Midway Takes Heat Over Executive Bonuses

Midway Takes Heat Over Executive Bonuses

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It's like a mini-AIG over at Midway, which got several earfuls in court from both its creditors and the bankruptcy trustee overseeing its operations over plans to award more than $3.5 million in bonuses to "key employees."

It's been a rough year for the beleaguered publisher, with piling losses, accusations of impropriety and finally, bankruptcy. The company is even faced with having to sell off Mortal Kombat, its most recognized and beloved franchise. Despite all that, someone decided it would be a good idea to fork over $3.755 million dollars in bonuses to 29 key employees, a tough sell at any time but particularly galling in the midst of this gurgling toilet swirl we call an economy.

Midway's creditors and bankruptcy trustee therefore headed off to court to express their reservations about the bonuses, which were to be awarded based on three "key steps": Selling the publishing rights to Wheelman to Ubisoft ($500,000), arranging the sale of the Mortal Kombat franchise or submitting a reorganization plan to the court ($1.3 million) and successfully closing the Mortal Kombat sale or having the reorganization plan approved by the court ($2 million).

There are many problems with this plan, according to everyone who isn't a Midway executive. First, the Wheelman publishing rights had already been sold when the incentive plan was drawn up, leading creditors to say, "The notion that a bonus program designed to reward employees for past accomplishments could be considered an 'incentive' is simply disingenuous." Then there's the fact that the sale of Mortal Kombat and the reorganization of the company are what Midway executives are supposed to be doing right now; it is, in essence, the totality of their jobs at this point. Why should they receive special pay for simply fulfilling the basic requirements of their jobs?

There is also concern over the fact that the second and third "milestones" for bonuses - the sale of Mortal Kombat and/or the submission and approval of a reorganization plan - apparently have no performance-related limitations attached. In other words, they get paid the same regardless of when and how well, or how poorly, they do the job.

And even if bonuses are somehow justified, which I find rather hard to swallow, the trustee claimed the amounts sought by the company are "outrageous," adding, ""The Debtors seek authority to pay bonuses to a selected group of officers and managers which are four hundred percent greater than bonuses paid to the same group in 2008 when the Debtors were not before the Bankruptcy Court."

For what it's worth, Midway executives agreed to revise the bonus plan and submit it to the court for consideration tomorrow. It's reasonable to assume that the amounts will be toned down somewhat but what I'm having trouble understanding is why the bonus plan is being "revised" and not "eliminated." The iconic Midway has been run into the ground and people are being patted on the back for a good job?

Source: The Cut Scene

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The more I hear the less I care... about Midway. A toast to greed!

This is despicable. This is just another instance of rewarding people for doing their jobs as they're supposed to, or just rewarding them for doing their jobs poorly. I thought bonuses are for those that go above and beyond what they're tasked to do. What happened?

Maybe I'm old-fashioned (or just old) but I remember a time when incompetence got you fired, not rewarded.

What the heck happened in American business, anyway, that made executive pay and incentives get so thoroughly disconnected from actual job performance? And this has apparently gone systemic, across multiple industries too... if this had gone on with the hourly guys the "talking points memo" crowd would fuss over how unions had made America fat and lazy, but this clearly shows that the problem isn't constrained to any one economic tier.

D00ds, fix this. It's hurting the rest of us, too.

-- Steve

Malygris:
Maybe I'm old-fashioned (or just old) but I remember a time when incompetence got you fired, not rewarded.

It still does, so long as the incompetent people aren't the one's who decide who gets sacked. All of these guys are giving eachother bonuses, and making money off of a business that is going under. They will continue to get salary and bonuses, like AIG, until the lenders won't lend them any more. This is the type of thing that a board of directors is supposed to prevent, but as seen with Tyco and Worldcomm, that doesn't always work.

 

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