Hertz Global Holdings is set to give out more than $14 million in bonuses to the company CEO and 13 top managers while the company is working on a bankruptcy filing under a plan it is asking a judge to authorize.
Hertz filed for Chapter 11 protection in May as its business has suffered falling demand brought about by the ongoing global health crisis. The planned bonus comes months after the group spent more than $16 million in additional pay intended to keep executives from resigning due to the pandemic.
Based on a Journal report, Hertz is seeking to secure bankruptcy assistance of around $1.5 billion after regulators prevented the car rental firm from divesting a half-billion-dollar of worthless stocks in June. Hertz asked its existing creditors and potential investors for $1.1 billion funding this week, the report added, citing sources with knowledge of the matter. The company shed a total of $852 million in the quarter ended June 30, a SEC document showed.
Another 295 low-ranking managers would divide among them as much as $9.2 million in payouts under a related arrangement. The bonuses are linked to Hertz's financial performance and depending on how the company does, other managers and executives could get nothing, or receive the maximum payout.
The judge handling the company's Chapter 11 proceedings would be required to sign off on the new tranche of payouts, which Hertz outlined in court documents on Thursday. The payouts are categorized as "incentives," which are meant to enhance work output.
This kind of payout schemes are common in major corporate bankruptcies and are usually settled with top creditors prior to being evaluated and presented to a judge for final approval. The proposed payouts are often challenged by creditors and the government bankruptcy regulator that forces the company to justify the incentives during a court proceeding.
The U.S. House responded to public criticisms some 15 years ago over such payouts for top executives of businesses that filed for bankruptcy protection and eliminated thousands of employment contracts. The so-called "retention" payouts were scrapped unless an executive could prove he/she was offered a better position and would leave.
Meanwhile, several businesses that have filed for Chapter 11 protection in the wake of the pandemic have so far paid out bonuses this year. The chief executives of J.C. Penney Co., Ascena Retail Group, Tailored Brands, GNC Holdings, Neiman Marcus Group, and other companies have been granted such incentives moments before their CEOs filed for bankruptcy.
