Toys R Us bankruptcy trustee blasts executive bonus plan
WOODLAND PARK, N.J. — The U.S. trustee in the Toys R Us bankruptcy case has filed a strongly worded objection to the company's plan to pay between $16 million and $32 million to its 17 most highly paid executives.
"It defies logic and wisdom," the objection by trustee Judy A. Robbins states, that Toys R Us is proposing "multimillion-dollar bonuses for the senior leadership of a company that began the year with employee layoffs and concludes it in the midst of the holiday season in bankruptcy.
"Apparently," Robbins said, "this Christmas, Toys R Us intends to deliver not only 'children their biggest smiles of the year' but the insiders, too,’ " which is a reference to court claims by Toys R Us that its No. 1 goal is to keep children happy.
U.S. trustees are assigned to bankruptcy cases to make sure bankruptcy laws are followed and to administer regulations involving claims by creditors.
More:Amazon, Nike, Toys R Us among the top U.S. companies for diversity
More:Hasbro, Mattel deal would unite Barbie and Mr. Potato Head
Toys R Us filed a motion Nov. 15 asking for permission for an executive incentive bonus plan that would give its top executives $16 million in extra pay. Those bonuses would double to $32 million if certain financial goals were reached.
Robbins noted that five of the top Toys R Us executives also received $8.2 million in retention bonuses five days before the bankruptcy filing in September. Those bonuses included a $2.8 million payment to CEO Dave Brandon "just to stay with the company," the objection states.
The trustee also argued that the incentive bonuses are questionable in light of the fact that Toys R Us does not yet have a reorganization plan in place and that there is "great uncertainty" that creditors will recover the money owed to them by the company. She also commented that Toys R Us did not provide enough information on how the performance guidelines for the bonuses were set.
Toys R US, in seeking approval of the incentive pay, told the bankruptcy court that motivating its top employees was crucial to the company's successful turnaround.
Attorneys for Toys R Us also filed a motion for permission to pay an additional $45.8 million to 3,805 management employees not in the top executive ranks. Those bonuses would rise to $68 million if the company exceeds its financial goals.
In a statement on the incentive motion, Toys R Us said: "This type of plan is standard practice for a company involved in a restructuring and in this case rewards team members at all levels of the company. Before an incentive program can be implemented, we will continue consulting with our creditors and the U.S. trustee regarding the program, and the program must be reviewed and approved by the Federal Bankruptcy Court."
Bankruptcy Judge Keith L. Phillips, who is hearing the case in Richmond, Va., is expected to rule on the motion in December.