Associated Press
BOSTON — In 1996, when Gary DiCamillo joined Polaroid Corp. as chief executive officer, the company had 10,000 employees and its stock was trading at more than $40 a share. Five years later, Polaroid is bankrupt, thousands of employees have been laid off, and its shares trade for pennies each.
But while former workers scrounge for medical coverage, DiCamillo, who was paid nearly $850,000 last year, stands to earn up to twice that in bonus pay under a plan Polaroid has asked a U.S. Bankruptcy Court to approve.
The justification? Polaroid said it must pay millions to 45 top executives to make sure they don’t jump the sinking ship before the company can use their expertise to disassemble itself and pay off creditors. Some of the payments would be tied to how well sales go, but others would be guaranteed.
The plan has angered former Polaroid workers, many of whom never got severance pay and lost thousands in an employee stock plan.
"(DiCamillo’s) looking after his cronies at the top, and he forgot about the people that have been there for years," said Noel Barry, a former employee who is on long-term disability and recently received word that Polaroid will no longer contribute to his insurance.
These payments to executives, known as retention bonuses, are common in bankruptcy cases, and often creditors say it’s money well spent since smart employees are as essential in bad times as in good.
"It’s not a crazy idea," said Alan Johnson, managing director of the executive compensation firm Johnson &Associates, who has testified for companies seeking approval for retention bonuses. "It’s almost a necessity. The question is, to whom and how much."
Others say the ensuing bad publicity can outweigh the benefits.
"From just a perceptual point of view, it certainly seems not to pass the ethical stink test," said W. Michael Hoffman, executive director for the Center for Business Ethics at Bentley College in Waltham, Mass.
Generally, such arrangements mix guaranteed payments with incentives based on how long employees stay and how successful they are in selling assets.
When discount retailer Bradlees Inc. went under last December, 10,000 workers lost their jobs. According to court papers, the company received permission to pay 155 key employees retention and incentive bonuses. The biggest winners were two senior executives, chief financial officer Greg Ambro and vice president of real estate Dan Defelice, who could each earn more than $1 million.
Bradlees attorney Adam Rogoff said the plan is conservative, entirely incentive-based, and the result of a consensus developed with creditors.
Boston bankruptcy lawyer Paul Daley said such proposals are increasingly popular.
"When I started 30 years ago, when someone filed a Chapter 11, one of the things you recommended was they take a cut in salary," Daley said. "Now, the fear is always that executives without the bonuses would leave and would spend their time looking for their next job rather than concentrating on the needs of the company."
Polaroid retirees call the argument that executives would leave for other jobs ridiculous. With a weak economy and Polaroid’s reputation in tatters, they doubt recruiters are actively wooing the company’s top executives.
"Maybe they’re right, these 45 people are essential to the reconstruction of the company, and if so, obviously shareholders ought to applaud such a move because perhaps their investment would be salvaged," Hoffman said. "I guess it’s possible, but it does raise not only factual eyebrows but ethical eyebrows."
Company spokesman Skip Colcord said, "This is an incentive to get key people with key skill sets to remain with the company through the Chapter 11 process."
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