Corporate Governance

From the Pages of The Pomerantz Monitor: Bankruptcy Judge Drastically Cuts "Bankruptcy Exit Bonuses" for Delphi Execs

By Carolyn Moskowitz

The Pomerantz Monitor recently updated its readers on the attempts by troubled Delphi Corp.?s senior executives to award themselves big bonuses.

Delphi, the bankrupt auto parts supplier, became infamous last year when it threatened to dump its pension obligations on the Pension Benefits Guaranty Corp., which can ill afford it. Now it is preparing to emerge from bankruptcy, and had proposed that top managers receive bonuses totaling $87 million for shepherding the company through the bankruptcy process. That process, however, entailed major layoffs of rank and file workers and financial hits to Delphi's creditors and shareholders.

The United Automobile Workers and International Union of Electronic Workers-Communication Workers of America objected to these bonuses, and in late January the bankruptcy court agreed with them, refusing to approve the reorganization plan unless these bonuses were cut to $16.5 million.

Delphi quickly caved. Given the disaster the bankruptcy had caused for so many, the Court was not satisfied that this bonus met the criteria for "equivalence of sacrifice," and that such huge bonuses were warranted simply because the company would survive the bankruptcy process.

Full post as published by PomTalk on March 18, 2008 (boomark / email).