TBO.com - TBO is Tampa Bay Online

Circuit City wants to pay retention bonuses

ADVERTISEMENT

BY LOUIS LLOVIO

MEDIA GENERAL NEWS SERVICE

Published: February 13, 2009

RICHMOND, Va. - Circuit City Stores Inc. is asking a U.S. Bankruptcy Court judge for permission to pay up to $4.65 million in retention bonuses to some of its employees to keep them as the chain winds down its business affairs.

In all, 153 employees would be eligible to divide up to $3.9 million, while an undetermined number of nonmanagers could share up to $750,000.

Sixteen top-level executives, including James A. Marcum, the chain's vice chairman and acting chief executive officer and president, and Reginald D. Hedgebeth, its senior vice president and general counsel, would split $2.3 million among themselves.

The remaining 137 employees are middle managers who would divide up to $1.6 million.

A bankruptcy judge would have to approve the motion at a hearing Feb. 25.

The money would come in the form of bonuses that the executives and managers would split based on achieving specific targets, including closing distribution centers or the corporate headquarters building by certain dates.

In court filings, Circuit City said it has "experienced a noticeable increase in employee turnover" since announcing last month that it was liquidating under Chapter 7 of the U.S. Bankruptcy Code. "The turnover threatens the debtors' ability to implement the wind-down plan and maximize value for their estates and stakeholders."

Robert Lawless, a law professor specializing in bankruptcy at the University of Illinois, said asking for money is not unusual as a company tries to get as much as it can from its assets.

"It makes a lot of sense to pay an incentive to employees to increase the recovery," he said. "For example, it gives incentives for the early closing of distribution centers, which cuts down on administrative costs."
Circuit City creditors likely will stand behind the plan because the current management could maximize the return and, in turn, how much creditors get paid, Lawless said.

"This is the creditors' money right now," he said.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT