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Kodak executives received a total of $15.6 million in bonuses and other payments in the 12 months prior to filing for bankruptcy. That’s according to a Wall Street Journal database. CEO Antonio Perez received nearly $2 million in bonuses, stock wages and other benefits.

The WSJ looked at a number of companies that enriched executives in the months leading up to bankruptcy. The newspaper called it “Payday Before Mayday.” Hostess is among the companies that paid officials big bucks before going belly up:

To avoid running afoul of limits on bonuses that reward executives for sticking around during bankruptcy, companies craft incentive plans that compensate managers for meeting certain performance targets. But another way they can steer clear of the law’s restrictions is by paying bonuses before filing for Chapter 11.


Companies often say they are using their best business judgment when paying bonuses to executives who are working overtime to keep operations afloat. A firm’s fate often isn’t known when bonuses are paid, and companies argue they must motivate some executives to stay lest they suffer exoduses that further destabilize troubled situations.

The WSJ found more than 1,600 top-level executives at 80-plus companies got more than $1.3 billion in payments before their companies filed for Chapter 11.

Links of the Day:

– Communities are discovering the value of being walkable. Williamsville is redoing its highway-like Main Street.

– Governor Cuomo shot down a proposal to implement a booze tax and place limits on bars and liquor stores in an effort to curb problem drinking.

– Are Common Core standards sacrificing literature for nonfiction?

– Chicago is planning to raise money by installing digital billboards on city-owned land along expressways. Coming soon to a city near you?

This made my day:


On the day Kodak filed for bankruptcy, CEO Antonio Perez led a town hall-style meeting with employees. Here are the highlights from the audio, which I posted on 13WHAM News:

– Kodak’s code name for its contingency plans that included bankruptcy was Project Cartier. A bankruptcy consultant left his watch on the corporate plane. “By the way, we won’t have planes anymore,” Perez said. There was a slow clap. “Go on and clap.” The room burst into applause.

– Less than 24 hours before Kodak filed for bankruptcy, Perez thought he had a deal to sell the patents and keep Kodak afloat. For 45 minutes, he thought the company would avert Chapter 11. It didn’t happen.

– Perez said Kodak held onto the film business because it’s a buyers market and it made more financial sense to hang onto it.

– Perez thought Kodak’s restructuring was over in 2007. “Baby, we’re going to the Olympics!” But then the recession hit.

– Perez knows he’s not too popular. “I have four dogs. They love me when I get home. They lick me up and down. They take care of all those problems. Of course, my wife and my daughter too. I know you are tweeting these things. That’s why I had to say that.”

– Perez blamed the media for the company’s inability to sell the patents and for reporting on nostalgia. He said reporters might “grow up” one day and realize it’s not 1890 anymore.

About those patents…

During the meeting, an executive revealed the price of the patents goes up in a bankruptcy:

If we kept on the same path we’ve been on for the next 5, 6, 7 years, just licensing to companies one by one, how much money would we generate? And that model shows $6 billion through licensing over next 4 years. It’s a very valuable asset.

What would this be in the hands of Google against Apple or in the hands of Apple against Android or in the hands of Sony against Apple or in the hands of Apple against HTC? These are all companies that are really warring with each other in the wireless space. That’s probably a bigger value. We can’t gauge it.

In this formal process…when parties are made to come oout of the dark shadows and come to the table…that competition will drive the price up as it did with the Nortel portfolio.


More Links of the Day, Kodak version:

– During a bankruptcy, it’s not uncommon for CEOs to get big bonuses. The Wall Street Journal lists a number of chief executive officers who made out like bandits while laying off workers, closing factories and watching their companies sink into financial oblivion.

For example, Lear Corp. filed for bankruptcy in 2009. It’s CEO got a bonus of $5.4 million and stock worth $11.78 million when the company emerged from bankruptcy.

There’s a federal rule designed to curb such payouts, but corporations have found a way around it through special incentive packages. Here’s an excerpt from the WSJ article, which is behind a paywall:

By examining court documents and regulatory filings, The Wall Street Journal was able to determine the pay of executives at 21 of the 100 largest companies that recently went through bankruptcy. Together, the chief executives of those firms earned more than $350 million in salary, bonuses, stock grants and severance for the periods their companies were under Chapter 11 bankruptcy protection or just afterward.


The median compensation of the 21 CEOs was $8.7 million—not far off from the $9.1 million median compensation in 2010 for CEOs of Standard & Poor’s 500 companies, according to data compiled by Kevin Murphy, a University of Southern California finance professor.

There is much speculation about the future of Kodak’s CEO Antonio Perez. If he survives the company’s trip through bankruptcy – it’s possible creditors will force him out – details about his compensation will be filed with the court. The judge would have to approve any incentive packages. But as the WSJ noted, there is precedence for rewarding CEOs that helped their companies fail and then come back to life.

– Kodak asked the bankruptcy court’s permission to pay $40 million to a select group of vendors. In a court filing (read it here) the company notes it has 2,000 vendors who are owed $332 million. The vendors Kodak wants to pay now are suppliers of raw materials and chemicals, as well as information technology services. Kodak calls them critical. Law 360 reports, in an article behind a paywall, the judge postponed a decision on the request:

The pushback from the judge and the ensuing delay are notable because motions to pay critical vendors in large corporate bankruptcies are often granted right away, in part because when key vendors don’t get paid they might threaten to halt delivery of important goods and services that will allow the company to keep operating.


There are plenty of reasons for judges to be cautious about granting such motions. In particular, they allow the critical vendors — who would otherwise just be unsecured creditors — to jump to the very front of the line.

While the rest of the unsecured creditors will have to wait — possibly for years — to get paid back some of what they’re owed for prepetition claims, critical vendors who are plucked from the bunch get their money before the case even really gets underway.

– Bankruptcy has a human toll. The Harvard Business Review talks about the pain shared by workers and a community. The article quotes former Xerox CEO Anne Mulcahy:

Anne Mulcahy, the former CEO of Xerox, understood how devastating a bankruptcy would be to her employees. In 2000, when her advisers recommended that Xerox file for bankruptcy, she said the following:

“You just don’t get it. You don’t understand what it’s like to be an employee in this company. To fight and come out and win. Bankruptcy’s never a win. You know what? I’m not going there until there’s no other decision to be made. There are a lot more cards to play.”

Mulcahy’s concern about employees paid off. Her conviction carried Xerox through four years of struggle to undeniable success.

– Readers of Rochester Business Journal are divided on whether Kodak can emerge from bankruptcy.

– CNN looks at the success of Kodak spinoff, Eastman Chemical.

More Links of the Day, Kodak version:

– Kodak filed a Public Lender Presentation that has some insight into where the company is headed. (Read the document at bottom of this post.)

1. The plan lists four key objectives, among them “fairly resolve legacy liabilities.” That means pensions, health care and the cost of current workers. (Page 11)

2. Kodak lists divisions it will “manage for cash/value.” Those include cameras, entertainment, patents and film. Many analysts have suspected Kodak will sell off consumer units. This will have an impact on the workers in those units. (Page 12)

3. Kodak lists intellectual property it thinks is valuable. (Pages 14-15)

4. Kodak lists the departments expected to take a hit, including human resources, corporate engineering, finance, research, legal, marketing and purchasing. This is where we could see big job losses. (Page 16)

– Is Antonio Perez the man to guide Kodak through restructuring? He faces some criticism in my 13WHAM report.

– Kodak could have trouble selling its patents if they are encumbered by licenses, as InterDigital discovered.

Read the Public Lender Presentation: