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I was hoping the judge would set some limits in this economy. Why does the judge have to cater to whatever the artifical exec market set by cronies on corporate boards? What makes these executives who ran the company into the ground deserving of such high bonuses for liquidating it?

http://www.huffingtonpost.com/...

The judge approved Hostess' bonus plan, according to a tweet from CNBC:

CNBC@CNBC

BREAKING: Judge approves Hostess bonus payout plan; 19 Hostess senior executives in line for up to $1.8M in bonuses

 29 Nov 12

The update on the sale of the company's brands comes as Hostess seeks approval in U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. to give its top executives bonuses totaling up to $1.8 million as part of its wind-down plans. The company says the incentive pay is needed to retain the 19 corporate officers and "high-level managers" during the liquidation process, which could take about a year.

Two of those executives would be eligible for additional rewards depending on how efficiently they carry out the liquidation. The bonuses would be in addition to their regular pay. A spokesman for Hostess noted executives will need to meet certain goals to get the bonuses.

More info from the article:

The bonuses do not include pay for CEO Gregory Rayburn, who was brought on as a restructuring expert earlier this year. Rayburn is being paid $125,000 a month.

Hostess is also seeking final approval for its wind-down, which was approved on an interim basis last week. But the bakers union, Hostess' second-largest union, is asking the judge to appoint an independent trustee to oversee the liquidation, saying that the current management "has been woefully unsuccessful in its reorganization attempts."

I am a big time capitalist. But I find these kind of terms so unseemly. It seems like the execs get away with everything. If I left my company without taking care of wrapping up my project in an organized manner , guess what, I will not get a good reference and that could potentially hurt me with getting a lucrative offer down the road if I have more than one of these kind of references. Why don't execs have to bear the same burden of responsibility of wrapping things up responsibly without having to get paid obscene amounts to wrap up the problems they created?

Thoughts from people in the industry? How much power does the bankruptcy judge really have to put pressure to reduce these bonuses?  Was it a mere formality and the judge had only so much room?

The same thought occurs to me when you see judges approve legal costs and obscene hourly rates for lawyers regardless of the market for that grade of lawyer in cases where the losing party has to pay legal costs. It';s like they all aspire to the highest possible rate as the reference point.

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Comment Preferences

  •  omgeesh. sickening. eom. (3+ / 0-)
    Recommended by:
    jacey, mrsgoo, Kevskos

    sometimes I spend more time reading the comments than the diaries. no offense to diarists: thanks for the launch pad.

    by dunnjen on Thu Nov 29, 2012 at 05:14:37 PM PST

  •  pravin - I am no expert (1+ / 0-)
    Recommended by:
    pravin

    but my understanding is that the judge has a lot of authority and could have denied the bonuses. The mitigating issue is that if a lender/investor is funding the company while it is in Chapter 11 the people providing the cash also have a lot of influence.

    "let's talk about that"

    by VClib on Thu Nov 29, 2012 at 05:25:05 PM PST

  •  Bankruptcy Courts (10+ / 0-)

    Warning, I am an attorney who does bankruptcy as part of my practice.  The Courts main purpose in theory is to make sure that the creditors receive the most possible in the dissolution of the company.  It is the experience of the Courts that if the executives who run the company leave, it is near impossible to replace them and the value of the assets is probably adversely affected.  I will save you my cynicism about the whole process as I could spend the whole evening writing about the wrong assumptions that are sometimes made and who the parties are who always seem to make out well.

  •  grrrrrrrrrr (0+ / 0-)

    if a habitat is flooded, the improvement for target fishes increases by an infinite percentage...because a habitat suitability index that is even a tiny fraction of 1 is still infinitely higher than zero, which is the suitability of dry land to fishes.

    by mrsgoo on Thu Nov 29, 2012 at 06:10:03 PM PST

  •  This makes me sick to my stomach. (0+ / 0-)
  •  So a company has to be liquidated. (0+ / 0-)

    Capital assets inventoried.
    Capital assets maintained (preventative maintenance, etc.) until sold.
    Capital assets sold or auctioned at best possible price.
    Personnel retained, paid, and managed to accomplish the above.
    (And they are not mainly all executives.)
    Outstanding bills prioritized and paid, as able.

    The point is, liquidation is not a cost-free endeavor, and doing it well is worth something.

    •  Couldn't the existing accountants take care of thi (1+ / 0-)
      Recommended by:
      Kevskos

      When Delta had retention bonuses for their execs after the bankruptsy, most of them just stayed long enough to fulfil the terms of their retention terms. There was no major incentive for them to do the best job possible. They were busy trying to move on once they fulfilled the terms.

      Wouldn't it be better to have the non-exec higher level personnel who are hungry for recognition take care of the proceedings and hire  a freelance veteran in the industry with a track record to oversee the liquidation. I am not saying that it is the best scenario in this case, but frequently, they don't even seem to consider this option.

      •  Perhaps you are right. (0+ / 0-)

        But there is value in corporate memory, particularly in a manufacturing business with a large capital asset inventory and dependent locations.  

        I'm just suggesting that some current expertise is required, bonuses (if approved) are not unthinkable.

        Are 19 at around $1M/bonus reasonable? I'd tend to doubt it, but 5-7 sounds reasonable, though I know not a damn thing about realities.

  •  Glad all the news media (but Faux) covered it. (0+ / 0-)

    Points out the real issue is management greed and union busting.

    Expect the reincarnation to be non-union.

    cheerleaders need not apply.

    by kravitz on Thu Nov 29, 2012 at 08:55:01 PM PST

    •  kravitz - I think the brand names and recipes (0+ / 0-)

      will be sold to someone who is a national bakery products distributor who can leverage existing employees, equipment, infrastructure, and logistical expertise to make and distribute these products on a marginal cost basis. They would obviously have to add people, Hostess sold $2.5 billion of products in 2011, but I don't think they will be making many, or maybe any, of the Hostess products in the existing Hostess bakery facilities.

      "let's talk about that"

      by VClib on Thu Nov 29, 2012 at 09:46:34 PM PST

      [ Parent ]

  •  125K a month! (0+ / 0-)

    That's much more than I earn in a year, and I could run a company into the ground just as well as this moron did.

    Radarlady, wondering when the crooks in business get their comeuppance...

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