U.S. government files objection to Borders' executive bonus plan
A trustee representing the U.S. Department of Justice on Thursday objected to Borders Group Inc.'s plan to distribute up to $8.3 million in bonuses to its top executives.
In a 17-page filing with the U.S. Bankruptcy Court's Southern District of New York, U.S. attorneys said Ann Arbor-based Borders had not provided sufficient proof that the bonuses are necessary, criticized the way they are being structured and questioned whether they would simply benefit "insiders."
The attorneys — Susan D. Golden and Paul K. Schwartzberg, filing on behalf of trustee Tracy Hope Davis — also said the bonuses are not tied to Borders' "financial performance."
"Despite the characterization of the bonus payments as providing necessary incentives to insiders, there is no information that explains what extra services the insiders would perform beyond their ordinary job duties or a detailed description of the nexus between the supposed incentives and the payment trigger," the attorneys wrote.
"The bonus motion provides no financial performance metrics nor are the bonuses tied to the number of stores that will continue to operate under a plan of reorganization. It is also unclear at this stage whether there will be any distribution to unsecured creditors."
U.S. bankruptcy trustees promote "the efficiency and protect the integrity of the federal bankruptcy system," the government says on its website.
The attorneys also spelled out more objections to Borders' plan. They expressed skepticism about Borders' claims that the bonuses are needed and questioned the methodology a consultancy used to generate recommendations on the size of the bonuses.
In documents filed with the court, Borders' compensation consultancy, a firm called Mercer, suggested that the company faces a "risk of disengagement" among its top employees if they don't receive bonuses.
Mercer said it concluded that the company's top 17 executives are being paid base salaries of 38 percent of executives at similar "specialty retailers."
Those 17 executives would get bonuses of up to $7.1 million. Mike Edwards, CEO of Borders Group subsidiary Borders Inc., could get as much as $1.68 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 its submission.
or
• Successfully attracts a buyer that would continue to operate the company.
Borders filed for Chapter 11 bankruptcy protection on Feb. 16. The company is closing 225 superstores and hopes to exit bankruptcy this fall.
Meanwhile, the company is also considering a move out of Ann Arbor. The firm has determined that it can't afford its current headquarters on Phoenix Drive and is considering other locations in metro Detroit.
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
LB
Sun, Apr 10, 2011 : 4:46 p.m.
Why didn't the US DOJ speak up when all that bonus $ was paid to the financial exec's, at the wall street firms, with our tax money
zip the cat
Sat, Apr 9, 2011 : 10:56 p.m.
If you want to send a clear message to the big shooters of borders for the shenanigans of the bonuses when there workers lost there jobs. Do as I plan to do if this gets approved. BOYCOTT them for good
Bill
Sat, Apr 9, 2011 : 5:59 p.m.
I imagine they took bonuses for new stores opened. Shouldn't they subtract income for all that they have closed?
Tru2Blu76
Sat, Apr 9, 2011 : 3:47 p.m.
I worked for 13 years at a company that gave bonuses to all employees, every year. But that was because that company enjoyed both sound leadership and a period of relative economic health during that period. Those bonuses were scaled - according to what specific contributions were made by individuals. Notable: that company was family owned and the third generation was just coming in as I left. They are still family owned. Perhaps the lesson is that it's not always such a hot idea to "go national" when a company is doing well on the smaller scale. I join others in cutting the nostalgia for Borders - which is nothing like the Borders of old. I'll leave it to the court to decide on the matter of bonuses for the few. After all, bonuses may serve as an incentive to stay during a very shaky period. If all the employees at every level bail out now, then Borders Books will face more than just restructuring the business, they'll have to recruit a whole new crew which may not have the experience or dedication of the former employees.
Orangecrush2000
Sat, Apr 9, 2011 : 3:32 p.m.
Power corrupts..., as the saying goes. Those execs need to be stripped of their power. And, if anything, they should be paying fines to the company for losing so much money.
Wolf's Bane
Sat, Apr 9, 2011 : 2:21 p.m.
No bonuses, bad dog! Seriously though, rumor has it that the flagship store on Liberty and Maynard in downtown Ann Arbor will be close quite soon and that Border's plan's on moving a much smaller and leaner company from the its current headquarters to Detroit. Where exactly, I don't know, but is in downtown. Perhaps the old Compuware building? My source is a long time employee at Border's corporate and wishes to remain anonymous.
Urban Sombrero
Sat, Apr 9, 2011 : 2:32 a.m.
The idea of giving the Borders execs bonuses, for essentially running the company into the ground, makes me gag a little. Still, our government saw fit to not only bail out the big banks, but to also let their corrupt CEO's and other higher ups walk away with huge bonuses. So, maybe it's just part and parcel of (corrupt?) coprorate culture? Regardless, as someone struggling to pay off student loans, with no health/dental/optical insurance and absolutely NO retirement fund......it makes me sick. It's completely disgusting. How about using the money that would have gone to those bonuses to pay severance pay to all the workers Borders laid off-----you know.....the people in the trenches who actually work hard? And, don't have a cushy office and the ability to take 3 martini lunches?
InsideTheHall
Sat, Apr 9, 2011 : 3:36 p.m.
Urban don't fall into the trap of being jealous of others. Make your own way and remember it is all up to the person you see in mirror every morning.
Urban Sombrero
Sat, Apr 9, 2011 : 2:33 a.m.
Apologies for all the typos. It's almost bedtime!
Left is Right
Sat, Apr 9, 2011 : 1:52 a.m.
"38% of salaries of specialty retailers"? So what? They deserve zero. Disengagement? Fire 'em all now. Reserve bonuses for those who have the skills to rescue the company. Way too much mismanagement. Way too much incompetence. Way too much this-a-way and that-a-way over the years. Too bad they have D&O insurance.
InsideTheHall
Sat, Apr 9, 2011 : 12:41 a.m.
The government should have no interest in the affairs of a private sector company. That is why they have shareholders, bondholders, and Board of Directors elected by those who have skin in the game. Yet another assault on the private sector from the Socialist Obama regime.
Garrett
Thu, Apr 14, 2011 : 5:59 p.m.
Yeah, they should. Especially given the fact of corporate tax breaks and writing off losses, using highways to ship their books... and on and on.. to pretend that there is no such thing as a private company that doesn't in some way rely on socialism is to live in a Randian dreamland.
johnnya2
Sat, Apr 9, 2011 : 3:08 p.m.
So if they should have no interest, that means you do not believe BK should even be an option? BK is the GOVERNMENT allowing you to dismiss or reduce your CONTRACTUAL obligations. If that is your position, let's go all out with it. Since Borders owes me money, and I am not sure they can pay it back, I am going to take assets as I see fit. Whoever can get them first gets to keep them. Bankruptcy trustees have been around since BK was invented, but ignorant people like you see it as having something to do with Obama. IT DOES NOT. Companies that can not pay their bills do not have the right to decide how to spend the money they don't have. By the way, socialism is what we have in the military. All people are required to be the same, health care, food, living quarters, free education and clothing is all provided by the government. I guess socialism if is ok for the military, why would it be bad for the rest of us? I can only wish Obama were a socialist. It is an insult to socialism. Obama is right of center.
Epengar
Sat, Apr 9, 2011 : 1:54 p.m.
Another ignorant post from someone who doesn't understand bankruptcy, or that bankruptcy laws are made by the legislature.
Gorc
Sat, Apr 9, 2011 : 1:41 p.m.
Sweet life- please help me understand how a corporate bankruptcy filling triggers government intervention to help the creditors financial position. When General Motors filed for bankruptcy the government intervened and created two GM's...a "bad GM" and a "good GM". The financial interest of the stockholders, bondholders, and creditors were tied with the "bad GM". The bondholders and creditors were paid a fraction of what they were owed in a normal bankruptcy filling..all due to government intervention. Now I don't support the excutives at Boarders receiving a bonus based on the criteria that they are currently asking for.
jameslucas
Sat, Apr 9, 2011 : 1:35 a.m.
That has never happened in world history, never will.
sweet_life
Sat, Apr 9, 2011 : 1:08 a.m.
By filing for the court's protection from creditors under Chapter 11, Borders has made it the public's interest to ensure that money that should be going to creditors isn't being wasted on undeserved executive bonuses.
Huron74
Fri, Apr 8, 2011 : 10:52 p.m.
Every place I've ever worked bonuses were only awarded for superior performance or achievement. The current crop of BB execs sure don't seem to fit in that category. An especially not now when they're in bankruptcy.
jameslucas
Fri, Apr 8, 2011 : 10:44 p.m.
Once Snyder starts taxing retirement income, thus allowing him to lower the business tax burden, there will not be these corporate bankruptcies, so we will have that going for us.
alternativeview99
Sat, Apr 9, 2011 : 1:34 p.m.
So, in essence we subsidize exec bonuses from the savings of those who worked? Retirement plans are often deferred income and are considered in any event part of the compensation package offered to employees. Why is it fair to decide to now take away those benefits anymore than it is fair to tax the super rich (the top 10%) who take 90% of the weath of the nation each year. Why can't the super rich be happy with just a 40% cut. It is still 4 times their pro-rata share. The fact is the lowering of taxes in recent years has funneled wealth to the super rich from 1980 until the present. If you think that's equitable, that's your opinion. But, it will never be mine. And, I don't see how taxing the middle class will help. It just continues the problem. <a href="http://www.stateofworkingamerica.org/" rel='nofollow'>http://www.stateofworkingamerica.org/</a>
Brian Kuehn
Fri, Apr 8, 2011 : 9:42 p.m.
Give them all stock options.
ronaldduck
Fri, Apr 8, 2011 : 9:19 p.m.
I say give them the bonuses. They won't have any problem paying them when they get the Snyder tax breaks.
jcj
Fri, Apr 8, 2011 : 9:01 p.m.
Don't wait for them to leave or go under completely. Run them out of town now! What apparently started out as a good company went the way of most companies that get too big too fast. They know they will be going under so they want to shaft the creditors and run with the money!
Tom Joad
Fri, Apr 8, 2011 : 9 p.m.
Bonuses? Bonuses, for what?