It is well known that the news giant, the Tribune Company, is currently undergoing bankruptcy proceedings. While the company is still struggling financially, their flagship newspaper, The Chicago Tribune, reports that many company executives may receive hefty bonuses and severance packages.
In late July the Tribune Co. proposed paying the top 43 executives at the company a severance package consisting of cash and benefits if they aren’t retained by the new board.
Without releasing the exact monetary figures, the company did state that the packages will be between 2.5 times salary and bonus, plus 24 months of the company’s benefits for the Chief Executive Randy Michaels and 1.5 times their salary and 18 months of benefits for 32 lower executives. Benefits include health care.
The news giant, which owns both the Chicago Tribune and the Los Angeles Times, will have to get the consent of the several large banks and hedge funds that will likely take over the company.
Several of the creditor groups have already expressed their concerns about the compensation scheme. As of December 2008, the U.S. Bankruptcy Judge behind the proceedings, Judge Kevin Carey, has approved $57.3 million for more than 600 top and middle managers. The Tribune Company, however, felt that this amount wasn’t quite high enough, and recently asked the judge to approve an additional $42.9 million.
Part of this new proposal would also include compensating executives with shares of stock in the company after it gets reorganized.
The anticipation is that the long term leadership of the company will probably be replaced after the bankruptcy is finalized and the new owners come in to power. This would most likely include the board of directors and the current Chairman of the Tribune Company, Sam Zell.
In a time when people are finding it difficult to pay their own bills, the frustration over the notion of bonuses for executives in a failed business is understandable. If a bonus is to work as an incentive to for the executives to perform well, then it leaves the average citizen to wonder, just what are we incentivizing when we reward the executives that were unable to keep a company out of bankruptcy.
The exact future of these bonuses is as uncertain as the prosperity of the company as a whole. It is already decided that a substantial amount of money is going to be allocated to the executives that were in charge of a company that failed.
Hopefully the new owners will have more success after their bankruptcy, and the new leadership will earn themselves a well deserved bonus and salary based on the financial prosperity of a once great media company.