Just because J.C. Penney (JCP +0.00%) is expected to file for bankruptcy on Friday, missed its bond payments, is scrounging in the couch cushions for money to keep going through a restructuring, and has furloughed tens of thousands of employees doesn't mean its executives don't deserve a bonus.
Despite the tough times, the troubled retailer gave CEO Jill Soltau a $4.5 million bonus, while the CFO, CMO, and top human resources executive were all given $1 million bonuses.
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Gold-plated incentives
J.C. Penney naturally framed the outsized emoluments as necessary to retain and incentivize the executives to remain with a company that is otherwise circling the drain, but at a time when it is planning to close as many as 200 stores, meaning it will be firing hundreds, if not thousands of its employees during what may turn out to be the worst recession in modern history, the optics are exceptionally poor.
Keeping top talent at a business on the brink of bankruptcy is a valid excuse, as such companies are not exactly an executive magnet. And J.C. Penney is requiring the executives to remain with the company until at least Jan. 31, 2021 or they will have to repay 80% of the bonus.
They'll have to repay the other 20% if certain performance goals are not reached, and the executives will forfeit any annual bonuses or long-term incentive awards they were qualified for this fiscal year, as well as any outstanding equity or options for past awards.
Still, such compensation is not supposed to be guaranteed, but rather is meant to reward executives for outstanding performance. While the expected bankruptcy filing isn't fully J.C. Penney's fault, that will be cold comfort to the employees losing their jobs in the restructuring that follows.
