On Friday, a bankruptcy judge denied a proposal that would award 8 executives $5.8 million in bonus while the company reorganizes their debts.
Hawker requested the bonuses last month stating that they were a necessary incentive to keep these executives on board during the Chapter 11 process. The move was heavily criticized by a machinist union who vowed to challenge the bonuses.
U.S. Bankruptcy Court Judge Bernstein stated that the bonus plan amounted to nothing more than a retention program for corporate insiders and set the bar to low. While his judgment wasn’t meant to disparage their efforts or contributions to the company during bankruptcy he said that he did feel like the bonus plan met legal standards of setting challenging goals which would justify the bonuses.
Judge Bernstein further stated that the bonus plan was not “an appropriate exercise of business judgment.”
Hawker filed for bankruptcy earlier this year and sough to eliminate employee pension plans. Shortly after they filed for bankruptcy 2,500 employees were laid-off and the company left the employee pension plan $751 million in the red which leaves the American taxpayer on the hook as the missing funds have to paid through the a federal program.
Chapter 11 is typically used by small business and corporations who are deeply in debt. This bankruptcy structure allows a business to continue operations while they negotiate with creditors and employees to reduce their liabilities.
In order for a company to avoid challenges from creditors and employee unions a business must employ a savvy bankruptcy attorney to draft plan that will satisfy both the court and creditors, allowing the business to emerge from bankruptcy in a timely fashion.
