Sears is seeking court approval to pay executives as much as $25 million in annual bonuses while the company struggles to restructure in bankruptcy. Three top executives could get nearly $1 million each if the company goes out of business. If Sears remains in business, they could get nearly $500,000 each for hitting the top performance targets. A judge's approval is needed before the bonuses could be paid. A hearing on the plans is set for Dec. 20. Sears wants to retain as many executives as it can, but the retailer is laying off employees who staffed hundreds of stores it's closing. Many hourly workers claim they will not be paid severance.
Total Retail's Take: This isn't the first time we've seen this scenario play out — a retailer files for bankruptcy, announces store closures and the associated job losses that come with such action, but still wants to pay its corporate executives their bonuses. And each time the public's reaction is the same: outrage. It's a PR nightmare for the retailer in question, whether it be Sears, Toys"R"Us, Sports Authority, RadioShack, among others. Retention bonuses for top executives are not unusual when companies go bankrupt, however, bankruptcy law limits how much severance companies can pay. The argument against paying these bonuses is pretty clear: stores are closing, employees are losing their jobs (typically lower-earning hourly positions), and therefore bonuses shouldn't be paid out to execs. The argument or justification for paying these types of bonuses is that the goal of a Chapter 11 bankruptcy is for a company to shed debt and start over, and it couldn’t do that if its executives jumped ship. The bonuses are framed as a retention tool for top talent. While there's likely some merit in that argument, it doesn't make the optics of the situation any better or any easier for a recently laid off worker to accept.