Lori Vaughan Discusses Executive Bonuses during Bankruptcy on Marketplace
During the national evening broadcast of Marketplace with Kai Ryssdal on April 10, 2018, Lori Vaughan provided insight for a segment on bonuses offered to executives at companies that have filed for bankruptcy, such as Toys ‘R’ Us. Executives are important for companies to achieve the key objectives of Chapter 11 bankruptcy: relieve the business of its debts and start over. “When you have a distressed company, the loss of upper management can be disastrous,” said Vaughan. “You would lose that institutional knowledge. So it’s important to retain those individuals.”
Still, legislation was approved in 2005 that requires companies to meet certain requirements before offering these retention bonuses, such as showing that executives had another offer to join another employer. Despite these restrictions, judges are still able to approve bonuses tied to performance metrics, such as certain sales objectives, which is what happened in the case of Toys ‘R’ Us.
You may listen to the full interview or access the segment and an accompanying article online here.