In the “it doesn’t only happen on Wall Street” department, the Wall Street Journal is reporting that the bankrupt Borders bookstore chain expects to hand out $8.3 million in executive bonuses in 2011 as part of its bankruptcy proposal. 70% of the recipients of a $7.1 million bonus package that makes up the bulk of the award have been with the company for less than 18 months, and many joined less than a year ago.
Saddled with leases on big stores, Borders has said it will try to get out of bankruptcy by August or September. The Ann Arbor, Mich., company said the bonus program should help ensure that happens because rewards are linked to an "aggressive" time frame for exiting Chapter 11. The bonuses won’t be paid if Borders liquidates.
This looks kind of like a repeat of the Wall Street banker bonus uproar, but to be fair, Borders didn’t pay bonuses at all for the 2010 period. And it claims that these bonuses are “incentives” for sticking with the company and helping it recover as quickly as possible. And even one of Borders’s creditors admitted that even though he didn’t like to see the money go toward doubling executives’ salaries, bringing new executives in would probably cost even more than giving the current ones a reason to stick around.
It always looks a bit suspicious when executives of bankrupt firms nonetheless earn 6- and 7-figure bonuses, especially to people who might never make that much money in their lifetimes. Certainly the news media play this up as a story to whip up all sorts of outrage (and drive all sorts of traffic as outraged people send the story on to other outraged people). But as outsiders, do we really have the context to determine whether the bonuses are justified or not?
(Found via Galleycat.)
At least Borders is a private company and can spend it’s money as it sees fit. The banks were bailed out by taxpayers, it makes such bonuses hard to swallow.
Tell that to all the out-of-work Borders employees who won’t see any of that $8.3 million.
This looks like a very smart and aggressive proposal that will motivate these people to get Borders out of trouble. That is how bonuses should be used.
Or tell it to all the small publishers to whom Borders owes millions, who won’t be getting any bit of this $8.3 million.
Actually they will stand a much better chance of being paid it is succeeds in it’s purpose.
These executives are the same people who scream about the outrageous employee benefit packages of workers. Why, oh, why do we continue to reward failure and lack of foresight? Pathetic! The Peter Principle lives…
I am always amazed at how often people don’t even read an article before commenting.
Perhaps Mike you could explain where exactly these bonus’ are rewarding failure ? I am all agog.