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On eve of bankruptcy, U.S. firms shower execs with bonuses

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4 years ago

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(Reuters) – 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.

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 authorised 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, a supplier of sand for oil-and-gas fracking, paid executive bonuses two days before its July 12 filing.

J.C. Penney – forced to temporarily close its 846 department stores and furlough about 78,000 of its 85,000 employees as the pandemic spread – approved nearly $10 million in payouts just before its May 15 filing. On Wednesday, the company said it would permanently close 152 stores and lay off 1,000 employees.

The company declined to comment for this story but said in an earlier statement that the bonuses aimed to retain a “talented management team” that had made progress on a turnaround before the pandemic.

The other companies declined to comment or did not respond. In filings, many said economic turmoil had rendered traditional compensation plans obsolete or that executives getting bonuses had forfeited other compensation.

Luxury retailer Neiman Marcus Group in March temporarily closed all of its 67 stores and in April furloughed more than 11,000 employees. The company paid $4 million in bonuses to Chairman and Chief Executive Geoffroy van Raemdonck in February and more than $4 million to other executives in the weeks before its May 7 bankruptcy filing, court records show. Neiman Marcus drew scrutiny this week on a plan it proposed after filing for bankruptcy to pay additional bonuses to executives. The company declined to comment.

Hertz – which recently terminated more than 14,000 workers – paid senior executives bonuses of $1.5 million days before its May 22 bankruptcy, in part to recognise the uncertainty they faced from the pandemic’s impact on travel, the company said in a filing.

Whiting Petroleum Corp bestowed $14.6 million in extra compensation to executives days before its April 1 bankruptcy. Shale pioneer Chesapeake Energy Corp awarded $25 million to executives and lower-level employees in May, about eight weeks before filing bankruptcy. Both cited fallout from the pandemic and a Saudi-Russian oil price war, which they said rendered their incentive plans ineffective.

Reuters reviewed financial disclosures and court records from 45 companies that filed for bankruptcy between March 11, the day the World Health Organization declared COVID-19 a pandemic, and July 15. Using a database provided by BankruptcyData, a division of New Generation Research Inc, Reuters reviewed companies with publicly trade stock or debt and more than $50 million in liabilities.

Such bonuses have long spurred objections that companies are enriching executives while cutting jobs, stiffing creditors and wiping out stock investors. In March, creditors sued former Toys ‘R’ Us executives and directors, accusing them of misdeeds that included paying management bonuses days before its 2017 bankruptcy. The retailer liquidated in 2018, terminating more than 31,000 people.

A lawyer for the executives and directors said the bonuses were justified, given the extra work and stress on management, and that Toys ‘R’ Us had hoped to remain in business after restructuring.

In June, congressional Democrats responded to the pandemic-induced wave of bankruptcies by introducing legislation that would strengthen creditors’ rights to claw back bonuses. The bill – the latest iteration of a proposal that has long failed to gain traction – faces slim prospects in a Republican-controlled Senate, a Democratic aide said.

Firms paying pre-bankruptcy bonuses know they would face scrutiny in court on compensation proposed after their filings, said Clifford J. White III, director of the U.S. Trustee Program, a Justice Department division charged with monitoring bankruptcy proceedings. But the trustees have no power to halt bonuses paid even days before a company’s bankruptcy filing, he said, allowing firms to “escape the transparency and court review.”

Dodging bonus restrictions

The 2005 legislation required executives and other corporate insiders to have a competing job offer in hand before receiving retention bonuses during bankruptcy, among other restrictions. That forced failing firms to devise new ways to pay the bonuses, according to some restructuring experts.

After the 2008 financial crisis, companies often proposed bonuses in bankruptcy court, casting them as incentive plans with goals executives must meet. Judges mostly approved the plans, ruling that the performance benchmarks put the compensation beyond the purview of the restrictions on retention bonuses. The plans, however, sparked objections from Justice Department monitors who called them retention bonuses in disguise, often with easy milestones.

Eventually, companies found they could avoid scrutiny altogether by approving bonuses before bankruptcy filings. Dozens of companies have approved such payouts in the last five years, said Brian Cumberland, an executive compensation expert at consulting firm Alvarez & Marsal who advises companies undergoing financial restructurings.

Companies argue the bonuses are crucial to retaining executives whose departures could torpedo their businesses, ultimately leaving less money for creditors and employees. Now, some companies are bolstering those arguments by contending that their business would not have cratered without the economic turmoil of the pandemic.

The pre-bankruptcy payouts are needed, companies say, because potential stock awards are worthless and it would be impossible for executives to meet business targets that were crafted before the economic crisis. The bonuses ensure stability in leadership that is needed to hold faltering operations together, the firms contend.

Some specialists argue the bonuses are hard to justify for executives who may have few better job options in an economic crisis.

“With double-digit unemployment, it’s a strange time to be paying out retention bonuses,” said Adam Levitin, a professor specializing in bankruptcy at Georgetown University’s law school.

Closed stores, big bonuses

J.C. Penney has not posted an annual profit since 2010 as it has struggled to grapple with the shift to online shopping and competition from discount retailers. The 118-year-old chain, at various points, employed more than 200,000 people and operated 1,600 stores, figures that have since been cut more than half.

On May 10, J.C. Penney’s board approved compensation changes that paid top executives, including CEO Jill Soltau, nearly $10 million. On May 13, Soltau received a $1.7 million long-term incentive payment and a $4.5 million retention bonus, court filings show.

The annual pay of the company’s median employee, a part-time hourly worker, was $11,482 in 2019, a company filing shows.

J.C. Penney filed for bankruptcy two days after paying Soltau’s bonuses. At a hearing the next day, a creditors’ lawyer argued the payouts were designed to thwart court review. The payouts were timed “so that they didn’t have to put it in front of you,” said the lawyer, Kristopher Hansen, addressing U.S. Bankruptcy Judge David Jones.

Jones – who is also overseeing the Whiting Petroleum, Chesapeake Energy and Neiman Marcus cases – told Reuters that such bonuses are “always a concern” in bankruptcy cases. “That said, the adversarial process demands that parties put the issue before me before I can take action,” he added, emphasising he was speaking of general dynamics applicable to any case. “A comment made in passing by a lawyer is not sufficient.”

In its statement earlier this year, J.C. Penney said the bonuses were among a series of “tough, prudent decisions” taken to safeguard the firm’s future.

Dennis Marten – a shareholder who said he once worked at a J.C. Penney store – disagrees. He has appeared at court hearings pleading for an investigation of the company’s leadership.

“Shame on her for having the gall to get that money,” he said of Soltau.

Reporting and photo: Reuters

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Atmosphere Core appoints Maurice Van Den Bosch as GM of RAAYA by Atmosphere, Milan Mookerjee as VP of Human Resources

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4 weeks ago

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October 17, 2024

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International hospitality company Atmosphere Core has announced the appointment of Milan Mookerjee as Vice President of Human Resources.

This appointment reflects Atmosphere Core’s ongoing commitment to enhancing guest experiences and fostering a people-centric culture across its portfolio of three brands and nine resorts.

Veteran Human Resources leader, Milan Mookerjee will oversee talent management and employee growth initiatives across the Atmosphere Core’s resorts in the Maldives. With over 15 years of industry experience, Milan is a seasoned professional known for aligning HR initiatives with business goals and fostering a human-centric culture.

Reflecting on his approach to human resources, Milan said, “Leadership is a privilege that we owe to our team. Intentionality with direction and purpose drives results, and I am committed to fostering a culture that empowers our people to grow and succeed. In hospitality, success begins with a motivated, engaged workforce, and I believe in creating an environment where employees feel valued, supported, and inspired to deliver exceptional guest experiences. This includes investing in continuous learning, nurturing talent, and promoting a strong sense of belonging within the team.”

Before joining Atmosphere Core, Milan served as Head of Human Resources and Training at Encalm Hospitality Pvt. Ltd., where he led HR and training functions to drive business growth. He has also held several HR leadership roles at prominent companies in India, with a proven ability to develop talent and design learning programmes tailored to business needs.

Meanwhile, Maurice Lucien Van Den Bosch recently returned to the Atmosphere Core family as General Manager of RAAYA by Atmosphere.

Born in Australia, Maurice Lucien Van Den Bosch draws from the country’s renowned laid-back yet dynamic culture in his leadership style, fostering a spirit of inclusivity, adventure, and warm hospitality. He brings over 24 years of expertise in resort management, with a demonstrated ability to exceed profit targets, cost-effectively develop new projects, and lead culturally diverse teams with motivation and efficiency.

Maurice’s extensive experience includes leadership roles at some of the world’s top hospitality brands in the Maldives, Sri Lanka and the Caribbean. A familiar face within the Atmosphere Core family, Maurice has served as General Manager at both OZEN LIFE MAADHOO and Atmosphere Kanifushi.

As the General Manager of RAAYA by Atmosphere, Maurice will leverage his deep understanding of the brand to lead the resort with a focus on anticipating, crafting, and elevating guest experiences. “The culture and hospitality inspired by the Joy of Giving resonate deeply with me, and this shared value brings me back to the Atmosphere family”, Maurice said. “At RAAYA by Atmosphere, we are creating a castaway island experience of choice, a guest experience like no other, with a fine balance of escapism and energy. And I look forward to foster a collaborative working environment so that we create unforgettable moments for our guests.”

Ashwin Handa, Senior Vice President of Operations at Atmosphere Core, emphasised the importance of a strong leadership team. “At Atmosphere Core, we foster a people-first culture built on trust, collaboration, and mutual respect, ensuring that every employee takes pride in their work. This dedication extends to curating experiences that guests cherish and return for. Maurice’s deep industry expertise and understanding of our brand, combined with Milan’s people-centric approach, will significantly enhance our operations and guest satisfaction across our resorts”.

Atmosphere Core is a dynamic international hospitality company with three distinctive lifestyle brands, THE OZEN COLLECTION, COLOURS OF OBLU, and Atmosphere Hotels & Resorts. The company operates nine resorts in the Maldives and has a strong pipeline of one resort in the Maldives, one resort in Sri Lanka, and fourteen hotels and resorts across India – all set to open within the next three years. Distinctive design, an authentic sense of place, inspiring service styles, and the freshest and finest cuisine lend a unique flavour to every Atmosphere Core property.

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Maldives makes export of baled PET waste for recycling with support from The Coca-Cola Foundation

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1 month ago

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October 16, 2024

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The Coca-Cola Foundation and partners have announced that a container of baled post-consumer Polyethylene Terephthalate (PET) plastic was exported from Male as a part of Sustainable Island Waste Management and Plastic Recycling Initiative.

Completed on World Cleanup Day 2024, the event also marked the handover of The Coca-Cola Foundation (TCCF)-funded infrastructure, which includes pickups and balers, to the government-owned Waste Management Corporation (WAMCO).

The TCCF-funded initiative is a collaboration between the Maldives Ocean Plastics Alliance (MOPA), and WAMCO, and represents an important development to strengthen the PET collection process and address the issue of plastic waste in the Maldives.

This initiative will export baled PET to Malaysia and China for recycling. While PET bottles have been exported in the past, baling the waste significantly improves the efficiency of storage and transport, marking an advancement in the process.

The overall objective of the TCCF-funded Island PET Collection Project is to help provide a countrywide solution for plastic waste recycling in Maldives by establishing both the infrastructure and systems required.

Currently, much of the waste in Maldives is disposed of or incinerated in K. Thilafushi industrial island, and this project represents a shift toward better waste management practices.

The project focuses on expanding PET collection systems beyond Greater Male’, improving collection efficiency across the nation until local recycling capacity is developed.

“This project is a turning point for the Maldives in our fight against plastic waste,” said MOPA President Ahmed Maumoon. “By educating communities and aligning with national partners like WAMCO, we are not only improving how waste is managed today but also setting the stage for long-term sustainability and environmental health.”

By collaborating with WAMCO, MOPA has supported the roll-out of community education programs and has worked to ensure the infrastructure deployed with funding from TCCF, such as compactors and pickups are used effectively across Greater Male’ and across other islands.

“This initiative represents a crucial step toward improving plastic waste management and enhancing recycling efforts in the Maldives,” said WAMCO Managing Director Mujthaba Jaleel. “By equipping islands with the tools and infrastructure needed to collect and process PET waste, we are not only helping address the immediate challenge of plastic pollution but also building a foundation for a more sustainable future.”

WAMCO’s role is pivotal in overseeing the operational aspects of PET waste collection, ensuring that baling and export processes run efficiently.

“Our commitment to this project extends beyond waste collection,” said Carlos Pagoaga, President, The Coca-Cola Foundation. “By funding work of MOPA and WAMCO, we aim to foster a culture of sustainability in the Maldives and help support a circular economy.”

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Italian and Spanish media experience Maldivian paradise on exclusive journey with Atmosphere Core

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1 month ago

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October 8, 2024

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From September 28th to October 4th, 2024, Atmosphere Core hosted an exclusive media trip to the Maldives for ten prominent journalists and PR professionals from Spain and Italy. The group experienced the serene and captivating lifestyle of two stunning private islands—OBLU XPERIENCE Ailafushi and RAAYA by Atmosphere—both renowned for their distinctive hospitality, thoughtfully curated holiday plans, and the unique “Joy of Giving” philosophy.

“At Atmosphere Core, we believe in a more creative approach to media trips,” said Euan Blake, Assistant Vice President of Communications. “The Italian and Spanish markets have been expanding for the Maldives, with a notable increase in room nights and revenue compared to last year. Over the past two years, we’ve been building strong relationships in these regions, and this journey through our islands aims to leave journalists with not only cherished memories but also lifelong friendships.”

The trip began at OBLU XPERIENCE Ailafushi, a lively four-star resort just 15 minutes by speedboat from Velana International Airport. Journalists were welcomed with breathtaking lagoon views and vibrant social gatherings at the X360 Bar. A standout experience was the customised Martín Códax Wine Masterclass at the Element X restaurant, led by Ms. Celina, a representative of Bodegas Martín Códax, and Nicolas Laguette, Director of Wines at Atmosphere Core. Representing 600 winemaking families from northern Spain, Ms. Celina guided the group through an exquisite multi-course wine tasting, featuring a selection of wines perfectly suited for the tropical climate and fresh seafood.

This was followed by an unforgettable underwater dining experience at the Only BLU restaurant and a visit to the neighbouring “island of love,” OBLU SELECT Lobigili, where they enjoyed a chic lunch at Ylang Ylang. The island’s lively, party atmosphere provided the journalists with a full immersion into the vibrant and relaxing resort lifestyle.

Next, a scenic seaplane journey transported the group to RAAYA by Atmosphere—a picturesque escape offering a blend of fairytale island charm and authentic Maldivian experiences. The 45-minute flight over the stunning atolls’ turquoise waters set the stage for their arrival in paradise, presenting the perfect introduction to the Maldives’ breathtaking beauty.

At RAAYA, the journalists experienced an ideal mix of energy and tranquility. A private dinner atop a secluded watchtower, inspired by the legendary sailor Seb, captured the essence of the resort’s castaway theme. The group explored the island’s natural wonders, took part in customised activities, and dined at RAAYA’s signature restaurants, including Seb’s Shack, Ampers&nd, and the Italian-inspired The Village.

Throughout their stay at both islands, the media guests were treated to rejuvenating spa therapies and wellness sessions at ELE|NA Ayur, Atmosphere Core’s signature spa and wellness brand. This immersive journey offered the journalists a true taste of tropical luxury, intertwining indulgence and adventure into every experience. Their stories are sure to inspire countless Spanish and Italian travellers to discover the hidden treasures of OBLU XPERIENCE Ailafushi and RAAYA by Atmosphere firsthand.

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