Judge Rejects Hertz's 'Offensive' Bankruptcy Bonuses
September 17 2020 - 8:50PM
Dow Jones News
By Becky Yerak
A bankruptcy judge blasted Hertz Global Holdings Inc.'s plan to
pay top managers up to $14.6 million in bonuses after they
collected millions in additional bonuses days before the rental car
company filed for bankruptcy.
"It seems offensive to give senior executives bonuses when they
were paid" retention compensation immediately before the bankruptcy
was filed, Judge Mary Walrath said Thursday in U.S. Bankruptcy
Court in Wilmington, Del. The 14 most senior executives could
receive as much as $5.4 million.
"The incentive plan has serious problems," she said, asking
Hertz to revise it.
The judge also said the financial targets the Hertz executives
need to hit to qualify for the bonuses need to be tougher, echoing
objections by a federal bankruptcy watchdog
That proposed $14.6 million in potential incentive compensation
was on top of the $16.2 million in retention bonuses Hertz, just
days before its May bankruptcy filing, said it would pay to about
340 employees in recognition of the uncertainty faced as a result
of the novel coronavirus pandemic's impact on travel.
The new incentive plan would pay 309 employees.
The judge's ruling is a victory for a group of retired Hertz
executives who criticized the new bonus plan, saying the company's
promises to provide them with a secure retirement are being cast
aside.
U.S. Trustee Andrew Vara, the government's bankruptcy watchdog,
also has criticized Hertz's bonus plan.
The trustee said the company's top executives were reneging on a
deal they made to get their retention pay before bankruptcy. Those
executives signed agreements waiving their rights to 2020
performance bonuses as a condition of collecting the retention
bonuses, Mr. Vara said.
Now in bankruptcy, they were trying to revive the
performance-bonus program, with targets set at much lower levels,
he has said.
Some key Hertz creditors, however, had backed the company's
bonus plan. Those creditors supporting the plan include a
bankruptcy committee that includes the International Brotherhood of
Teamsters.
A lawyer for Hertz said during the hearing that the incentive
plan was developed by independent directors and advisers who had no
direct financial stake in the bonuses.
Hertz representatives couldn't be reached for immediate comment
after the hearing.
Peg Brickley and Alexander Gladstone contributed to this
article
Write to Becky Yerak at becky.yerak@wsj.com
(END) Dow Jones Newswires
September 17, 2020 20:35 ET (00:35 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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