Bankrupt Toys "R" Us wants to pay $16 million in executive bonuses Yep seems no matter how bad you fail as an executive they always seem to get their bonuses and huge perks, company has lost billions and they are still reaching out for bonuses.......the most amusing part of this is that now since toysrus is bankrupt they have to get the approval by the courts to pay out these millions in bonuses, but this is where it gets really jokingly funny and completely idiotic.... "In the filing made with the court Wednesday the company argues the bonuses are necessary to get executives to perform at a high level during its bankruptcy." Is this for real? The company is arguing that BONUSES ARE NECESSARY TO GET EXECUTIVES TO PERFORM AT A HIGH LEVEL DURING ITS BANKRUPTCY....are they for fu$king real....the company has lost billions and now all the sudden it's necessary after the fact they are bankrupt that these extra dollars right at this moment will help these executives perform at a high level...why weren't they performing at these high fu$king levels years ago before they went bankrupt and we're losing billions.... no worries though as the courts will approve these bonuses as the company goes under and all 65000 jobs are gone and 1600 stores closer for good. Bankrupt Toys "R" Us wants to pay $16 million in executive bonuses http://money.cnn.com/2017/11/16/news/companies/toys-r-us-executive-bonuses/index.html
Like many "common sense" responses this isn't as black and white as you might first think. Let's say you're a top executive, brought in to turn around a failing company. Turns out you realize a year and a half later that it's just not possible, so you declare chapter 11 to salvage as much value for the debt holders as possible. Are you going to stay if they tell you that you have to work for $200k a year with no hope of bonuses no matter how good of a job you do? Hell no. Are you going to be able to attract anyone with Cxx level experience in a company that big to come in to successfully bring it out of chapter 11 if you ensure they have no chance of a bonus. Again, hell no. Is it in the best interest of bondholders to incentivizing that executive to stay and other good executives to come in? In many cases yes, although clearly in some cases no. Again, not that cut and dry. Remember, common sense says the Earth is flat and the sun revolves around it.
Courts could say take the bonuses in form of stock options..... Don't see Debt holders collecting much of anything being 5 billion in debt. Of course folks will say there is real estate holdings of the stores, but like all the empty stores of K-Mart, Sears and JC Penny, takes long time to rent them out or bulldozer over. https://www.reuters.com/article/us-...f-debt-caught-up-with-toys-r-us-idUSKCN1BV0FQ Actually, if they didn't have the 400 million in interest payments each year, they might be profitable.
You hit the nail on the head with a couple things. First, the debt holders won't collect much of anything....if they decided to liquidate. If they were doing a chapter 7, then any bonuses would generally be inexcusable. But, as you pointed out, if they didn't have $400M in interest payments, they might be profitable. Hence chapter 11 which restructures interest payments and keeps the company a going concern. The bondholders decided the company was much more valuable as a going concern than liquidated, so they hired/retained the staff to do that. You have to pay those folks bonuses if you want to attract/keep high level talent at that level. Especially coming into a difficult situation like this one. Would stock options work, maybe. It's really up to the bondholders at this point to determine the best way to get the most out of the remainder of the company, the stockholders no longer own it. If they decide cash or a mix is better, then who are we to question that? You would certainly have to give a person a lot more options in a company that just emerged from chap 11 to attract them than if you gave them cash or options in a more stable company. So paradoxically if the information asymmetry is such that the bondholders are more confident in the company's eventual success than potential C level employees, it's in their best interest to give cash bonuses and keep the more valuable equity.
There are very elite people of doing a Phoenix. https://en.wikipedia.org/wiki/Phoenix_(mythology) And they be grabbing at the stock options, but for the many who are not.....11 turns into 7 like Sears Holding will eventually do. When you sell your number one department, Craftsman Tools, to stay afloat another year, writing on the wall. Companies got lazy into thinking nothing will change, like being in huge malls and expensive rents are ok providing people keep coming. But people's tastes change, instead of leaving home, more rather stay in than fight the crowds and parking, or go toward more strip centers where parking is easier and feel more spread out.
I own puts on SHLD, and interestingly it's based on exactly what we're talking about here. I think the CEO of SHLD is both a horrible leader and has horrible ideas with his whole "make Sears like Apple" thing, so it's a bet on executive team, not the company itself. If they fired him and the sycophants who are the only execs left and replaced them with a good team that they paid big bonuses to, I'd close out my puts the day they announced it.
%% ''Bonuses needed to perform @ a high level ??'' Stock option may be fair , but sounds a bit late to reward cash .LOL
This kind of crap went down during the Banking Meltdown in 2008-2010 and really did not work. Those of us who pay taxes enabled the Bankers to get a big bonuses because we loaned all that money to them at 0 percent while they loaned it back to the US Government. Was it Warren Buffet or Peter Lynch who said "You need to invest in a company any idiot can run because eventually a idiot will run it"? The Airlines had bonus issues after 9-11 when it was the beginning of the Great Consolidation. All employees except for upper management were to take big wage cuts while the Top Brass got some really great money. I wonder if the companies shared any of their reclaimed wealth with the Pilots and nice stewards. One point they were making $8 a hour as a steward, pilots were making less than my LDS friend who flew for PanAm. Does anyone see a future for Sears or ToysR? Walmart's earnings were better than I expected, Walmart get's how important the Web is.
What does that have to do with what the Toys R Us bondholders get to do with their company? I'm pissed about the Iraq war too, but I'm not going to bring it up here! BTW, it did work if the intent was to maintain the banks and car companies as profitable going concerns, which is the intent in this instance, no? Really I don't see your point at all? There's no government funds involved here, no tax dollars, nothing that gives you any right to be upset about anything, unless you're a Toys R Us bondholder?