Judge orders more changes to Borders' executive bonus plan
Ann Arbor-based Borders Group Inc. today agreed to revise its executive bonus plan by tying the possible payments for the top executives to the company's ability to pay unsecured creditors, according to a Bloomberg report.
But a New York bankruptcy court judge instructed the company to make further revisions to the plan before he would approve it, according to the report.
Borders appeared before the judge this afternoon to request the right to distribute up to $7.8 million in executive bonuses if the company successfully and quickly exits the bankruptcy process.
Under the new terms of the plan that Borders and the creditors agreed to before visiting the judge, the amount of money the company pays out to creditors would determine the size of the top executives' bonuses.
The parties were set to discuss a revised version of the new plan with the U.S. Department of Justice trustee, who last week filed an objection to the plan, saying that Borders had not proved it was warranted at this stage in the bankruptcy process.
In a response this week, a Borders consultant requested that the court take "immediate action" to authorize the bonus plan, saying that the company was facing an exodus in employees that must be stopped.
Borders, which filed for Chapter 11 bankruptcy on Feb. 16, is closing 226 superstores nationwide, including the location at Arborland Center on Washtenaw Avenue.
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
jcj
Fri, Apr 15, 2011 : 6:30 p.m.
Other than the fact that these executives are trying to raid the fridg before they leave, Borders is a non-story! For those that believe this is a good move (and there are only 1-2) come back in 1 year and tell us how right you were! Borders will soon be like the edsel, cassette tape and VCR!
grye
Fri, Apr 15, 2011 : 1:40 p.m.
Regardless of how long the current executive team has been in place, to provide them with bonuses while the company is filing for bankruptcy is a lousy decision. All creditors should receive their money, then stockholders. The employees deserve their paychecks for current work but nothing on top of that. If they own stock, they might get something back. The rule of thumb should be pay your bills first, then yourself.
Mike D.
Fri, Apr 15, 2011 : 12:50 p.m.
Every time this comes up, there are a lot of uninformed comments. The execs who ran the company into the ground are long-gone. Borders needs a top-tier management team today if it's going to have *any* chance at survival, and the current team has only been around for a short time. Pinning the bankruptcy on these folks is like blaming Obama for Afghanistan. The best members of today's management team can leave and go elsewhere for comparable salaries and bonus plans, so it makes sense to offer them meaningful bonuses if they can turn it around. Let's say you were the CEO or a VP there, a year into the job, and you got an offer at a more stable company for the same money. Would you stick around? Might a million-dollar bonus keep you on the job? Every company pays good execs a lot. If you want to boycott companies that pay their execs millions of dollars, go live on a farm and grow all your own food, don't buy a car, don't talk on the phone, and don't connect to the internet to post on this site.
jcj
Fri, Apr 15, 2011 : 6:23 p.m.
" If you want to boycott companies that pay their execs millions of dollars, go live on a farm and grow all your own food, don't buy a car, don't talk on the phone, and don't connect to the internet to post on this site." When the "execs" you mention are in charge of a company that has filed for BR and THEN try to milk the compasny for millions I WILL boycott them every time! "The best members of today's management team can leave and go elsewhere for comparable salaries and bonus plans' So they came here out of a sense of loyalty? Or maybe they did not have all these "offers" in their mail boxes! Get real! Sounds like the comments you would hear from a carpet bagger!
MyOpinion
Fri, Apr 15, 2011 : 3:46 p.m.
I understand your point, BUT why are these top-tier folks trying to amend their contracts at this stage? If they are so on the ball, they should have said "I am good, being recruited by xx, xx, and xx and I won't come to work for Borders unless my package is . . . . " It seems rather poor form to demand bonuses (for 'just because') after the fact. The reason there are all these uninformed comments is that we've all seen the pay/bonuses for CEOs and there seems to be little association between the job these folks do and the bonuses they get. They get their bonuses no matter what.
Veracity
Fri, Apr 15, 2011 : 12:36 p.m.
I have an idea: Fire the executives who road the company into the ground. Use the $7.8 million to pay creditors their due. Place the Borders enterprise into receivership and convert any remaining assets into cash to pay off debts.
Lynn S
Fri, Apr 15, 2011 : 12:22 p.m.
They need the bonuses to keep this fantastic team of business geniuses from leaving? Leaving might be the best thing they could do for Borders. Of course, that is if they can find another job that will pay them the same amount for such paltry accomplishments at their current employer. Oh wait, that is what networking is all about - fail at one place, chat up your bud, get a new high level job and drive another company into the ground. When will the rank and file get fed up with this and revolt????
Hot Sam
Fri, Apr 15, 2011 : 10:21 a.m.
Let's see...the company is bankrupt, the state is bankrupt, and the country is bankrupt. Can someone tell me where the money would come from?
Tom Joad
Fri, Apr 15, 2011 : 3:11 a.m.
The rats aren't leaving the ship until they get paid
proudtobeme
Fri, Apr 15, 2011 : 2:54 a.m.
I have no clue how the judicial arena works because I am not a lawyer,judge,etc. Can't the Judge just say,"NO way,you get nothing?" Why are they allowed to revise their plan? It just seems crazy to me that they would get any money for any kind of bonus. period.
proudtobeme
Fri, Apr 15, 2011 : 2:56 a.m.
and of course regardless of what ever comes of all this,I will never shop at Borders.
Bones
Fri, Apr 15, 2011 : 2:08 a.m.
Just like big banks and wallstreet. They reward failure. Nice. Never cared for borders anyway. Now I know why.
snapshot
Fri, Apr 15, 2011 : 1:58 a.m.
Big difference between the GM and Chrysler bankruptcies that allowed bonuses not only to execs, but to union members while they still owe the taxpayers billions for their current 23% ownership. Can unions buy judges in addition to legislatures?
javajolt1
Fri, Apr 15, 2011 : 1:19 a.m.
Uhhhh... how about tying bonus compensation to an actual REAL-LIVE turn around? The CEO already gets a huge salary. So why would the CEO be eligible for a $1.6 MILLION bonus without making it contingent upon NOTHING LESS bringing this company back to profitability? $6.5+ million in executive bonus compensation for a company in bankruptcy makes about as much sense taking a shower, then going out and rolling in the mud!
zip the cat
Fri, Apr 15, 2011 : 12:53 a.m.
Pay bonuses while 75% of there workers lost there jobs. Time to BOYCOTT borders. A real farce