Bankrupt Borders seeks to pay $8.3 million in bonuses

DETROIT — Borders Group has asked bankruptcy court permission to pay $8.3 million to key employees it says are leaving at a rate of five a week since its Chapter 11 filing last month.

The Ann Arbor, Mich., bookseller filed for bankruptcy protection on Feb. 16.
Since then, it says that 25 “significant corporate employees have
voluntarily departed” from major departments such as finance,
merchandising and information technology.

The incentive payments for the company’s top 17 executives would range from $4.7 million to $7.1 million
and would occur either 30 days after the plan of reorganization becomes
effective or the closing of a “going concern” or liquidation sale.

A separate retention bonus plan would apply to 25
non-executive managers and a small number of other key employees, who
together handle Borders’ day-to-day operations. This plan would pay out $1.2 million with the non-executive managers receiving an average of $37,000 and the other key employees seeing an average of $20,000.

“The debtors have concluded that the critical
employees are highly talented and that it would be difficult, if not
impossible, to replace them given the debtors’ current circumstances,” Borders’ attorney wrote in a motion.

Borders Group has
given annual bonuses routinely to employees, but ceased doing so last
year because of poor financial performance. The incentive pay plan is
critical, Borders lawyers argue, because many of the top 17 executives have been with the company for less than a year.

“Because of the short tenure, these leaders have
been unable to earn any incentive compensation for the risks taken in
working for a company with significant operational and market
obstacles,” the filing stated.

A hearing on the employee incentive plans is scheduled for April 14 in U.S. Bankruptcy Court in Manhattan.

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