A bankruptcy judge on Wednesday approved a $45.6 million incentive program for top executives and managers of the Tribune Company, overruling objections by a union and the bankruptcy trustee that the payout was too high and unwarranted.
The program for 2009 covers 10 top executives and 710 managers. Kevin J. Carey, the chief judge of the Delaware Bankruptcy Court in Wilmington, did not rule on two other incentive programs for 20 top executives that totaled about $20 million. In remarks before issuing his ruling, he suggested that the Tribune board consider rolling the remaining incentive plans into the reorganization plan under which the company would emerge from Chapter 11 bankruptcy protection.
The bonuses amount to about 11 percent of the company’s 2009 operating cash flow of $500 million. William Salganik of the Washington-Baltimore Newspaper Guild, which represents employees at The Baltimore Sun, a Tribune property, called the bonuses “unprecedented” compared with the previous high payout of 3.3 percent during a 12-year period. “It’s a greater reward for lower performance,” Mr. Salganik said, noting that the 2007 cash flow had been $1.2 billion.
He said the Tribune had laid off or bought out about 3,000 employees companywide.
In court papers, the bankruptcy trustee, Roberta A. DeAngelis, disputed Tribune’s claim that the incentive programs were bona fide awards “based on real performance targets that are intended to motivate superior performance.” She said Tribune officials failed to “back up their characterization” that cash flow targets were real and had failed to provide records of actual versus projected performance.
But in a 10-minute ruling from the bench, Judge Carey said he found the proposed bonuses were justified because “there is a reasonable relationship between the plan and its objective to restore profitability and let the company move forward.” The plan,” he said, “was developed over time by and among all the major constituents of the company and has their support.” He explained that the incentive was intended for the unsecured creditors and to “put more money in their pockets.”
'Courts of bankruptcy are essentially courts of equity, and their proceedings inherently are proceedings in equity.'
