"Success Bonus" for Bankruptcy - 15 Apr 2009

Six Flags to Give Executives “Success Bonus” in Bankruptcy

Looks like the golden parachutes are opening in every industry. Six
Flags’ CEO Mark Shapiro, as well as other executives, could be given a
“success bonus” tied to the “success” of its debt reorganization. The
shocking thing is that the executives will be eligible for the “success
bonus” even if the company fails to secure an out-of-court workout and
files for Chapter 11 bankruptcy. Here’s the story from Bloomberg:

The bonus is part of an employment agreement with
Shapiro extended through April 1, 2013, Six Flags said in a regulatory
filing yesterday. Five other managers also had contracts extended with
such bonuses. The accords keep the base salaries at current levels.

Shapiro receives a base salary of $1.3 million a year. Chief
Financial Officer Jeffrey Speed, who earns $775,000, would get another
$750,000 as a “success bonus.” The plan would also give the executives
stock options and restricted shares.

Six Flags hasn’t posted a profit since 1998. The New York- based
company faces bankruptcy if it fails to restructure $287.5 million in
Preferred Income Equity Redeemable Shares, or PIERS, plus accrued
dividends, before a mandatory Aug. 15 redemption.

The stock plunged 88 percent in the last year, and Six Flags said
last week it will be suspended from trading on the New York Stock
Exchange for not meeting listing standards.

“A ‘success bonus’ — it just makes a profanation of the word
‘success,’” said Graef Crystal, a former compensation consultant and
author of “The Crystal Report on Executive Compensation.” “Success is
going bankrupt?” he said in an interview yesterday. “Success is coming
out of bankruptcy?”

Six Flags said in March that it may have to seek a pre- packaged or
pre-arranged Chapter 11 filing if it can’t negotiate a restructuring
agreement with the PIERS holders out of court.

For more information on Bonuses for Bankruptcy.

Posted by Dan Walter

Performensation: Equity Compensation for High Performance Companies.