J.C. Penney has long been battered by changes in retail and mismanagement by top executives, leading the company to file for bankruptcy protection.
So it would be counterintuitive to reward top executives. But prior to filing for bankruptcy, J.C. Penney CEO Jill Soltau received a $4.5 million bonus and other top executives received $1 million. This even as the company was missing debt payments it owned creditors.
Such brazen greed is not isolated. Reuters found that nearly one third of more than 40 large corporations seeking bankruptcy protection during the coronavirus pandemic awarded bonuses to executives within a month of filing their cases.
Neiman Marcus, Hertz, Libbey, Whiting Petroleum and Chesapeake Energy were among those that handed millions to top executives just prior to filing for bankruptcy.
Reuters found that even more companies handed out bonuses within six months leading up to filing bankruptcy.
While bankruptcy laws in most cases prohibit bonuses, the companies use a loophole by handing out the cash before the bankruptcy petitions are officially filed.
The payoffs came as corporations were getting government bailouts and laying off employees.
The unconscionable moves come at a time when the disparity in pay for executives and rank-and-file workers is greater than ever.
Boards of directors of public companies are supposed to ensure executives are diligent in making decisions that are in the best interest of the business and its shareholders.
But far too often the directors are simply part of an unethical money grab, not protectors of the shareholder owners.
Some company shareholders have mounted legal challenges to the bonuses, but they face an uphill battle. Too many corporate leaders and directors can’t police themselves, leaving it up to Congress to tighten the rules on executive bonuses.