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Financially distressed toy giant allowed go give execs bonuses

A bankruptcy judge approved the plan of the nationwide retail toy seller, Toys R Us, to pay its top leadership bonuses of up to $14 million, provided they meet certain sales goals, particularly over the Christmas season.

After the United State Bankruptcy Trustee objected to the original bonus plan, which called for $16 million in bonuses, the company reduced the total amount of bonuses that would be paid. The company also set more definite standards under which the executives would earn all or part of the bonuses.

Prior to the judge making a decision, the company argued in court that the standards for earning a bonus are actually pretty high, and they are there to encourage the executives to push for higher sales. The company also pointed that higher sales ultimately will mean a more successful Chapter 11 bankruptcy and a better chance that creditors will get paid.

Interestingly, none of the creditors to whom Toys R Us owes money raised any issues with the proposed bonuses. In fact, they agreed that the company's achieving its sales goals was most important on the list of priorities and were on board with the bonus package because they encouraged more sales.

One thing that a Louisville business will need to realize is that, if it files bankruptcy, many of its business affairs will be subject to scrutiny and may even be vetoed by the bankruptcy court. Although, as in this case, a court might be sensitive to business and market needs, the fact a court is involved at all is one additional reason why the help of an experience business bankruptcy attorney is almost essential in a Chapter 11.

Source: USA Today, "Bankruptcy judge approves $14M Toys R Us Executive bonus payout," Joan Verdon, Dec. 5, 2017.

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