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Electronics chain Radio Shack filed for Chapter 11 bankruptcy last week. Now, as the shuttering and/or sell-off of thousands of Radio Shack stores to new owners proceeds, the company has asked permission from the bankruptcy court to pay $3 million dollars in retention bonuses to eight top executives and another thirty senior managers.
Salesman Jacob Wolley, at one of the stores to be closed in Portland, Oregon, is not too upset about the proposed bonuses.
“Of course, the first person to keep money is the top guy,” he says. “I’m just hoping that I get my paid vacation and everything that’s owed to me and I won’t feel sore.”
Finance professor Jarrad Harford at the University of Washington says companies going through bankruptcy, as well as their creditors, want knowledgeable, skilled managers to stick around through the bankruptcy, instead of jumping ship for new jobs. Although he readily admits: “The optics are never good when you’re asking to set aside extra money to pay the managers.”
Steve Odland, former CEO of Office Depot and now president of The Committee for Economic Development, a Washington think-tank, predicts the bankruptcy judge will go along with the bonus plan.
“This is the group that needs to deal with the liquidation and repositioning of the company,” says Odland. “It’s a very standard process, and this is not a big amount.”
Odland says the hope is these managers will maximize value for creditors and shareholders through the bankruptcy, and keep some stores open for Radio Shack workers.
CORRECTION: An earlier version of this story mis-identified the company at which Steve Odland was CEO. We regret the error.
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