Hundreds of managers and executives at the bankrupt Tribune Company will get bonuses as part of a $45.6 million incentive program, under plans approved by a Delaware bankruptcy judge.
This is the largest such payment in at least 12 years and will be awarded to 720 managers. Judge Kevin Carey overruled objections by the Washington-Baltimore Newspaper Guild and the US bankruptcy trustee that the payment was too high and unwarranted, particularly considering that the company had frozen salaries for most staff. Carey found that many of the targets had already been met when he held hearings on the issue in September.
The Tribune owns the Los Angeles Times, the Chicago Tribune, The Baltimore Sun and other daily newspapers as well as 23 television stations. After filing for bankruptcy in December 2008, the company posted better than expected results at the end of last year, with an operating cashflow of almost $500 million. Of course, this figure is dwarfed by the 2007 cashflow of $1.2 billion.
The bonuses total close to 10% of 2009 operating cashflow. In the past decade, the company has not paid bonuses of more than 3.3% of operating cashflow, and in 2008 paid only 1.5% or $13.4 million. "There has never been an MIP like this one: an unprecedented payout of millions of dollars to a smaller number of executives," the union said in documents it filed this week.
The Tribune has argued that the bonuses are necessary to retain top managers working in a difficult environment. Carey concluded: "here the evidence shows there is a reasonable relationship between the plan and enhancing the company's chance of survival".
The company has also asked the court for permission to pay two other bonus programs worth up to around $20 million combined to the top 40 executives. Carey said that his decision on these two programs would "remain in the queue" and may be folded into a plan of reorganisation.