Hostess Execs Ask Judge For $1.8 Million In Bonuses
NORTH TEXAS (CBSDFW.COM) - While thousands of employees for the now bankrupt Hostess Brands Inc. are being shown the door, executives with the company could soon be receiving close to $2 million in bonus pay.
On Thursday the maker of Twinkies, Sno Balls and Wonder Bread asked a judge to approve giving 19 top executives bonuses totaling some $1.8 million. The Irving-based company justified the request saying the money is being used as an incentive to get the managers to stay on with the company through the liquidation process.
Bankruptcy Attorney Joe Acosta said while the bonuses might seem shocking they aren’t uncommon in companies being forced to liquidate. “In their shoes, they [executives] could probably start looking for a job right now and that would abandon all efforts to orderly wind down the company and that would not be in the best interest of anyone that’s working with the company or any creditors that are expecting a return.”
If the maximum bonus amount is approves it would represent .07-percent of Hostess’ revenue. “After Enron the bankruptcy code was amended to restrict this type of compensation to executives for the purpose of avoiding abuse,” Acosta explained.
The legal request also includes a request that would make two of the 19 executives eligible for additional rewards, depending on how well they carry out the liquidation.
The bonus pay request comes as attorneys for Hostess say the company will no longer be able to pay about a million dollars in retiree benefits.
Hostess said there has been a flood of interest from other companies considering picking up some of its brands. “The brand name is very important,” Acosta said. “There’s a premium for Twinkies and Ding Dongs and Ho Hos and all those brands that Hostess has produced. So they have a great idea, they’ve been producing a great product; it’s just that they have some internal restructuring that needed to be completed.”
Two of those 19 would then be eligible for additional rewards depending on how well they carry out the liquidation.
Company officials chose to close the company after the Bakery, Confectionary, Tobacco Workers and Grain Millers Union (BCTGM) went on strike November 9, shutting down production at over half of the company’s 36 plants. The final contract offer made to workers included slashed wages, commissions and pensions. Union officials said that they wanted executives to feel the hardships caused by the company’s bankruptcy.
The Hostess liquidation process could take up to a year. When the company officially closes its doors an estimated 18,500 jobs will be lost.
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