As Circuit City continues to liquidate its retail stores, a small number of employees remain on board with the company’s corporate headquarters to wind down operations. The company was granted approval by a bankruptcy judge on Wednesday for $4 million in retention bonuses for 150 senior level executives and managers. Circuit City argued the bonus money was needed in order to retain the individuals, who would likely otherwise leave for positions elsewhere.
The amount is $600,000 less than was originally asked for because Vice Chairman and acting CEO James A. Marcum took himself off the list of executives to receive retention pay. The company reserved the right to go back to court to ask for money for Marcum in the future, however.
14 top level executives will spilt a pool of $1.63 million under the retention payment plan devised by the company, and an additional 137 senior managers will divide up another $1.62 million. Circuit City defended its decision for asking for bonus money by stating that experienced management is needed to close down the chain, and the bonuses would be paid only when specific goals were met. The company presented at least 20 goals at the hearing Wednesday, and said the company could recover up to $250 million for creditors if all goals are met.
Circuit City officials have also been asked by a House panel to testify before a congressional subcommittee at a hearing entitled “Circuit City Unplugged: Why Did Chapter 11 Fail To Save 34,000 Jobs?” next Tuesday. The panel will investigate why the company’s Chapter 11 bankruptcy filing in November failed to help the company turn around. At issue are new laws passed in 2005 that some say make it more difficult for companies to restructure because they prevent them from terminating leases, which can save corporations millions. Changes were also made to how long businesses in Chapter 11 bankruptcy had to repay creditors.
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