Nothing Exceeds Like "Success Payments"

Remember the management team at Boscov's, which had sought $1.45 million in "success payments" for leading the privately owned department store chain out of bankruptcy?

They justified the idea in part by noting that they wouldn't received their regular bonuses this year because, well, the company was forced to seek bankruptcy court protection -- on their watch.

The trustee overseeing the company's reorganization, Roberta A. DeAngelis, was, to put it mildly, mystified. In objecting to the idea last week, she said the executives seemed to think they merited a bonus "for simply remaining employed by the company and completing the tasks which they are required to perform."

A judge in U.S. Bankruptcy Court in Wilmington, Delaware, however, saw things differently. In a ruling handed down Friday, U.S. bankruptcy judge Kevin Gross signed off on the bonuses -- if they meet certain targets in turning the company around.

The executives could receive bonuses of 20 percent to 50 percent of their annual salary if they secure debtor and court approval of a debt-reorganization plan by the end of February or if they can find someone to buy the whole chain by early January, according to the court docket.

"The debtors have articulated a sound business purpose for the approval and implementation of the incentive program," Gross said in a court document. He later added: "Approval of the incentive program is in the best interests of the debtors, their creditors, their estates and other parties."

Bankruptcy experts say that performance bonuses aren't uncommon for firms trying to right themselves. They can be used to recruit new executives to come aboard and meet specific timetables for getting out of bankruptcy, for example.

But the Boscov's executives who seek the payments are hardly fresh talent with new insights. Chief executive Kenneth Lakin has worked at the retailer for more than 24 years and has run the company since 2001. Finance chief Russell Diehm has worked there for nearly 20.

by Mark Stein