Judge: Bonuses for Furniture Brands executives 'justified'
A U.S. Bankruptcy Court judge brushed aside objections Friday to paying bonuses to seven Furniture Brands International executives but capped the total possible payments at $3.5 million.
Furniture Brands proposed bonuses based on the sale price of the company's assets that could have totaled an amount greater than $3.5 million.
The U.S. bankruptcy trustee for Furniture Brands' case, a Justice Department employee serving as a watchdog on proceedings, filed an objection Wednesday saying the proposal's goals were too easy to reach and that company executives who had drawn healthy bonuses even as the company swirled down into bankruptcy, the pension fund was left $200 million short and benefits for retirees were cut did not deserve further bonuses. Industry analyst Budd Bugatch also had filed an objection, noting the company's history of setting low goals to pay bonuses as the company lost money for years.
Judge Christopher S. Sontchi overruled the objections, writing in his order that the bonuses were "justified by the facts" and "in the best interest of the debtors, their estates and all other parties in interest."
The names of the seven and the amounts they would be paid after the bankruptcy case ends, which is scheduled in December, were ordered kept sealed.
The court also approved retention plan for a number of other corporate employees.
Bankruptcy trustee Roberta DeAngelis wrote in her objection to the proposal that bonuses are not warranted for several reasons, including the underfunding of the pension plan and the terminated retiree benefits. “The executives responsible for these events should not be rewarded with additional bonuses,” she wrote.
In a footnote, DeAngelis noted that the company’s top five executives received bonuses in 2012 despite the company losing money, leading with DEO Ralph Scozzafava’s $541,968. In 2010, Scozzafava received a bonus of $4 million.
But DeAngelis’ main objection was that the goals that must be met in order for the executives to get the bonuses were much too easy to reach, amounting to "lay-ups."