A lot of retail stores are looking for a big win this holiday season. At least one has gotten a win, but not exactly what they were looking for. Thanks to a win in bankruptcy court, Toys R Us will be allowed to pay $16 million in bonuses to top executives … IF the company manages to bullseye sales projections this season.
And that’s a pretty big “if.”
While registers are beeping more this season than they have in the recent past, more shoppers are choosing to shop online than ever before as well. Those online shoppers are peeling away at Toys R Us’ chances of hitting sales goals. And, while the bonuses are not yet a done deal, bankruptcy court trustee Judy Robbins has been arguing for the interests of the creditors, who don’t think $16 million should be going out to executives they’re holding responsible for the poor state of the store’s finances.
There’s also a bit of a legal gray area. During bankruptcy, executives are allowed incentive bonuses, but they are not allowed to receive retention bonuses for sticking with the company through the tough financial times. Robbins says the proposed bonuses are not incentives for good performance, they are clearly meant to pay executives to stick around.
In her filing, Robbins said: “It defies logic and wisdom, not to mention the Bankruptcy Code, that a bankrupt company would now propose further multi-million dollar bonuses for the senior leadership of a company that began the year with employee layoffs and concludes it in the midst of the holiday season in bankruptcy…” And Robbins was just getting warmed up… “Apparently, this Christmas, Toys R Us intends to deliver not only ‘children their biggest smiles of the year’ but the insiders, too.”
Statement Raises Hackles
The statement was meant to raise hackles in court, and it certainly won’t sit well with the consumer public wondering where to shop this year. They are liable to wonder: if employees are getting laid off, why are executives getting bonuses?
Toys R Us countered that they had to pay the bonuses to keep the executives working hard through the bankruptcy proceedings: “It is the [company’s] employees – and more particularly the senior management team – that must execute at this critical juncture and provide the foundation for a successful turnaround…”
Of course, some consumers have read that statement and pointed out that it’s the employees that get the shaft when top executives get big bonuses. Even if they get out of this hole, Toys R Us will have a lot more work to do.
Ronn Torossian is the Founder and CEO of the New York based public relations firm 5WPR: one of the 20 largest PR Firms in the United States.