By Becky Yerak
A bankruptcy judge blasted Hertz Global Holdings Inc.'s plan to pay top managers up to $14.6 million in bonuses after they collected millions in additional bonuses days before the rental car company filed for bankruptcy.
"It seems offensive to give senior executives bonuses when they were paid" retention compensation immediately before the bankruptcy was filed, Judge Mary Walrath said Thursday in U.S. Bankruptcy Court in Wilmington, Del. The 14 most senior executives could receive as much as $5.4 million.
"The incentive plan has serious problems," she said, asking Hertz to revise it.
The judge also said the financial targets the Hertz executives need to hit to qualify for the bonuses need to be tougher, echoing objections by a federal bankruptcy watchdog
That proposed $14.6 million in potential incentive compensation was on top of the $16.2 million in retention bonuses Hertz, just days before its May bankruptcy filing, said it would pay to about 340 employees in recognition of the uncertainty faced as a result of the novel coronavirus pandemic's impact on travel.
The new incentive plan would pay 309 employees.
The judge's ruling is a victory for a group of retired Hertz executives who criticized the new bonus plan, saying the company's promises to provide them with a secure retirement are being cast aside.
U.S. Trustee Andrew Vara, the government's bankruptcy watchdog, also has criticized Hertz's bonus plan.
The trustee said the company's top executives were reneging on a deal they made to get their retention pay before bankruptcy. Those executives signed agreements waiving their rights to 2020 performance bonuses as a condition of collecting the retention bonuses, Mr. Vara said.
Now in bankruptcy, they were trying to revive the performance-bonus program, with targets set at much lower levels, he has said.
Some key Hertz creditors, however, had backed the company's bonus plan. Those creditors supporting the plan include a bankruptcy committee that includes the International Brotherhood of Teamsters.
A lawyer for Hertz said during the hearing that the incentive plan was developed by independent directors and advisers who had no direct financial stake in the bonuses.
Hertz representatives couldn't be reached for immediate comment after the hearing.
Peg Brickley and Alexander Gladstone contributed to this article
Write to Becky Yerak at email@example.com