Staff and wire report
1:56 PM CST, January 27, 2010
A bankruptcy judge in Delaware on Wednesday approved a contested $45.6 million Tribune Co. bonus pool to be divided among a group of 720 managers and executives throughout the company.
The move comes after the Chicago-based media conglomerate last week asked U.S. Bankruptcy Court Judge Kevin Carey to consider the management bonuses separately from two other proposed bonus plans in hopes that the company could distribute checks as early as next month.
The Washington-Baltimore Newspaper Guild and the U.S. Bankruptcy Trustee have objected to all three bonus plans. Carey overruled the objections in this instance but has yet to rule on the other two plans, which would deliver another $21.4 million to Tribune Co. top executives.
Bill Salganik, a past guild president and a member of a committee representing unsecured creditors in Tribune Co.'s bankruptcy, said the unions are glad the judge reserved judgment on what he called the two 'big bucks" bonus plans. But "we still think the so-called annual bonuses are too high," he said.
Tribune Co. has argued the incentives the judge passed are necessary to motivate and reward the employees included in the bonus pools as well as make the media conglomerate's compensation plans competitive with the rest of the industry. Moreover, the plan approved by the judge has been in place for years in one form or another, the company has said.
But the union has countered with several points. First, only a small percentage of Tribune Co. employees are included in the bonus pools. Second, while the bonus plan has existed for years, it was altered by current management to be more generous, despite the company's weak performance and continuing bankruptcy. In a strong year like 2008, for instance, Tribune Co. paid out $13.4 million in bonuses, or roughly 1.3 percent of cash flow, the union has argued. This year, it will pay $45.6 million, or almost 10 percent of cash flow.
"There has never been a (plan) like this one: an unprecedented payout of millions of dollars to a smaller number of executives during a year in which employee salaries were frozen "to share the sacrifice" and there was an historic low in operating cash flow," the guild argued in its objection.
Tribune Co., which owns the Chicago Tribune, WGN-Ch. 9 and other media properties, sought bankruptcy protection in December 2008 because of dwindling advertising revenue and a $13 billion debt load incurred when billionaire investor Sam Zell took the company private a year earlier.
In July, Tribune Co. petitioned the U.S. Bankruptcy Court for permission to pay out bonuses through three performance-based plans. The largest in dollar amount was the company's normal incentive bonus plan for top and middle managers. But the other two would pay much more per capita to a group of about 20 top managers, who are also included in the first plan.
Tribune Co. originally requested that Carey rule on all three plans together. On the same day last week that the company said it was willing to have the court "bifurcate" its ruling so the bonuses for the larger group of recipients might be expedited, Tribune Co. Chief Executive Randy Michaels informed employees that the company had generated cash flow of nearly $500 million during 2009 "thanks to a stronger-than-expected performance by both the broadcasting and publishing groups in the fourth quarter."
A Tribune Co. spokesman said at the time that this meant cash flow exceeded the original plan by 200 percent, meaning bonuses for the group of 720 would come in at a maximum of $45.6 million, if approved. The unexpectedly strong results were largely due to a year of aggressive cost cutting, including layoffs, but Michaels' note also said that lower newsprint costs and a slightly better economy helped.
A Tribune spokesman said the company would have no comment on the bonuses.
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