JCPenney Gives Executives Bonuses Before Possible Bankruptcy Filing

On Monday, JCPenney announced that it paid a $4.5 million bonus to CEO Jill Soltau, and CFO Bill Wafford, Chief Merchant Michelle Wlazlo, and Chief Human Resources Office Brynn Evanson, each received bonuses of $1 million. According to the company, the purpose of the bonuses is to sustain top talent as “maintaining continuity of leadership” is critical to the future of its “long-term successes.”

“At JCPenney, we are making tough, prudent decisions to protect the future of our company and navigate an uncertain environment, including taking necessary steps to retain our talented management team,” the company said in a statement.

“Our compensation program is in line with those of other companies in similar situations and is aligned with milestone-based performance goals to continue incentivizing our team to drive results.”

The Bonus plan states that all executives who have received their bonuses must remain onboard till at least January 2021. Any executive that resigns before then would have to repay 80% of their bonuses. The remaining 20% will also have to be repaid if specific milestone-based performance goals are not met. In addition, they must forfeit the right to annual bonus plans or incentives for the current fiscal year, as well as their outstanding equity or options for previous awards.

JCPenney has been under a lot of pressure within the past week, with missed debt payment deadlines to meet and possible bankruptcy filing by Friday. While it prepares to file for a possible bankruptcy on Friday, the company has approved the sum of $1 million for its top four executives.

There are ongoing talks for a $450 million DIP loan between JCPenney and lien lenders. The outcome of the talks would determine whether or not the company would proceed with a Chapter 11 bankruptcy protection. The company is yet to disclose details of its intentions concerning filing for bankruptcy. However, it has acknowledged its two missed debt payments: $12 million and $15 respectively. The missed $12 million debt payment was due on April 15, and the missed $15 million debt payment was due this recent Thursday. The grace period given for both payments are Thursday and Friday this recent week. If the company fails to meet up, filing for bankruptcy would be inevitable.

While the company is faced with closing 180-200 of its stores alongside filing for bankruptcy protection, it said that prior to now its executives had made tremendous progress in turning the company around before the Covid-19 pandemic. Earlier this week, 16 of its 850 stores nationwide reopened. There were 25 more openings on Wednesday and another set of 13 stores that have not fully reopened but allowed curbside pickup for shoppers.

Bankruptcy filing for JCPenney would include large employee cuts with the possibility of no severance payments that normally come with layoffs. Filing for bankruptcy would permit the company not to pay laid-off employees severance payments. In a case whereby an executive has to repay bonuses due to failure to comply with the bonuses plan, the money would be set aside to pay severance.