The company’s new request to a Delaware bankruptcy court seeks to pay senior management $8.2 million and prevents 11 of Hertz’s top executives from participating. The proposal replaces an earlier one that would have paid 14 top executives $5.4 million and managers $9.2 million, a plan the bankruptcy judge called “offensive.”
The revised incentive program doesn’t rectify the offensive nature of the bonuses, considering that most of the participating employees already received a portion of $16 million in bonuses handed out on the eve of the May bankruptcy filing, the U.S. Trustee, the Justice Department’s bankruptcy watchdog, said in a response filed Thursday.
"[I]t is highly inappropriate to reward the management of a bankrupt company for its seriously weakened condition that, unlike other major car rental companies, could not survive the business downturn caused by the current pandemic,” the retired Hertz executives said Thursday in a separate court filing.
The plan also doesn’t create a legitimate incentive, the executives said. “It is a naked bonus, for which the requirements to earn compensation are either already substantially reached or driven by a low standard of achievement.”
Hertz is one of several companies that provided large bonuses shortly before filing bankruptcy, with more than $131 million doled out since the beginning of the Covid-19 pandemic in March, according to a Bloomberg analysis.
The company filed Chapter 11 May 22 with debts north of $24 billion, citing demand that was all but eliminated by pandemic shut-downs.
A hearing on the new bonus request is scheduled before Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware Oct. 20.
Hertz is represented in the bankruptcy by White & Case LLP.
The case is In re Hertz Corp., Bankr. D. Del., No. 20-11218, U.S. Trustee response filed 10/15/20.