Hertz Paid $16M In Bonuses To Top Executives Ahead Of Bankruptcy Filing
Rental car company Hertz dished out millions in bonuses to its top executives prior to filing for bankruptcy, CNN reported. The move also came one month after the company began laying off thousands of employees, as the pandemic has taken its toll.
According to CNN, Hertz’s decision to pay out bonuses is not unique: “Retention bonuses are typical for bankrupt companies that want to prevent their management from abandoning ship.”
However, such payments are “always awkward: the company can't pay its employees or its debts to lenders, but it prioritizes payments to its already handsomely paid bosses.”
In total, Hertz laid out $16.2 million to 340 executives on May 19, looking to keep them in their positions as the company seeks to reorganize.
If the executives decide to leave on their own before March 31,2021, they will be required to repay the money.
Hertz did not respond to CNN’s request for comment, but the news outlet noted that the company said in its “[Securities and Exchange Commission] filing that the payments are justified by financial and operational uncertainty that the company and its employees face.”
Characterizing Hertz’s decision as not a “good look,” CNN reported that employees on the lower end of the totem pole were not treated as well.
The company has “let go of 14,300 of its workers since April 14 -- nearly half its staff.”
Hertz also said it plans to shut down an undisclosed number of its approximately 2,600 locations near airports.
Bankruptcy law makes it difficult for companies that have filed for bankruptcy to pay severance to employees who lose their jobs after a bankruptcy filing. Hertz has filed a motion with bankruptcy court seeking authority to continue to pay severance payments to employees who were let go before the filing.
The company currently “owes about an average of $4,300 in termination pay to 2,500 employees, or just under $11 million in total,” CNN reported.