Ron Amundson’s Political Blog

Key Employee Retension Plan

In other words, how execs walk away with huge bonuses after running their corporation into the ground.

This is a key issue example of unintended consequences. To some extent, its a personal reward for a CEO to file bankruptcy. However, last month it changed. Originally the idea was to keep on key people by compensating them excessively to prevent the top management from jumping ship, and thus making the probability of company survival higher. However, to me, it never made sense. Why on earth would you want the same inept management that ran a company into the ground, trying to turn it around. If anything, the idea would be to ditch them. Then again, that should be a board of directors issue, however they often times lack the guts to do so.

At least after Oct 17th, some additional criteria is required. First, the exec in order to recieve a huge bonus has to show evidence of similiar compensation in a new position. Since a captain going down with his ship may not be all that great in the first place, the probability of getting a great offer is pretty low. Secondly, the judge has to accept it, and their guidelines are a lot stiffer now. As a result, a lot of corporations declared bankruptcy before Oct 17th. Some, perhaps had the companies best interests at heart. I would gather that most were more concerned about their personal bonuses though.