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Bankruptcy Judge Lets Tribune Co. Make Lofty Bonus Payments

October 10, 2011

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In a move that is sure to draw the ire of the Tribune Company’s critics, a bankruptcy judge in Delaware recently allowed Tribune Co. to distribute millions of dollars in bonuses to its top managers.

According to a report in the Washington Post, Tribune Co. justified its lavish bonuses by saying it needed to compensate its top employees for their efforts in keeping the company afloat while it trudged through bankruptcy proceedings.

The giant media company, which owns several newspapers, including the Chicago Tribune and the Los Angeles Times, faced a financial catastrophe in recent years as a shift in the media landscape undercut newspapers' traditional revenue streams.

With more content available for free or at little cost on the Internet, traditional newspapers have scrambled to compete with low-cost information sources.

In addition, the recent decrease in newspaper readership has led to a loss in advertisement, which has crippled the finances of major metropolitan newspapers like the Chicago Tribune.

In the midst of this financial crisis, the Tribune Co. filed for bankruptcy in 2008, shortly after a buyout of the company led by Sam Zell left Tribune Co. drowning in debt.

The newspaper company has been shedding jobs at a rapid pace over the past few years, which makes the recent round of bonuses a bit controversial, observers say.

Under the plan approved by the bankruptcy judge, Tribune Co. plans to distribute tens of millions of dollars to a few hundred top managers, provided that they meet certain performance objectives.

In the meantime, the bankruptcy court is weighing the merits of the company's proposed reorganization plan, which would likely shield it from payment demands by numerous creditors.

Critics of the proposed plan claim that the current reorganization plan would needlessly protect the lenders that funded the ill-conceived buyout of the company in 2008. Tribune Co.'s poorly timed bonus payments have only added to the frustrations shared by former employees of the company.

Thus, while the payment of bonuses during bankruptcy does not violate any bankruptcy law, it certainly hasn't helped the company's reputation in the court of public opinion.


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