05 Mar Hostess Speaks: Why Its Executives Deserve Bonuses
By Susan Adams
After I published a story yesterday critical of Hostess Brands’ request that a bankruptcy judge grant approval for $1.8 million in executive bonuses to be paid by the insolvent company, Judge Robert Drain approved the plan and I heard from a Hostess spokesman, Lance Ignon of the public relations firm Sitrick And Company. Ignon, who has worked for Hostess for the last year and a half, explained why he thought I got it wrong when I said that the 19 executives don’t deserve extra pay to oversee a liquidation that is in part a result of their own mistakes.
Ignon’s argument: “The company’s prime goal now is to maximize the value of the company as it goes through liquidation.” He pointed out that the executives won’t simply receive the bonuses no matter how they perform. Rather, the extra pay is linked to the meeting of certain benchmarks for rapid disposal of the assets. Ultimately, that performance could be crucial for union workers who are losing their jobs. At this point, Hostess has $1 billion in unfunded pension liabilities. That money won’t even begin to be paid until Hostess pays at least $860 million owed to its secured creditors.
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