nearly a third of more than 40 large companies seeking U.S. bankruptcy protection during the coronavirus pandemic awarded bonuses to executives within a month of filing their cases, according to a Reuters analysis of securities filings and court records.

Under a 2005 bankruptcy law, companies are banned, with few exceptions, from paying executives retention bonuses while in bankruptcy. But the firms seized on a loophole by granting payouts before filing.

Six of the 14 companies that approved bonuses within a month of their filings cited business challenges executives faced during the pandemic in justifying the compensation, Reuters reported.

Even more firms paid bonuses in the half-year period before their bankruptcies. Thirty-two of the 45 companies Reuters examined approved or paid bonuses within six months of filing. Nearly half authorized payouts within two months.

Eight companies, including J.C. Penney Co Inc and Hertz Global Holdings Inc, approved bonuses as few as five days before seeking bankruptcy protection. Hi-Crush Inc,