The judge overseeing RadioShack Corp's Chapter 11 bankruptcy case on Wednesday approved a revised $1.5 million bonus plan for eight top executives at the electronics retailer, over the objection of the U.S. Trustee in the case.
U.S. Bankruptcy Judge Brendan Shannon said that while he shared some of the trustee's concerns over the key executive incentive plan, or KEIP, he was convinced the executives would be "up to their elbows" with the sale of 2,000 RadioShack stores.
Shannon also said he was impressed the plan's payout had been reduced through negotiations.
Acting Trustee Andrew Vara on Saturday filed an objection to the plan, initially set at $2 million.
Vara said it would reward the executives for staying put at RadioShack after reaching the stalking horse bid for the 2,000 stores. A stalking horse bid is an attempt by a debtor to test the market in advance of an auction.
The bid was reached before RadioShack filed for bankruptcy in February. RadioShack said its executives worked to increase the value of the bid by $30 million during negotiations.
The objection said the plan was effectively a retention plan and criticized paying the executives an incentive bonus of $500,000 for working on the stalking horse agreement.
The Standard General hedge fund has agreed to make a $200 million stalking horse bid that would keep about half of the retailer's stores open and operate them under an agreement with Sprint Corp.
If there are competing bids, an auction will take place March 23.
Changes to the U.S. bankruptcy code in 2005 essentially swept away retention plans that unions criticized for rewarding insiders who slashed payrolls.
KEIPs then emerged as a way to reward insiders. Unions and investors have often complained they are little more than dressed-up retention payments.
The case is In re RadioShack Corp, U.S. Bankruptcy Court, District of Delaware, No. 15-10197.
