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About those incentive bonuses ...

By Pamela Jones et al.

SCO paid itself some incentive bonuses in October that the US Trustee's Office is now questioning. 60 employees (3 of them officers) received bonuses aggregating $150,157.21 for the quarter. There will be a hearing on it, on March 7, and SCO is asking the court to make it at least in part a private court session, closed to the public, and to seal all the testimony.

The US Trustee, SCO tells the court, suggested SCO file a motion for a determination as to whether they were paid in the ordinary course of business, and if they didn't, he said he would. The reason it matters is amplified because SCO got permission from the court to pay incentive bonuses, and they intend to do so quarterly. So the hearing will be about that issue -- what is "in the normal course of business" for SCO?

What triggered the trustee's concern? What happened in a nutshell is this: the incentive bonus program was set up, SCO explains, to tie employees to the risks and blessings of the SCO business:

Prior to September 14, 2007 (the "Petition Date"), the Debtors established an Employee Incentive Bonus Program for the Debtors' fiscal year 2007 (the "2007 Incentive Program"), designed to reward employees for their contributions to the successful achievement of certain corporate goals and objectives and to share the success, and risks, of the Debtors' business based upon successful achievement of quarterly business goals.

If certain targets were met, they got a bonus, up to 70% of their salary in the case of the CEO. In October, certain targets were met, but others were not, but SCO decided to pay the bonuses anyway, since the board thought it was not the fault of the employees that the targets were missed. Hmm, said the trustee.

Here's the motion [PDF] requesting a determination that the bonuses were paid in the ordinary course of business and the request for confidentiality [PDF], and thanks to Groklaw's numist and an anonymous volunteer, we have them both now as text.

Full post as published by Groklaw on February 20, 2008 (boomark / email).