Burlington broaches exec bonuses
January 14, 2002,
The struggling Burlington Industries has filed documents in federal court which proposes to more than double the salaries of some of its top executives while simultaneously proposing to drastically reduce the severance packages for the majority of its employees in the event that they are laid off.
Burlington had filed for Chapter 11 reorganization and protection in early November 2001, citing the economic recession and the U.S. government's apparent willingness to use the country's textiles industry "as a bargaining chip in international relations" as key factors.
According to documents filed with the U.S. bankruptcy court, Burlington has proposed a plan designed to prevent the mass migration of company executives to other businesses as it attempts to emerge from Chapter 11 protection.
Two division presidents and "the second ranking person at one of the debtors' [Burlington's] key manufacturing facilities" have already been lured away, documents filed by the company's law firm stated. To prevent more departures, an employee "Retention Program" will be implemented, Burlington has proposed. The plan, which is divided into three parts and must be approved by the court, affects 71 high level managers and executives and could cost Burlington up to $13 million.
Under the first part of the "Retention Incentive Plan," those covered will receive bonus payments, each of which is equal to approximately 30 percent of their base salary. George Henderson III, ceo, leads the list and would receive monies totaling 120 percent of his $600,000 salary in 2001. Going down the ladder, two senior vice presidents would receive bonuses equal to 110 percent of their salary; division presidents, 85 percent; vice presidents, 75 percent; "other management," 45 percent; and yet more "other management" would get 30 percent.
Part two of the retention plan would offer Henderson and five other top executives an "emergence bonus." If Burlington emerges from Chapter 11 on or before Feb. 14, 2003, the six would receive bonuses ranging from 100 percent to 200 percent of their base salaries.
The third part addresses the severance of any of the top 71 executives. If any of their jobs are eliminated, depending on circumstances, they will receive up to 36 months of pay.
In stark contrast to the Retention Incentive Plan, Burlington is also asking the court's permission to drastically reduce the amount of severance benefits due to its hourly and salaried employees.
Prior to this request, Burlington employees under the Hourly Severance Program were eligible for severance pay based on years of service — ranging from one to six weeks of base salary. Those employees under the Salaried Severance Plan could receive pay ranging from two weeks to 12 months of their base salary.
"Under the Modified Severance Programs, the debtors, in their sole discretion, would pay eligible employees 50 percent of the severance pay (collectively, the "Permitted Severance Payments") that the employees would have been entitled to receive under the Prepetition Severance Programs," documents filed by the company stated.
"The debtors believe that, under the circumstances, the Modified Severance Programs strike a fair balance between the debtors' obligations to their creditors and their obligations to their employees and is necessary to maintain the confidence, loyalty and morale of their employees at all levels," the documents further stated.
Burlington estimated the cost to the company for the Modified Severance Program to be approximately $14.8 million.