Patriot Coal Corp. (PCXCQ:US) can pay $6.9 million in bonuses to key employees, a judge said, rejecting a union’s claims that the payments wrongly benefit corporate insiders.
U.S. Bankruptcy Judge Kathy A. Surratt-States in St. Louis today granted the company’s request to pay 274 people under two bonus plans. Patriot said the money would give managers an incentive to improve the company’s performance and stay through its Chapter 11 reorganization.
The United Mine Workers of America, which represents 42 percent of Patriot’s workforce, objected, calling the payments “massive bonuses to corporate insiders” at a time when the company is seeking concessions from regular employees and claiming it faces a liquidity crisis. The company’s top 35 officers, who make up 13 percent of the bonus-plan participants by number, will get 42 percent of one payment plan by amount and 61 percent of the other, the union said.
“The facts remain that certain key personnel perform duties that are more integral to the viability of the organization and such individuals are generally compensated at higher levels,” Surratt-States said in her opinion.
Patriot said the payments are needed to keep executives in their positions and “perform their responsibilities at the highest level possible under increasingly difficult circumstances.” Average compensation has declined 20 percent from about two years ago, the company said.
Surratt-States said she was satisfied that insiders who weren’t eligible for bonuses under the U.S. Bankruptcy Code were excluded from the plans.
Patriot didn’t disclose precisely who would be paid under the plans. Chief Executive Officer Bennett K. Hatfield had a base salary of $600,000 in 2011 and was eligible for a $600,000 bonus that year. He was paid $193,451, as the amount was prorated because he joined the company Sept. 19, 2011, according to a proxy statement filed with the Securities and Exchange Commission.
The company’s departing CEO, Richard Whiting, had a base salary of $805,000, and was paid the same amount in bonus, netting him $1.61 million for the year.
The union objected that Patriot is simultaneously seeking concessions “numbering in the billions of dollars” that will “drastically reduce the standard of living for those employees and retirees.”
The union also said one of the two proposed bonus plans “is in reality a thinly disguised retention bonus” for seven individuals that was changed at the last minute to resemble an incentive plan.
Surratt-States rejected those claims, saying the bonus programs comply with federal law.
A 2005 bankruptcy law states that companies in Chapter 11 shouldn’t be able to pay so-called retention bonuses over a certain amount just to keep an executive unless there’s proof that the individual has a legitimate outside job offer.
Patriot’s July petition for court protection listed assets of $3.57 billion and debt of $3.07 billion as of May 31. The case was moved to St. Louis, where Patriot is based, from New York in November.
The case is In re Patriot Coal Corp., 12-51502, U.S. Bankruptcy Court, Eastern District of Missouri (St. Louis)
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