New York (CNN Business) Sears is seeking court approval to pay executives as much as $19 million in quarterly bonuses while the company struggles to restructure in bankruptcy.
Three top executives could get nearly $1 million each if the company goes out of business. If Sears remains in business, they could get nearly $500,000 each for hitting the top performance targets.
Sears filed two different types of bonus plans in bankruptcy court Thursday. The first is for the top 18 “key” executives, who would collectively get as much as $2.1 million per quarter. The bonuses would only be paid in full if Sears reaches its cash-flow targets. Sears Holdings, which includes both Sears and Kmart, has been burning through cash at a rate of about $125 million a month.
A second retention bonus plan was designed to encourage 322 other unnamed executives to stay put during Sears’ reorganization. They would collectively get $16.9 million a quarter, which works out to an average of about $52,000 per quarter per executive. No executive could receive more the $150,000 in bonuses for staying with the company during the bankruptcy process.
A judge’s approval is needed before the bonuses could be paid. A hearing on the plans is set for December 20.
The company wants to retain as many executives as it can, but Sears is laying off employees who staffed hundreds of stores it is closing. Many hourly workers claim they will not be paid severance.
Shelia Brewer, who worked for 17 years as a full-time hourly employee at a Kmart in Rockford Illinois, said the company told her she’d get eight weeks of severance. Instead, she received a letter saying that severance payments were being halted because of the bankruptcy, and she would get only the four weeks of pay she had already received.
“It hit me hard. I was already struggling as it was,” she said. She said the bonus plan makes her angry.
“They say we can’t get our severance because there’s no money, but they’re getting bonuses? It’s like a slap in the face,” she said.
A Sears spokesman declined to comment on the bonus plan or its current severance policy.
Eddie Lampert, the company’s primary shareholder and chairman, apparently will not receive a bonus, according to the filing.
The three top executives who were given the responsibility for running the company during its reorganization are in position for the largest bonuses. They are Chief Financial Officer Robert Riecker, Chief Digital Officer Leena Munjal and Gregory Ladley, president of the company’s clothing and footwear business.
Each could receive as much as $240,000 a quarter in bonus payments for hitting the maximum cash flow targets. They could receive four times that much if Sears goes out of business, in something the company called an “acceleration event.”
Retention bonuses for top executives are not unusual when companies go bankrupt. But bankruptcy law limits how much severance companies can pay.
Toys “R” Us won approval for up to $16 million in bonuses for 17 top executives a year ago during its failed attempt to stay in business, despite objections from employees groups and others.
“It’s outrageous that the bankruptcy court is considering bonuses for Sears’ high paid executives while laid off employees get their severance pay cut off,” said Carrie Gleason, campaign manager for Rise Up Retail, a retail employee advocacy group. “This is exactly what happened at Toys ‘R’ Us. A handful of executives who couldn’t save the company got millions in bonuses while tens of thousands of dedicated employees were denied their promised severance pay.”