In documents filed November 15 in U.S. Bankruptcy Court for the Eastern District of Virginia, Toys ‘R’ Us revealed a novel approach to working its way out of Chapter 11 bankruptcy.
Lawyers for the company asked the judge to approve $32 million in bonuses for CEO David Brandon and 16 other senior members of the company’s management team. Brandon would receive $12 million, with the other executives dividing the remaining $20 million, according to a report on Axios.
The executives would be required to reach certain financial targets to receive the full benefits, but the court filing asks for guarantees of $16 million in bonuses for Brandon and the other senior management employees, even if those goals are not met.
The bonuses, if approved, would be added to the $2.8 million bonus Toys ‘R’ Us gave Brandon and an additional $5.4 million it awarded to others in top management just before it filed for bankruptcy on September 18.
The suggestion that the bonuses are needed follows a quarter in which Toys ‘R’ Us posted $164 million in losses.
The request for the bonuses began with a mention of “the importance of Toys ‘R’ Us employees,” but quickly made it clear it was not referring to the people who stock shelves and man the cash registers at their retail outlets, when the phrase “more particularly the senior management team” was added.
The reason the $32 million in incentives is needed, accorded to the court filing is “to ensure these key members of the debtor’s management team are properly incentivized to meet the significant challenges upon us.”
The “incentives” would “benefit all stakeholders,” according to the filing.
Toys ‘R’ Us filed for bankruptcy after amassing more than $5 billion in debt, according to the original petition. Company officials promised to keep their approximately 1,600 Toys ‘R’ Us and Babies ‘R’ Us stores open through the holiday season. The company has not been profitable for the past five years.
Losses have been growing in recent years due to competition from retail giants such as Walmart and Amazon.
The company has doubled down on emphasizing its brick-and-mortar sales this year, beginning the holiday shopping season with a 30-hour Black Friday sale beginning at 5 p.m. Thursday, but many of the sales items were also made available beginning Wednesday on the company’s website.
A company news release indicates that Toys ‘R’ Us will also offer specials following Black Friday, including many during Cyber Week.
[Feature Image by Eric Gay/AP Images]