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A man comes out of a Sears store on October 15, 2018 in Montebello, California. The iconic US retailer on Monday demanded Chapter 11 protection from creditors, citing more than $ 10 billion in debt and more than $ 1 billion in assets. (Photo credit: Mario Tama / Getty Images)
Sears is seeking court approval to pay executives up to $ 19 million in quarterly bonuses, while the company is struggling to restructure in the event of bankruptcy.
Three senior executives could receive close to $ 1 million each if the company ceased operations. If Sears stays in business, they could get close to $ 500,000 each to reach the highest performance targets.
Sears filed Thursday two different types of bonus plans in bankruptcy court. The first concerns the 18 key "key" executives, who collectively would raise up to $ 2.1 million per quarter. Premiums would only be paid in full if Sears achieved its cash objectives. Sears Holdings, which includes both Sears and Kmart, has spent about $ 125 million a month.
A second loyalty bonus plan was designed to encourage 322 other non-appointed executives to remain in office during the reorganization of Sears. They would collectively earn $ 16.9 million per quarter, which is an average of about $ 52,000 per quarter and per executive. No executive could receive more than $ 150,000 bonus to stay with the company during the bankruptcy process.
Judge approval is required before bonuses can be paid. A hearing on the plans is scheduled for December 20.
The company wants to keep as many executives as it can, but Sears is laying off employees who have occupied hundreds of stores that it closes. Many hourly workers claim that they will not be compensated.
Shelia Brewer, who worked for 17 years as a full-time employee in a Kmart in Rockford, Illinois, said the company had announced an eight-week severance package. Instead, she received a letter stating that the severance pay had been suspended due to bankruptcy and that she would only be receiving the four weeks salary she had already received.
"It hit me hard. I was already fighting like that, "she says. She said the bonus plan made her angry.
"They say we can not get our compensation because there is no money, but they receive bonuses? It's like a slap in the face, "she said.
A spokesman for Sears declined to comment on the bonus plan or its current severance pay policy.
Eddie Lampert, the main shareholder and president of the company, apparently will not receive a bonus, depending on the file.
The three key executives who were responsible for the management of the company during its reorganization are in a position to receive the largest bonuses. They are CFOs Robert Riecker, Digital Directors Leena Munjal and Gregory Ladley, President of the company's clothing and footwear division.
Each could receive up to $ 240,000 per quarter in premiums to achieve the maximum cash flow goals. They could receive four times more if Sears ceased operations, in what the company called an "acceleration event."
Retention premiums for executives are not unusual when companies go bankrupt. But the bankruptcy law limits the amount of severance pay that companies can pay.
Toys "R" Us received approval of up to $ 16 million from 17 senior executives a year ago for its unsuccessful attempt to stay in business despite objections from employee groups and other.
"It is outrageous that the bankruptcy court is considering premiums for senior Sears executives as fired employees lose their severance pay," said Carrie Gleason, campaign manager at Rise Up Retail, an employee advocacy group. "That's exactly what happened at Toys 'R' Us. A handful of leaders who could not save the company received millions of bonuses while tens of thousands of dedicated employees were denied the promised severance pay. "
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