|Posted:||March 2, 2020 10:46 AM|
|From:||Senator Timothy P. Kearney and Sen. Anthony H. Williams|
|To:||All Senate members|
|Subject:||Compensation Limits in Bankruptcy|
|In the near future, we plan to introduce legislation to limit egregious bonuses paid to leaders of firms filing for bankruptcy which have previously benefited from public assistance.
Bankruptcy, especially for large firms that employ thousands of PA residents, should be an option of last resort. Firms entering Chapter 11 re-organization ought to be putting their employees, communities, and creditors ahead of their management’s personal interest. Too often, we see firms paying millions of dollars in bonuses to executives for managing the downfall of companies that are the lifeblood of thousands of jobs, families, and communities.
The vast majority of employees get no such benefit when they are laid off with little to no notice, despite the WARN Act.
The practice of rewarding mismanagement is especially worrisome for companies that have received state funding, subsidy, or tax incentives. When a company’s prior success relied on the state’s confidence, egregious bonuses during a bankruptcy crisis represent a violation of that trust and the spirit of state support. Furthermore, opaque and extraordinary executive compensation deteriorates public faith in our court system and the bankruptcy process.
This legislation would set reasonable limits on payouts to directors, officers, executives, and other higher-ups at organizations that have received state aid within the 10 years before entering Chapter 11 bankruptcy proceedings. For these companies, payout bonuses would be limited $100,000 or 10% of their final salary.
Please join us in prioritizing Pennsylvania workers in bankruptcy proceedings. With our communities on the line, we must restore faith that the bankruptcy system works fairly for justice, and not for the advantage of a management or consultant class.