- Hertz is among the largest companies to be undone by the COVID-19 pandemic
- The company entered chapter 11 without a deal with creditors and without a bankruptcy loan to fund its business.
- Hertz has laid off about two-thirds of its 21,000 employees
U.S. car rental company Hertz Global Holdings said on Tuesday it has disbursed over $16.2 million in retention bonuses to top executives at the director level and above, this follows after the company filed for bankruptcy protection.
The company paid President and Chief Executive Officer Paul Stone $700,000, and Executive Vice President and Chief Financial Officer Jamere Jackson $600,000 as retention bonuses, Hertz said in a filing to the U.S. regulators.
Last week, the board of the company, which counts billionaire investor Carl Icahn as its largest shareholder with a nearly 39% stake, sought chapter 11 protection in a U.S. bankruptcy court in Delaware.
The firm’s marketing value has plummeted since the virus outbreak.
Hertz said plummeting used-car values and a frozen used-car market prompted the decision to seek bankruptcy protection.
Where is the justice in regulatory evasion?
Bankruptcy law bars retention payments to senior executives. In the past 15 years, retention bonuses have been largely supplanted in bankruptcy cases by key-employee incentive plans that tie bankruptcy bonuses to earnings targets or to postbankruptcy goals.
Jared Ellias, a law professor at the University of California, Hastings School of Law, said that while the law prevents companies in bankruptcy from paying such bonuses, companies are still able to do so right before they file.
"The window is wide open," Mr. Ellias said. "It's regulatory evasion, you know there's a regulation, so you do it another way."