Estero-based Hertz tries again to get approval for employee incentive plan
Hertz has proposed a new employee incentive plan that he hopes will win over a skeptical bankruptcy court judge.
In a court brief on Wednesday, Estero-based Hertz Global Holdings said it “was considering dropping the incentive plans altogether” after Judge Mary Walrath quashed them, calling them “offensive.”
While this would have been the “easiest course” to take, Hertz argued that it wouldn’t have been the best.
Now the car rental company is seeking court approval for a single plan – and that plan excludes most of its top brass.
In her decision after a hours-long hearing last month, Walrath said she found the plan Hertz proposed for his upper echelon particularly offensive because they had already received hefty retention payments days before Hertz filed for bankruptcy. , even though they “were” I’m entitled to it. “
The judge also asked if the plans were really incentive.
Citing the judge’s “strong statements”, Hertz said in his brief that he had decided to “postpone consideration” of the plan he was proposing to his senior executives until 2021.
The company is still hoping to get court approval of a plan for other mission-critical employees, which it has amended based on concerns raised by the judge.
While Walrath rejected the initial plans, she left the door open for Hertz to come back with revisions, continuing last month’s hearing – and her final decision – at a later date.
Previous coverage: Bankruptcy Judge Rejects Hertz Employee Incentive Plans
The new plan reduces the rewards offered for all senior vice presidents and vice presidents by 20%. It would include three of the high-level employees who were originally part of the other plan that is on hold.
Hertz argued that incentives are essential to motivate and retain employees in its executive ranks – and necessary to reward them for their hard work during difficult times as the company struggles to extricate itself from Chapter 11 bankruptcy. .
Critics, however, called the incentives unnecessary and wasteful, saying they would use scarce funds.
The new incentive plan would include 291 employees – 65 senior vice presidents / vice presidents and 226 principals / senior managers.
Together, these employees could earn more than $ 8.2 million in incentive compensation if Hertz achieves its highest performance goals. That’s a drop of about $ 1 million from what the company originally offered as a maximum payout.
In his court case, Hertz said he also changed or removed settings that the judge deemed “problematic” and provided “additional evidence” to show that the goals to which the incentive rewards are tied are difficult to achieve.
“This analysis clearly shows that not only does achieving the goals require significant effort, but that the economic benefits to estates of achieving this far outweigh the cost of the programs,” the company said.
Additionally, Hertz argues that retention programs and incentive programs are “fundamentally different, and not mutually exclusive” and that it is common for companies to use both, even if they are bankrupt in the past. chapter 11.
The recent employee departures are “a stark reminder” of why the incentive plan is necessary and important, the company said.
Hertz said it has already seen more voluntary departures of employees with one or more managerial titles this year than in 2019, despite a “tough job market.”
Recently, the company appointed its third CFO in two months.
“These departures occurred at a time when debtors most needed the dedicated service of their key employees,” Hertz said.
While 85% of employees included in the new incentive plan received loyalty bonuses, Hertz said those bonuses have “proven to be insufficient” with proposed participants continuing to voluntarily resign, even if it means they have to surrender their loyalty. bonuses.
After taking a hard hit from the coronavirus pandemic, Hertz filed for bankruptcy on May 22 in Delaware under a mound of debt.
The Hertz Corp. operates the Hertz, Dollar and Thrifty brands, with thousands of branches and franchises across the country.
Parent company Hertz Global also owns Donlen, an Illinois-based US fleet rental and management company, which is included in bankruptcy filings.
Hertz has some 18,000 employees across the country, including Southwest Florida.