April 11, 2012
By: John Clark
Despite its recent decision to file for bankruptcy, Eastman Kodak Co. has asked permission to pay a total of $13.5 million in bonuses to 300 executives and top employees, according to a report from the Huffington Post.
The decision is likely to draw criticism from stockholders and other observers who might question the company’s decision to hand out bonuses during an internal financial crisis, but the company has a strong rebuttal to such claims.
Sources say that Kodak believes it must distribute some meaningful bonuses to key personnel in order to convince them to stay with the company while it reorganizes finances in Chapter 11 bankruptcy.
The Huffington Post reports that Kodak hopes to give the bonuses to specific employees who have the experience and skills necessary to help the company regain its strength after the bankruptcy process is completed.
The photography company, which is based in Rochester, New York, believes that paying these employees to stay could save millions in employee-hunting costs in the future.
According to the company’s filing, the company must be aggressive during its bankruptcy because, during this fragile time, "offers from competitors or from companies in other industries seeking talented employees may seem particularly attractive."
Interestingly, the proposed sum includes 119 middle managers who would receive $8.5 million of the $13.5 million, which suggests that the bonuses won’t simply be spent on a few wealthy executives.
The other 200 recipients of bonus money would receive smaller sums than the key managers, but most would see bonuses equivalent to about 25 percent of their base salaries, which is still a substantial boost.
Of course, if the company is allowed to distribute the bonuses during the bankruptcy process, plenty of other Kodak employees will be disappointed. Sources say that the company has a total of 7,600 employees, most of whom will not be receiving any extra cash.
Nevertheless, despite the possibility of some anger from its employees, Kodak reportedly believes that losing its key employees would compromise the company’s efforts to appease its creditors and improve its financial health.
Thus, Kodak believes that any potential alienation of its other employees is far outweighed by the long-term benefits of retaining its key workers. It is yet to be determined whether the bankruptcy court will agree with this equation.
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