A watchdog in the Neiman Marcus bankruptcy believes the retailer has a big legal hurdles to scale before the Dallas-based company's executives receive additional "pay to stay."
Unless Neiman Marcus can prove that bonuses are "equitable and just," Henry Hobbs, the acting U.S. trustee, has recommended that the bankruptcy judge deny the request.
On Friday, Neiman Marcus' attorneys will ask U.S. Bankruptcy Judge David Jones to increase the salaries of CEO Geoffroy van Raemdonck, seven additional executives who make up the c-suite and as many as 239 others key employees.
Additional compensation to the top eight executives would top out at $9.95 million with most of that, or as much as $6 million, earmarked for van Raemdonck.
Separately, $8.7 million additional pay is requested for the other 239 employees which include 17 senior vice presidents, 82 vice presidents, 40 directors and up to 100 additional key employees identified by the CEO as eligible.
The proposed retention and performance-based compensation plan covers staff who are "critical to day-to-day operations," and would be "difficult and costly" to replace, according to the retailer's court filing.
Hobbs in his filing said that Neiman Marcus has to prove that there's a relationship or connection between specific work duties and the achievement of performance goals and that those "performance goals represent challenging, incentive-based benchmarks."
Otherwise, Hobbs said, Neiman Marcus has to prove that the employees "have a bona fide offers from other businesses at the same or greater rate of compensation" and "that the services of these individuals are essential to the survival of the business."
If that's not proven, then the proposed bonuses "would appear to be duplicative of the bonuses paid prior to bankruptcy and the court should deny the motion," Hobbs said. Neiman Marcus paid executives retention awards of $3.25 million the year prior to the bankruptcy, Hobbs said.
In February, van Raemdonck received a $4 billion bonus and restricted stock award of $750,000, according to other court filings. He received another bonus of $500,000 on April 17 that was returned on April 24 as the company announced pay cuts.
A law was added to the bankruptcy code in 2005 to prevent abuses of executive pay in the high profile cases of Enron, WorldCom and Polaroid, Hobbs said.
