The US agency for federal bankruptcy has slammed telecommunications vendor, Avaya, after hearing about its decision to award eleven different executives throughout the board around £3 million in bonuses, only a couple of months after the company originally filed for chapter 11 bankruptcy protection this year.
The decision to offer huge bonuses to executive employees also came after Avaya allegedly commented that they may not be able to stick to their promises for retirement pay-outs - leading to a lot of concern for people associated with the company. It's fair to say however, right now Avaya is still paying federally guaranteed pension payments.
An Employee Retention Scheme?
My guess is that the bonuses are more of an attempt to keep key employees around as the business circles the drain. The US Trustee told the courts for New York bankruptcy that bonus payments to insiders of this level are "subject to strict standards", particularly if their aim is to convince those insiders to stay inside of the business.
According to trustee William Harrington, the recent proposal to pay out cash awards to members within Avaya's executive committee simply for performing the jobs they were originally hired to perform in the first place, doesn't seem like a good enough reason to shell out so much money, especially when the company is in a state of turmoil.
What's more, because the bonuses were apparently requested in relation to the executives' performance during the second fiscal quarter, coming to an end this year on the 31st of March, the debtors probably already know, although they haven't disclosed, whether the metrics required have been met, or are on target. In other words, benchmarks that are supposed to be incentivising may already have been achieved.
