Contact:
Hartgen
(703) 739-0800
href='mailto:jhartgen@abiworld.org'>jhartgen@abiworld.org
size='3'>“INCENTIVE BONUS” PAYMENTS SIDESTEP NEW BANKRUPTCY
LAW AND SHOULD BE CURTAILED IN CHAPTER 11, ACCORDING TO NEW ABI
POLL
size='3'>September 1, 2006, Alexandria, Va.
size='3'>—The majority of respondents in a recent American
Bankruptcy Institute online poll agreed by a wide margin that
“incentive bonus” payments subvert the new bankruptcy
law’s intended limits on retention bonuses for executives
operating companies under chapter 11 protection, and, that they should
be barred. Fifty-one percent “agreed strongly,” while 20
percent “somewhat agreed” that the “incentive
bonus” payments to executives sidestep §503 of the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) and should
be denied.
By contrast, 19 percent of
respondents disagreed that the trend of “incentive bonus”
payments skirts the new bankruptcy law’s provisions governing
executive compensation. Eleven percent “strongly disagreed,”
while 8 percent “disagreed somewhat” that the payments
violate the new bankruptcy law and should be banned. Nine percent of the
respondents did not know or had no opinion on the issue.
The poll was based on recent
chapter 11 cases in which bonus payments to company executives were
performance based and labeled as “incentive bonus payments”
rather than retention bonuses. Section 503(c) essentially prohibits
retention bonuses to executives operating companies under chapter 11.
However, because §503 does not contain specific language addressing
“incentive bonus” payments to key employees, a few debtors
have used this as a way to pay key employees under the label of
“incentive bonuses.”
ABI members and members of the
public were welcome to submit their response to the statement:
“The new trend of “incentive bonus” payments to
executives in chapter 11 companies are a thinly veiled end run around
new §503(c) and should thus be proscribed.” The
latest ABI Quick Poll was open to the public for voting from Aug.
25-31.
ABI’s weekly Quick Poll
is posted on ABI’s home page,
href='/AM/Template.cfm?Section=Home'>
color='#800080' size='3'>www.abiworld.org. ABI members and the public are invited to respond
to a question on a timely bankruptcy or insolvency issue. Visit
size='3'>http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick
Polls.
###
ABI is the largest multi-disciplinary, nonpartisan organization
dedicated to research and education on matters related to insolvency.
ABI was founded in 1982 to provide Congress and the public with unbiased
analysis of bankruptcy issues. The ABI membership includes more than
11,500 attorneys, accountants, bankers, judges, professors, lenders,
turnaround specialists and other bankruptcy professionals, providing a
forum for the exchange of ideas and information. For additional
information on ABI, visit www.abiworld.org. For additional conference
information, visit
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