Burchett, Bustos introduce bipartisan legislation to end abusive executive bonuses during corporate bankruptcies
KNOXVILLE, Tenn. (Oct. 14, 2021) -- Yesterday, U.S. Representatives Tim Burchett (TN-02) and Cheri Bustos (IL-17) introduced legislation to stand up for workers and consumers by ending abusive executive bonuses during corporate bankruptcies.
First introduced in 2019, the No Bonuses in Bankruptcy Act of 2021 is an updated version of the legislation that reflects the recommendations of a recently released GAO Report. The report found a widespread practice of corporations paying outrageous bonuses to executives right before or during bankruptcy.
“Executives who oversee the financial collapse of an entire business need to be held accountable for destroying jobs instead of rewarded with a fat payout,” Rep. Burchett said. “The No Bonuses in Bankruptcy Act would prohibit failed executives from walking away with cushy bonuses during their business’s bankruptcy proceedings.”
“Executives shouldn’t financially reward themselves for laying off workers and closing facilities,” Rep. Bustos said. “Bankrupt companies paying bonuses to highly-paid corporate executives and insiders, all while thousands of hardworking Americans lose their jobs is appalling. That’s why I’m proud to introduce this bipartisan legislation with Congressman Burchett today, which also incorporates the recommendations of my recently-commissioned report from the Government Accountability Office.”
“This is about what’s right – you shouldn’t be able to cash out after running your company into the ground and risking the livelihoods of working people.”
The Burchett-Bustos bipartisan, common-sense bill would prevent companies that file for bankruptcy from rewarding highly paid employees and company insiders with fiscally irresponsible bonuses.
The No Bonuses in Bankruptcy Act of 2021 would:
- Ensure bankrupt companies cannot pay a bonus during bankruptcy to employees making $250,000 a year or more.
- Include a claw back clause to allow the U.S. Trustee to take back bonuses made six months before bankruptcy if either the bonus would not have otherwise been allowed during bankruptcy or the recipient employee earns $250,000 or more.
The recently released GAO report found that in just FY 2020, during bankruptcy, 309 executives across 47 bankrupt companies were authorized to receive $207 million in incentive bonuses. The average bonuses authorized for these executives were $701,455. The maximum was $13,319,100.
The report also found that in just FY 2020, right before filing bankruptcy, 42 companies awarded 223 executives approximately $165 million in retention bonuses. Some bonuses were issued just two days before filing.
The GAO report states, “Congress should consider amending the Bankruptcy Code to clearly subject bonuses debtors pay executives shortly before a bankruptcy filing to bankruptcy court oversight and to specify factors courts should consider to approve such bonuses.”
In September 2021, a U.S. judge approved up to $7.1 million in bonuses for five executives of Purdue Pharma, the bankrupt maker of OxyContin who faced thousands of lawsuits from states and other plaintiffs who say the company fueled the opioid epidemic. Hertz paid more than $16 million in retention bonuses to its senior managers, including its new chief executive, days before it filed for chapter 11 last year. In 2017, a bankruptcy court judge ruled that Toys R US could pay $16 million in bonuses to 17 top executives – at the same time the corporation closed hundreds of stores across the country and laid off thousands of workers. In the same year, the bankrupt RadioShack corporation was authorized to pay $1.4 million in bonuses to key executives, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO).