Source: United States House of Representatives – Congresswoman Cheri Bustos (IL-17)
Report found some companies issued bonuses just two days before filing
WASHINGTON — Today, Congresswoman Cheri Bustos (D-IL-17) issued the following statement in response to a Government Accountability Office (GAO) report issued this week. The report, commissioned by Congresswoman Bustos in the FY 2021 Appropriations package signed into law last year, aimed to study the timing and size of bonuses paid to corporate executives and senior leaders in the midst of major companies declaring bankruptcy.
The report found that in just FY 2020, during bankruptcy, 309 executives across 47 bankrupt companies were authorized to receive $207 million in incentive bonuses. The average bonuses authorized for these executives were $701,455. The maximum was $13,319,100.
The report also found that in just FY 2020, right before filing bankruptcy, 42 companies awarded 223 executives approximately $165 million in retention bonuses. Some bonuses were issued just two days before filing.
The GAO report states, “Congress should consider amending the Bankruptcy Code to clearly subject bonuses debtors pay executives shortly before a bankruptcy filing to bankruptcy court oversight and to specify factors courts should consider to approve such bonuses.”
Bustos’ efforts to commission the report followed the introduction of her bipartisan No Bonuses in Bankruptcy Act, which would end executive bonuses during corporate bankruptcies for those who make $250,000 a year or more. Both the legislation and report were inspired by several high-profile cases where companies were authorized to pay bonuses to executives after filing for bankruptcy, even as thousands of workers were laid off.
“Bankrupt companies paying bonuses to highly-paid corporate executives and insiders, all while laying off thousands of hardworking Americans, is a problem that we need to fix, and that’s what this report shows,” Congresswoman Bustos said. “You shouldn’t be able to cash out after running your company into the ground and risking the livelihoods of working people. I am glad that the report I commissioned from GAO calls for common-sense policy solutions and will work to reform this appalling practice.”
“Simply put – executives shouldn’t financially reward themselves for laying off workers and closing facilities. This report shows we should fix that and that’s just what my bill will do.”
In September, 2021, A U.S. judge approved up to $7.1 million in bonuses for five executives of Purdue Pharma, the bankrupt maker of OxyContin who faced thousands of lawsuits from states and other plaintiffs who say the company fueled the opioid epidemic. Hertz paid more than $16 million in retention bonuses to its senior managers, including its new chief executive, days before it filed for chapter 11 last year. In 2017, a bankruptcy court judge ruled that Toys R US could pay $16 million in bonuses to 17 top executives – at the same time the corporation closed hundreds of stores across the country and laid off thousands of workers. In the same year, the bankrupt RadioShack corporation was authorized to pay $1.4 million in bonuses to key executives, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO).