A U.S. Bankruptcy Court judge on Friday approved Sears Holding Company's request to pay up to $25.3 million in bonuses to top executives, even as the company reported losing nearly $1.9 billion in the first three quarters this year, according to the Chicago Tribune. Sears, which filed for bankruptcy protection in October, said the funds will be used to encourage key employees to stay with the company as it attempts to restructure, according to court filings. More specifically, the company’s proposal offers bonuses totaling up to $8.4 million to 19 executives if Sears Holding Company achieves certain financial targets over the next six months. Those employees would also be eligible for bonuses if Sears is on track to hit those targets when it’s sold. Sears also got permission to set aside up to $16.9 million in retention bonuses for a separate group of 315 senior employees. Each could receive a cash award equivalent to 30 percent to 40 percent of his or her salary, split into quarterly payments over the next year. The news that Sears was seeking court approval to pay executives as much as $25 million in annual bonuses was announced last month.
Total Retail's Take: While this may rankle many of Sears’ current and former employees, not to mention loyal customers who are sorry to see the retailer close stores, it's not altogether surprising. In fact, since filing for bankruptcy two months ago, Sears has raised base salaries for certain executives, including three tapped to form the office of the chief executive after former CEO Edward Lampert stepped down. But come on, it's a PR nightmare.
Bonuses at companies in bankruptcy are getting more scrutiny than in years past due to concerns about executives receiving extra compensation for just doing their jobs at the expense of a company’s unsecured creditors, said Craig Barbarosh, a partner at law firm Katten Muchin Rosenman, in the Chicago Tribune. But as long as a company can show it has a good reason for incentives and is at risk of losing key employees, “it’s become fairly typical,” Barbarosh said.