Hertz's top executives just got a massive payday to keep them on staff. There's no word yet on how workers outside its headquarters might fare.
- The car-rental giant Hertz filed for bankruptcy on Friday.
- A federal filing on Tuesday said Hertz paid out $16.2 million among its 340 top executives on May 19 as part of a retention program to ensure executives don't leave the company.
- The filing did not clarify how the thousands of Hertz employees who are not top executives are expected to fare during the bankruptcy.
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Hertz paid its 340 top executives an average of $47,709 a few days before it filed for bankruptcy, the car-rental company said in a federal filing on Tuesday.
That's $16.2 million in total, distributed on May 19. Hertz, which was founded in 1918, filed for bankruptcy protection on Friday.
Its CEO, Paul Stone, got the biggest payday, at $700,000, though he took the role days before Hertz's bankruptcy filing. Hertz's chief financial officer, Jamere Jackson, received $600,000, and Chief Marketing Officer Jodi Allen got just under $190,000.
Hertz said in the Tuesday filing that "key employees at the director level and above" received the cash payments to ensure they stay at the company. It gave four reasons for the payouts:
- Hertz and its employees are facing "financial and operational uncertainty" thanks to the coronavirus pandemic, which has had an "adverse impact on the global travel sector."
- The "key employees" have undertaken "substantial additional efforts" with "a reduced work force in response to an extremely challenging business environment."
- Because of the bankruptcy filing, top executives have lost out on their annual bonus plan.
- There's a risk that "key employees" may leave Hertz when the company needs them.
The filing did not make clear how its nonexecutive employees might fare, and Hertz did not immediately respond to a request for comment. According to its most recent annual report, Hertz employs 38,000 people worldwide, mostly in the US. (That's likely now about 28,000, as Hertz said last month that it would lay off 10,000 employees.)
When a company goes bankrupt, executives usually get a parachute — and workers get burned
Massive bankruptcies at other public companies have included big paydays for top executives who stick around. Sears, which filed for bankruptcy in the fall of 2018, made available up to $4.2 million to give quarterly retention bonuses to more than 300 executives.
Meanwhile, workers like Sheila Brewer, who was a full-time employee at Sears-owned Kmart for 17 years, did not receive their full severance pay, making it challenging to pay bills even as executives received thousands in bonuses.
"It was a big toll emotionally and financially," Brewer told The Guardian in December 2018. "It's a big slap in the face, them telling me I can't get the rest of my severance because of bankruptcy."
Coronavirus-related bankruptcies have seemed to still favor the executive over the associate. JCPenney, which filed for bankruptcy on May 15, had given CEO Jill Soltau a $4.5 million bonus and three other top executives a $1 million bonus — all distributed a few days before the company announced its bankruptcy filing.
Under these executives, JCPenney accrued $3.7 billion in debt. Like JCPenney, Hertz was struggling long before the coronavirus took down global travel, carrying $19 billion total in debt.
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