JCPenney Paid Top Execs Huge Bonuses Before Firing Workers, Edging Toward Bankruptcy

JCPenney furloughed majority of store workers and skipped two recent debt payments.

JCPenney has furloughed the majority of its store workers due to the COVID-19 pandemic. KENA BETANCUR/AFP via Getty Images

In March and April, retail sales in the U.S. saw the worst two-month decline in history (8.3 percent in March and 16.4 percent in April) due to the coronavirus pandemic. The retail apocalypse has pushed a slew of iconic American retailers to the brink of bankruptcy.

JCPenney, for one, was facing imminent Chapter 11 filing after missing two recent loan payments (out of its total $4.3 billion debt load). It made one interest payment on Friday, but is still teetering on bankruptcy. It couldn’t be helped that the century-old department store paid its top four executives millions of dollars as a “please stay” bonus, the company revealed in an SEC filing on Sunday.

JCPenney said the bonuses were part of a compensation plan approved by the company’s board, under which CEO Jill Soltau was paid $4.5 million. Meanwhile, chief financial officer Bill Wafford, chief merchant Michelle Wlazlo and chief human resources officer Brynn L. Evanson each received $1 million.

The board argued in the filing that the bonuses were necessary to retain the management team and keep them motivated “through the volatile and uncertain environment affecting the retail industry” right now and that they¬†came with strings attached. Under the agreement, the four executives will have to repay 80 percent of the bonuses if they are “fired for cause” or resign before January 31, 2021. They will also have to repay the other 20 percent unless meeting specific performance goals.

In addition, the executives were required to forfeit the right to all annual bonus plans and long-term incentive awards for the current fiscal year, as well as outstanding equity or options from past award plans. But, as CNN Business noted, those annual bonuses are likely gone for the year anyway “considering the company’s financial problems, and any holders of JCPenney equity are likely to be wiped out in a bankruptcy filing.”

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JCPenney furloughed the majority of its store workers and some corporate employees in early April as stores temporarily shuttered amid the pandemic. “We are making tough, prudent decisions to protect both the safety of our associates and the future of our company,” CEO Soltau said in an announcement dated March 31.

More jobs are likely to get slashed at JCPenney when Chapter 11 restructuring comes in. If that’s the case, newly laid-off employees may receive smaller severance packages (or none at all) since bankruptcy laws require companies to pay creditors before employees.

JCPenney Paid Top Execs Huge Bonuses Before Firing Workers, Edging Toward Bankruptcy