Bankrupted department store Sears Holdings plans to pay $25.3 million in bonuses to its top executives next year, despite having lost more than $1.9 billion in the first three quarters of 2018 and closing hundreds of stores nationwide.
The company received approval on its bonus plan from a federal judge last Friday, The Chicago Tribune first reported.
About a third of the planned bonus package, or $8.4 million, will be paid to 19 executives, if the company is able to hit certain financial targets in the next six months, court filings viewed by the Tribune revealed. And even if the company is sold before that deadline, these executives can still get their bonuses if the company is on track to reach those goals.
Sears filed for Chapter 11 bankruptcy protection in October and is in the process of closing nearly 200 stores, a third of its total store network, by the end of this year. Sears Chairman and former CEO Eddie Lampert has offered to buy the majority of the retailer’s remaining assets for $4.6 billion through his personal hedge fund, ESL Investments.
In a court filing last month, Sears argued that the bonus plan was necessary to retain key employees through the company’s restructuring. The management was particularly warned by a slew of high-profile executive departures in the past month, including that of Jim Gimeson, chief operating officer of Sears Home Services, and five other employees who would have been eligible for bonuses.
“Under these circumstances, it would be understandable if many key employees are asking themselves whether they should be seeking other opportunities,” Sears said in the filing. However, the retailer “cannot afford this uncertainty—however understandable it may be.”
Sears hasn’t responded to Observer‘s request for comment.
Last year, Sears paid then-CEO Lampert $4.3 million in stock bonus (he received a nominal base salary of $1) as part of a 2013 stock award agreement, although Sears shares tumbled 60 percent that year, the company’s 2017 proxy statements showed. Six other top executives, including chief financial officer Robert Riecker and then-online business president Stephan Zoll, received various combinations of cash bonuses and stock award last year.
Sears is expected to disclose its 2018 financial around March of next year.