Pre-Bankruptcy Executive Pay a New Target for Fairness Advocates

Large companies’ awards of millions in executive bonuses on the eve of bankruptcy are drawing renewed congressional focus.

Bankrupt companies need court approval to award executive bonuses. But there isn’t a similar restriction on pre-bankruptcy bonuses, a loophole that’s been increasingly used by some big-name companies, such as Hertz Global Holdings Inc. and Chesapeake Energy Corp.

Companies argue bonuses are crucial in retaining key employees at a critical time. But extravagant compensation for the executives who may have contributed to their companies’ decline is unfair while creditors and employees are often left holding an empty bag, critics say.

A recently ...