U.S. Is Asked to Review Bankruptcy Bonuses

Wall Street Journal

In 2005, Senator Charles Grassley took the lead in legislation that amended the Bankruptcy Code to restrict executive compensation in bankruptcy cases. In a letter to the Justice Department dated February 7th, Senator Grassley questioned the perceived legality of certain pay practices at distressed companies. His concern is rooted in the perception that certain companies circumvent the rule of law in the execution of their pay practices such as when incentive plans function as retention bonuses for executives at financially troubled companies. These retention bonuses are restricted under federal law, and Mr. Grassley has reached out to the Justice department for their experiences on the matter.

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Value of “Golden Parachute” Payments Increased by 32 Percent in Past Two Years

Alvarez & Marsal Taxand

In a study by the tax group Alvarez and Marsal Taxand, LLC, the average CEO change-in-control benefit has increased 32% over the past two years and is being driven largely by equity payouts. The authors hypothesize that change-in-control benefits will continue to increase in tangent with increases in performance-based compensation. However, the increasing scrutiny on rich exit packages for executives could cause future shifts in practice. Additionally, large exit packages can partially be attributed to stock market performance. The authors do not specifically mention how exit awards are influenced by other factors.

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