Despite Bankruptcy, Judge Approves Bonuses For Toys R Us Executives

Liz West/’Greed’/Flickr

The judge approved a $14 million bonus for top Toys R Us executives.

A New Jersey judge ruled Tuesday that Toys R Us can pay its top 17 executives a bonus of up to $14 million. The bankrupt company initially wanted a payout of $16 million but agreed to the lesser amount, along with the stipulation that $5 million will be contingent on the company's creation of a plan to emerge from debt.

Bankruptcy Judge Keith Phillips overruled objections by the U.S. Trustee's office, which serves as a public watchdog in bankruptcy cases, that executives at Toys R Us are already highly paid compared to other retail leaders, and that they also receive lavish perks, such as cars and drivers and private airplane trips.

Phillips said the plan exercises sound judgment and is “fair and reasonable under the circumstances,” remarking that none of the creditors to whom Toys R Us is indebted opposed the compensation plan:

“On the contrary, I see the committee and any creditors who have addressed this court are asking the court to approve this plan and I think that’s telling,” Phillips said. Toys R Us answered the concerns of creditors and the court by amending the original plan, he said.

Toys R Us attorneys argues that bonuses are necessary to encourage executives to work hard and bring the company forth from bankruptcy, but Lynn Kohen of the U.S. Trustee’s office remains unconvinced.

“I think there’s real fear here that the debtors are not going to survive after this Christmas,” she said