Yellow paid its executives millions in bonuses to keep them around as the company failed, court papers show.
$4.6 million in bonuses were paid out to eight current and two former Yellow executives in the weeks before the company filed bankruptcy. Two million of those bonuses were approved by Yellow’s board in June, when the company was in trouble but not yet considering bankruptcy, reported Bloomberg. Those were paid out on July 14th.
Just days after the approval, Yellow’s dispute with the union escalated and a strike notice from the workers caused Yellow customers to withdraw their business. The reminder of the bonuses paid on July 31st as Yellow planned for a bankruptcy filing.
The payments made in July included $1.08 million to Chief Operating Officer Darrel Harris, $1 million to Yellow Chief Restructuring Officer Matthew Doheny, and $625,000 to Chief Executive Officer Darren Hawkins. Yellow’s former chief commercial officer was paid $249,000, and its former senior vice president of human resources was paid $23,000.
Companies are encouraged to pay these executive retention bonuses prior to filing Chapter 11, as paying these bonuses during Chapter 11 is not permitted, as of a 2005 decision in Congress. Since then, the Government Accountability Office has suggested that Congress require the court to oversee the distribution of executive retention bonuses.
Executives disputing pay in bankruptcy court is not uncommon, and can become especially tense when unions are involved. “Given what’s gone on here, I can see why they paid out the bonuses before filing,” said Harvard Law School Professor Jared Ellias, who is involved in Chapter 11 research.