Bankrupt Borders to pay Executives Bonuses

As much as $8.3 million in incentives and bonuses will be paid by Borders Group Inc. to its top executives, the bookstore chain confirmed.  This payout is aimed at retaining the services of key executives in its efforts to emerge from bankruptcy by late summer.  The Ann Arbor-based bookstore company says it typically rewards its workers with incentives and has sought a bankruptcy judge’s approval to go ahead with its proposed program.

On the other hand, if Borders was liquidated, no one would receive any incentive or bonuses due to the “debtors declining financial performance”, the company said.  Borders filed for bankruptcy protection in February this year after management changes, job cuts and debt restructuring exercises did not succeed in cutting losses due to stiff competition in book sales from rivals Amazon.com, Barnes & Noble and Wal-Mart Stores.

Borders spokeswoman, Mary Davis said, “A number of key members of the management team have been put in place or in their positions within the last year.  This management team has been fully focused on repositioning Borders to have the potential to be successful for the long term.”  Most of the top management staff has joined the company over the last 2 years.

Among the newly recruited executives are Chief Financial Officer Scott Henry, Chief Merchandising Officer Michelle Delahunty-Cloutier and Senior Vice President for Human Resources, Rosalind Thompson, all of whom were hired last year.  In addition, James Frering was brought in as Executive Vice President of Store Operations in February this year.  Michael Edwards gained promotion to become the President of Borders Group and Chief Executive of the parent company, Borders Inc. in June last year after initially joining the company as Chief Merchandising Officer in September 2009.

Up to $7.1 million has been set aside for this main incentive program depending on whether the company files a reorganization plan or receives approval to sell the company.  The goal is to submit a turnaround plan by April and exit bankruptcy by September this year if not sooner.

The rest of the money is earmarked for the incentive bonuses.  The filing states that under the incentive program, Edwards would get as much as $1.7 million in bonuses.  It also states that the ‘award opportunities’ would be 150% of what the company normally gives out in incentives.

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