Dive Brief:
- Macy's has resumed its equity bonuses for top executives after a protracted closure period, emergency financial measures and recently announced corporate staff layoffs. The awards going to more than a dozen executives were worth millions, including more than $3.6 million in company stock to CEO Jeff Gennette at the time of the award.
- Macy's board typically considers its equity grants at its March meeting, but opted to delay them this year because of the COVID-19 impact, the company explained in a July filing. A Macy's spokesperson told Retail Dive in an email that the company would "fully describe" its 2020 compensation plans in its annual proxy filing.
- Elsewhere in the department store world, Neiman Marcus is facing opposition from the U.S. Trustee assigned to its Chapter 11 case for a plan to dole out up to $10 million in performance bonuses for top execs, including as much as $6 million for CEO Geoffroy van Raemdonck.
Dive Insight:
In the early weeks of the COVID-19 crisis, the financial pain of mass store closures was spread among stakeholders. Executives at companies around the industry took pay and bonus cuts while retailers furloughed employees, skipped payments to vendors and landlords, and scrapped cash dividends and share buybacks.
With retailers seeking out a new normal in the post-closure world, some of those measures are being unwound. Along with the equity bonuses, Macy's in July moved to restore cash salaries for its executives. That announcement came just days after the department store giant said it would slash 4,000 jobs across its business. Gennette said in a statement at the time, "We know that we will be a smaller company for the foreseeable future."
As for Neiman Marcus, issuing bonuses is more complicated than a simple board directive. Cash payments outside the course of daily business get scrutinized and may need court approval, including employee and management bonuses.
In the case of Neiman Marcus, the Department of Justice official tasked with watching over the case on behalf of the public has taken issue with the luxury department store's plans to pay incentive bonuses. The trustee noted in a court filing that by law, bankrupt companies can't pay mere retention, or "pay-to-stay" bonuses. The trustee asked the judge overseeing Neiman's Chapter 11 case to deny the approval of the incentive payments unless the retailer can prove it is justified and the payments are aimed at more than merely keeping top executives at the company.
For its part, Neiman said in court papers that it had been "on track to accomplishing their goal of profitable and sustainable growth despite the tough retail landscape, and this was due in no small part to the extraordinary efforts of the Debtors' management team and key employees." COVID-19 and the retailer's descent into bankruptcy forced executives to pivot to negotiating a workable Chapter 11 reorganization plan with key stakeholders.
Other retailers have paid out bonuses to executives ahead of bankruptcy filings, including J.C. Penney. Ascena, which is reportedly preparing a possible filing, also paid out millions to executives.
That can help keep an executive team in place while pursuing a reorganization, and before court scrutiny of executive compensation commences. But such payments can also bring legal scrutiny later. Former Toys R Us executives were named as defendants in a lawsuit earlier this year, brought by unsecured creditors to the failed toy retailer. Among several other allegations, plaintiffs alleged that CEO Dave Brandon orchestrated a plan to pay himself and his peers millions of dollars just days before the toy retailer filed for bankruptcy.
via https://ift.tt/2Jn9P8X by Ben Unglesbee, Khareem Sudlow
