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On eve of bankruptcy, US firms shower executives with bonuses

reuters.com

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Re: On eve of bankruptcy, US firms shower executives with bonuses

#271

Post by lm28469 »

eat_veggies wrote: post #244

There are so many comments in this thread justifying this behavior. > The last thing you want is key employees jumping ship > Of course they do. How else do you get people to stick around on a sinking ship? > While it looks immoral if you don't understand the mechanics, people are simply responding to incentives around bankruptcy laws Do people really believe that the mechanics of bankruptcy laws, and the incentives…

It's HN (aka people making 3-10x the minimum salary of their country) and an American issue (aka individualism is king), most of them have an easier time projecting as the exec getting free money for their "good" work than the employees getting abused, because they're closer to the former and never experienced the later.

These people don't think about such things as "moral" or "common good". It doesn't matter if many other countries successfully banned these practices because in their mind it's the only way.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#272

Post by mostlyghostly »

kelnos wrote: post #200
mostlyghostly wrote: post #89

Earlier quoted context omitted.

I've actually helped manage a company in financial distress. Here's reality: - First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. Fire safety was most assuredly NOT within my purview or even something I could ask about) - Running a business in financial distress basically sucks. Take your job and make it 10 X harder. You…

> First, most executives have little impact on the specific event that put the firm under. (I was a senior marketing person; the building burned down. Fire safety was most assuredly NOT within my purview or even something I could ask about) That's perhaps reasonable for you, but business succession planning and disaster contingency planning is the job of the board and executive team. They made a choice to discount th…

You're assuming:

a) the risk can be neatly packaged and mitigated b) the cost of appropriately mitigating that risk wouldn't preclude running the business.

Long tail risks exist in every business, that rare event that takes the whole thing down. There are tons of them.

Each of which has a .00001% chance of happening.

The consumer brand version of this having one of your employees say some stupid shit in at bar (on video) or the summer intern like the wrong tweet, at which point a woke mob descends upon your brand with pitchforks at the ready....

There is no practical way to mitigate this. You can do the basics (don't hire assholes) but it's open season from there.

I've always thought the most thankless job in the world is running HR or PR at a massive retail company like Wal-mart or Macdonalds. You're one redneck idiot away from being on the national news (for doing or saying something most reasonable humans would never dream of) and you have literally hundreds of thousands of these people showing up for work each day.

At which point, you get the soul crushing task of getting on national television to explain the conduct of the moron in question and explain how it doesn't represent some embedded policy of the company to encourage . Better yet - you get do this every couple of months, since you have hundreds of thousands of these morons. Statistically, it becomes a predictable process.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#273

Post by darkerside »

gbacon wrote: post #238
darkerside wrote: post #220

Earlier quoted context omitted.

Luck plays into business so much now than people assume. Incomplete information and unpredictable black swan events mean you're not making decisions with certainty. You make the best decision with the information you have, try not to spend more time once you get to diminishing returns, and you hope things work out. Executive talent will not ensure success, but it can raise the odds. But on the other side, a dearth of…

This idea that success is all about, mostly about, or largely about luck is intellectually lazy, is extremely misleading, and stokes envy. None of that benefits society. To benefit from luck, you have to put yourself in position to get lucky, which does not happen by accident. There is all the difference in the world between good timing and dumb luck. Yes, we can all think of anecdotes where someone did buffoonishly…

I feel like you only read the first half of my comment...

Re: On eve of bankruptcy, US firms shower executives with bonuses

#274

Post by aspenmayer »

koheripbal wrote: post #247
xkcd-sucks wrote: post #64

Earlier quoted context omitted.

So they quit, and someone hungrier + lower on the ladder gets a chance to prove themselves by turning the company around, rewarded by staying in the position when it's cushy again.

So they quit and no one else wants the job, nor has the key knowledge of how those internal systems works. ....so the company needlessly dies.

Why is it needless? If the company can’t stay viable, doesn’t the company legitimately need to do something else, perhaps even stop existing entirely or in part? The lack of profits is the market telling the company and/or its employees to do something differently, or do something else. How is a free market supposed to work?

Re: On eve of bankruptcy, US firms shower executives with bonuses

#275

Post by chooseaname »

lend000 wrote: post #27

While it looks immoral if you don't understand the mechanics, people are simply responding to incentives around bankruptcy laws. Nobody wants to try to turn around a bankrupt company at their old salary (with their old RSU's and options now worthless). The real question is, should Chapter 11's even be allowed for corporations (as opposed to Chapter 7)? Shareholders vote for these because they know that in a Chapter 7…

Bonuses should reflect success. Succeed at keeping the company afloat until sold? Bonus. Succeed in turning company around? Bonus.

Nothing before.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#276

Post by scarface74 »

minitoar wrote: post #235
scarface74 wrote: post #224

Earlier quoted context omitted.

Do you make minimum wage? Do you give any excess over minimum wage that you earn to charity? The vast majority of us posting here “make more when others are making less”. Even in your own company you probably make 10x more than the lowest paid contract worker who cleans your office after hours.

This is more like all the contract workers are getting laid off and you give yourself a bonus, then leave the company.

That’s the deal you make as a contract worker. Yes, I’ve been a contract worker. Heck, I have even left a full time job for contract to perm role before knowing that there was a chance I would be let go if the project I was hired to lead wasn’t successful even if through no fault of my own. I negotiated a premium because of that risk.

On the other hand, half the issue with being a contractor is that we as a country decided to tie health insurance, workers comp, and unemployment insurance to the company instead of making them universal and state run like every other industrialized country on earth.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#277

Post by scarface74 »

jzb wrote: post #254
koheripbal wrote: post #237

Earlier quoted context omitted.

I've had the same experience. No one wants to work at a bankrupt low-morale company, so the only way to keep key people was to offer special bonuses for retention to keep things together through the bankruptcy process If you think about it, it's literally the only way to do it. These folks have usually lost a ton of money on their company stock options. The only way to keep them around is to pay them more in the shor…

"The only way to keep them around..." I call BS. It's not as if there's a shortage of employees or execs to go around right now. When a company is taking its lumps, the execs should too. That should be part of the deal. If the people who actually do the work are getting laid off or asked to double their efforts to compensate for people laid off, then the execs ought to be content to ride out a period without bonuses…

I call BS. It's not as if there's a shortage of employees or execs to go around right now

Again in my case, how many “other employees” are they going to find from the outside who have built a relationship with their largest client [1], built internal relationships with other employees to get things done, know they business domain, and have two years of experience at the company to know how to maintain the codebase? If I were that valuable and hard to replace as an IC, can you imagine trying to replace the customer service managers, salespeople and CxO’s?

[1] I was valuable enough that our largest client made a deal with the company that finally did acquire us for scraps signed a special contract that allowed them to hire me as a contractor and get access to all of the source code of the company while I was contracting.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#278

Post by fredophile »

sokoloff wrote: post #199
fredophile wrote: post #90

Earlier quoted context omitted.

Whenever I see people complain about C level exec's salaries I see one of two arguments used in favour of it. First, people will say that their compensation is tied to performance either through bonuses for milestones or stocks. Second, people will say it's compensation for risk. If you still get most of the money after running the company into bankruptcy then neither of the two applies. The only reason I can see pay…

If you are a shareholder in a failing company and looking to hire a turnaround CEO, do you want them to be bleeding the company dry in high salary every month or do you want them taking a modest cash salary each month and have their economic incentive be to drive the turnaround of the equity in the company, so they get paid for saving your investment not for putting in the months?

I'd prefer to pay the higher salary instead of a low one followed by paying out a big bonus if they fail.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#279

Post by Retric »

sokoloff wrote: post #225
Retric wrote: post #221

Earlier quoted context omitted.

These bonuses are pre paid, not compensation for future work.

Have you ever accepted a signing bonus? Did it have a requirement to be paid back if you quit before a certain date? If these bonuses have no requirement that the recipient "not quit before XYZ date", then I agree they're improper. I strongly suspect they have such a requirement. If you interview with us for 4 hours and get a job offer with a $12K signing bonus and a requirement that it's paid back pro-rated if you l…

The issue is the executives keep the bonus even if fired in bankruptcy. Further, because the money has technically already been paid out, the bankruptcy court can’t claw it back. It’s therefore not pay for work done.

At best executives get leverage in their job search and a fallback option should their job search fail to find better options. So, it’s not even an effective means to maintain someone actually talented.

Re: On eve of bankruptcy, US firms shower executives with bonuses

#280

Post by rightbyte »

mcrae wrote: post #61
Wowfunhappy wrote: post #5

This sort of thing ought to be grounds for a lawsuit from shareholders, or other creditors.

Generally it’s the shareholders approving these payments. It’s in their interest, and perhaps in the interest of the creditors as well, to have a competent management team who know the company well in place to maximise enterprise value through Chapter 11.

The boards approve right? They are mostly a boys club rather than shareholder representatives. A executives union so to say.
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