Borders requests 'immediate action' on executive bonus plan
UPDATE 8:27 p.m.: The bankruptcy court judge ordered changes to the plan after Borders agreed to revisions in discussions with its unsecured creditors.
A judge is set to rule this afternoon on Ann Arbor-based Borders Group Inc.'s request to distribute up to $7.8 million in executive bonuses if the company successfully and quickly exits the bankruptcy process.
The 3 p.m. hearing in New York comes after a U.S. Department of Justice trustee, who is assigned to protect the integrity of the bankruptcy court process, objected to Borders' executive bonus plan in a filing with the court last week.
Borders, which is based in Ann Arbor, wants the right to distribute bonuses to its top executives if it exits bankruptcy.
In a response this week, a Borders consultant requested that the court take "immediate action" to authorize the bonus plan.
"Based on my experience, retailers have to move on a faster track than other debtors in order to survive Chapter 11 and avoid liquidation," John Dempsey of compensation consultancy Mercer wrote in the filing. For Borders, "this has influenced the need to get the (bonus plan) in place very quickly and has set a faster track to implementing the same."
In a separate filing yesterday, Borders said that 47 corporate employees have left the company in the wake of its Feb. 16 Chapter 11 bankruptcy filing, which allowed the company to immediately launch liquidation sales at 226 superstores nationwide. The company also says that it has lost 85 "directors and officers" over the last two years.
Since two of the resignations were executives, the maximum cost of the company's bonus plan dropped from $8.3 million to $7.8 million.
The Borders consultant, Dempsey, described the company's executive leadership as "extremely lean" and said the bonuses are necessary to prevent further resignations at a critical time for the company.
"This risk of disengagement could be higher among short service leaders whose future careers and reputations are less directly linked to Borders' survival, but who are critical to that survival," the consultant wrote.
As part of the bonus distribution plan, the company's top 17 executives would get bonuses of up to $6.6 million. Mike Edwards, CEO of Borders Group subsidiary Borders Inc., could get as much as $1.69 million. The company's executive vice presidents could get up to $1.08 million.
Another $1.2 million would be distributed to 25 other "director-level" employees.
The bonuses would be distributed if Borders:
• Can convince the bankruptcy judge to approve a reorganization plan that involves the company's survival. For the top executives, the bonuses are also tied to the company's ability to get the plan approved within five months of the plan's submission.
or
• Successfully attracts a buyer that would continue to operate the company.
Meanwhile, Borders also revealed last week that it is considering moving its headquarters out of Ann Arbor. The company plans to exit its corporate headquarters on Phoenix Drive in favor of cheaper space somewhere else in metro Detroit, which, the company said, could still be Ann Arbor.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
ligrasp
Sat, Apr 16, 2011 : 12:33 p.m.
Bonus? Really? No way. Stock option? Exercisable in 3 years? Sure.
oneofsix
Fri, Apr 15, 2011 : 1:07 p.m.
The bonuses should go to the many people, who actually kept Borders from going out of business many years ago. The people who bought their product. Bad management and their decisions, brought them to where they find themselves today. One again, these corporate CEO's and managers want to grab what they can before the ship sinks, leaving the shareholders, employees and customers holding the bag.
Nathan Bomey
Fri, Apr 15, 2011 : 12:30 a.m.
We just published a new story with details of the court hearing in New York, as reported by Bloomberg. The judge is ordering revisions to the plan. <a href="http://www.annarbor.com/business-review/judge-orders-more-changes-to-borders-executive-bonus-plan/index.php">http://www.annarbor.com/business-review/judge-orders-more-changes-to-borders-executive-bonus-plan/index.php</a>
15crown00
Fri, Apr 15, 2011 : 12:08 a.m.
are u kidding me/this on a SMALLER scale is like Wall Street a few years ago when all the high executives got bonuses while those that did the work lostbtheir jobs and got little or nothing. no wonder Borders went bankrupt.they were run by a bunch of crooks and thieves.
fredric
Fri, Apr 15, 2011 : 12:06 a.m.
Let me see if I have this correct, If I take control of a company and lead it to" Bankruptcy", I can qualify for a $1.6 millions bonus. Where do I apply? I always thought the job and priority of the "Top Management" was to find ways, and provide Leadership, to drive sales and profits so the company would be able to expand and grow. I also thought that they had the responsibility to the Stock holders to eliminate the risk of failure. Guess I missed a few classes when I was in school. I think that the one class some of these folks missed was the one called " Common Sense"! I can not believe this. Are they handing out these "Fat Checks" with out the Venders being paid. How many small business's are being stuck by this company, How many of these small companies may end up going out of business because of giving these guys a bonus instead of paying a Invoice, and how many jobs could be lost because of it. I know that this happens but I am a former top executive of a extremely large company and if certain established goals are not met, " NO BONUS" and I do not remember seeing "Bankruptcy on the list of approved goals for executive compensation!!
Ricebrnr
Fri, Apr 15, 2011 : 12:03 a.m.
Hmm what might the vendors and creditors who are owed have to say? Mayhap they'd like to be paid?
Ypsiloo
Thu, Apr 14, 2011 : 10:13 p.m.
Just say no! join the employees! Sign the petition! <a href="http://www.change.org/petitions/say-no-to-borders-books-ceo-bonus-after-6000-in-layoffs-and-company-files-for-chapter-11-2" rel='nofollow'>http://www.change.org/petitions/say-no-to-borders-books-ceo-bonus-after-6000-in-layoffs-and-company-files-for-chapter-11-2</a>
Thaddeus
Fri, Apr 15, 2011 : 12:14 a.m.
Unfornately, I get the message that the time frame for this petition has already ended. Perhaps the orginator can extend the time frame....?
jcj
Thu, Apr 14, 2011 : 10 p.m.
I think it might be fair to say Borders will not be seeing more than one of these posters in a Borders at any time in the future! I know for sure they have seen me for the last time!
ab
Thu, Apr 14, 2011 : 9:02 p.m.
I work for this company and really like it. I am however really upset that us in the stores make crap for money have bad benefits and get no hours. For the people who ruined this company to make so much money for doing nothing I think that the judge should divide that money up and give it to the people who work in the stores and have to deal with all the people who treat us like crap everyday because were failing. Some of us are single parents trying to get by and who might be out of jobs soon and were not getting anything but a pink slip and a trip to the unemployment line. That sucks!
MyOpinion
Thu, Apr 14, 2011 : 8:30 p.m.
This management team is not the same group that got them into the steep decline. However, nothing about this team inspires any more confidence than the previous teams. I thought one reason the bankrupcy judge turned down the bonuses was that there were no performance incentives/metrics. It was give us a bonus or else. These folks need to make a credible case or else the money remains in-house to be used for turn-around actitvities. It might not be a bad idea to extend the pool for bonuses to store managers, staff, etc. Get everyone on board. Some of these folks may have a track record as turn around specialists and will be snapped up by some other underperforming company, but I doubt all of them do. Call their bluff.
Macabre Sunset
Thu, Apr 14, 2011 : 8:19 p.m.
I have an "immediate" response. It makes liberal and demonstrative use of one of my phalanges.
leaguebus
Thu, Apr 14, 2011 : 7:42 p.m.
This is so wrong on so many levels. What about the shareholders?
tmad40blue
Thu, Apr 14, 2011 : 7:22 p.m.
So if this doesn't work out, can we put that $7,800,000 towards saving our schools, please?
julieswhimsies
Thu, Apr 14, 2011 : 7:14 p.m.
No. Shared sacrifice. Remember that?
Tarc
Thu, Apr 14, 2011 : 7:13 p.m.
Salary is what people get for doing their job. Bonuses are an incentive for doing a *fantastic* job and producing significant gains for the company. Bonuses are NOT a 'give me'. The people that dove the company down should have been dismissed, and these new people should have been given an appropriate intermim salary. NO ONE shoud be getting binuses for any reason (until the company is well into solvency). This is a no brainer, in fact, it should be federal law.
Mike D.
Thu, Apr 14, 2011 : 6:31 p.m.
Most of these people are "short-service." That means they haven't been at Borders very long. These are not the people who made bad decisions ten years ago and "ran the company into the ground." Borders needs senior executives to stick around along enough to guide it through the transition. Because these people haven't been at the company long (try to count the number of CEOs in the last few years), their reputations aren't riding on the outcome of this process. The only hope of retaining them is performance based post-bk bonuses. If you resent executives getting big bonuses, maybe you should become one instead of posting on here all day complaining.
proudtobeme
Fri, Apr 15, 2011 : 3:03 a.m.
and hey if the CEO job doesn't work out for me,please hire me as the next UM football coach. At least I'd get a little more for failing at that job!
proudtobeme
Fri, Apr 15, 2011 : 3:01 a.m.
Sign me up! How do I become a CEO of a failing company and still receive a bonus? Hey,if I fail,at least I still get my 1.5 mil! I'd do that job in a heart beat,tell me where to go Mike!
Gorc
Thu, Apr 14, 2011 : 11:43 p.m.
For all those criticizing Mike D's post....how much in salary (give a dollar amount) and how much in incentives (give a dollar amount) would you expect to receive if you were the CEO of Boarders today? And keep in mind you are not the CEO that created the situation that Boarders in today. I would expect my salary to be at least $500,000 with potential incentives of at least $250,000. Or do you consider that to be too excessive?
jcj
Thu, Apr 14, 2011 : 10:04 p.m.
I doubt many of these "senior executives" are in great demand! "The only hope of retaining them is performance based post-bk bonuses." Fine lets see where Borders is in a year then we can talk about a bonus. Care to make a bet as to how much impact they will have?
jcj
Thu, Apr 14, 2011 : 9:59 p.m.
Mike D. And what was the name of the company YOU ran into the ground? With your sort of logic, if you have ever been in an executive position you must have run it into the ground! I sincerly hope you are not in a postion to cost others their job!
Left is Right
Thu, Apr 14, 2011 : 8:28 p.m.
1. Short-service? No reason to keep them around then. Find someone to do it for less. 2. Not short-service? Definitely part of the problem. Get rid of 'em. 3. I am one.
Macabre Sunset
Thu, Apr 14, 2011 : 8:21 p.m.
The only reason why they'd leave so quickly is if they didn't believe in the changes they're making. Why give them even more incentive to do a bad job quickly?
julieswhimsies
Thu, Apr 14, 2011 : 7:16 p.m.
I agree. These "short term" CEOs need to earn their bonuses.
Forever27
Thu, Apr 14, 2011 : 6:41 p.m.
your comment still doesn't justify these CEO's getting a bonus. If anything, it further proves they have yet to earn one.
javajolt1
Thu, Apr 14, 2011 : 6:38 p.m.
I'm guessing the poster "Mike D" is might be the "short-term" CEO. Fine, you may not have made the decisions that got Borders here. But how can you justify a $1.6 million bonus ON TOP OF YOUR SALARY? This is an outrageous train wreck. Unlikely it will be turned around. These bonuses will exacerbate and accelerate the demise to the inevidible. How about making the bonus contingent upon actually turning this mess around??
SuperiorMother
Thu, Apr 14, 2011 : 6:22 p.m.
I'm curious about how many of those directors and officers that they "lost" over the past two years actually left of their own volition, rather than being laid off by Borders.
javajolt1
Thu, Apr 14, 2011 : 6:19 p.m.
IMMEDIATE ACTION??? Are you kidding me?? I thought a bonus was based upon positive performance. Not losses. The CEO has been with the company for....what....5 minutes? This is why people think 'business' and capitalism stinks. It doesn't, but this sure gives it a bad name. There are a lot of similatities with elite government jobs with huge perks and private sector executive positions in publicly traded companies. JUST SAY NO!
MikeB
Thu, Apr 14, 2011 : 6:18 p.m.
Hmmm, aren't these the same guys who drove them into bankruptcy? They want a bonus for ruining Borders? Not being able to adapt to market changes? They want a bonus to keep these guys? Really? Nonsense
Ypsiloo
Thu, Apr 14, 2011 : 5:59 p.m.
Employees are not too happy about these bonuses either. This petition is making the rounds- <a href="http://www.change.org/petitions/say-no-to-borders-books-ceo-bonus-after-6000-in-layoffs-and-company-files-for-chapter-11-2" rel='nofollow'>http://www.change.org/petitions/say-no-to-borders-books-ceo-bonus-after-6000-in-layoffs-and-company-files-for-chapter-11-2</a>
Turd Ferguson
Thu, Apr 14, 2011 : 5:37 p.m.
They must have a boat payment due. ?
dading dont delete me bro
Thu, Apr 14, 2011 : 5:36 p.m.
"...immediate action..." ? then the answer is "no"
Forever27
Thu, Apr 14, 2011 : 5:22 p.m.
I can't believe the audacity of these people to DEMAND that they get their bonuses. they ran the company into the ground, and as a result, thousands will be without a job and unable to pay the most basic of their bills. Meanwhile, those responsible, demand a bonus for the terrific job they did. wow.