Some companies don’t even try to argue that executive pay was cut. At $6.4 million, the cash bonus paid to Whiting Petroleum’s chief executive, Bradley J. Holly, is larger than the $5.5 million at which the company valued his total compensation for 2019.
And of course the bonuses are far higher than what regular employees earn. Ms. Soltau’s was many times the $11,482 the retailer’s median employee, a part-time worker, earned during J.C. Penney’s 2019 fiscal year, according to a securities filing.
Are troubled companies linking bonuses to goals in any way?
The cash bonuses have also led to the concealing, loosening and removal of the tools companies normally use to tie pay to performance, which many critics contend were already too weak. Companies still operate when seeking protection under Chapter 11 of the bankruptcy code. And in theory, boards could require chief executives to hit sales targets or achieve other goals.
And in some cases, a few strings remain. Ms. Soltau has to repay a fifth of her cash bonus if she fails to achieve certain performance goals, and Mr. Lawler has to repay half of his. But J.C. Penney and Chesapeake did not disclose the goals in their securities filings and declined to answer questions about them.
Hertz and Whiting, the oil and gas company, did not tie cash bonuses to performance goals at all. Whiting and Mr. Holly didn’t respond to requests from comment, but the company said in a securities filing that the new bonuses “eliminate any potential misalignment of interests that would likely arise if existing performance metrics were retained and/or new performance metrics were established at a volatile and uncertain time.”
Could lawmakers do anything about these bonuses?
This is not the first time that executive pay at troubled companies has prompted an outcry. Congress passed a law in 2005 aimed at curbing retention bonuses paid during bankruptcy. Under the law, companies are allowed to pay incentive-based bonuses, but the legal cost of constructing such payments and getting them approved in bankruptcy court soared after 2005, according to research by Jared Ellias, a professor at the University of California’s Hastings College of the Law.
Of course, Congress could change bankruptcy law so that compensation payments made before the filing could be clawed back, Mr. Ellias said. In addition, lawmakers could make it easier for creditors to pursue claims against executives after the bankruptcy.