Friday, January 27, 2012

The CEO Bankruptcy Bonus

On the way to bankruptcy court, Lear Corp., a car-parts supplier, closed 28 factories, cut more than 20,000 jobs and wiped out shareholders.

As companies struggle through bankruptcy court, many still pay significant bonuses to top executives - despite a federal rule designed to curb such pay. Mike Spector reports on Lunch Break. Photo: Getty Images.

Still, Lear sought $20.6 million in bonuses for key executives and other employees, including an eventual payout of more than $5.4 million for then-Chief Executive Robert Rossiter.

The Justice Department objected, arguing that the package violated a federal law intended to rein in pay for executives at companies that harmed investors and cut jobs before and during the bankruptcy process.

But a judge approved the payouts, accepting the company's arguments that the executives would deserve them if they met earnings milestones and steered Lear through a quick exit from bankruptcy.

In a statement, a Lear spokesman said the bonuses were "customary" and "fully market competitive." The company has since rebounded, adding more than 23,000 jobs since emerging from bankruptcy in 2009.

Read the rest of the article at the Wall Street Journal

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