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Creditors Decry Midway's 'Outrageous' Employee Bonus Plan

Creditors Decry Midway's 'Outrageous' Employee Bonus Plan

March 31, 2009 | By Eric Caoili

March 31, 2009 | By Eric Caoili
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Bankrupt Mortal Kombat publisher Midway is now under fire from government-appointed trustees for its intentions to pay up to $3.755 million in bonuses as part of a "Key Employee Incentive Plan".

Both the Official Committee of Unsecured Creditors and the United States Trustee, the latter of which oversees bankruptcy cases, filed objections to the plan, which proposes rewarding 29 key employees with bonuses for the completion for the completion of three milestone.

The first goal seeks to pay executives $497,500 for the sale of Wheelman's publishing rights to Ubisoft, which Midway accomplished in February. Both agencies, however, note that the sale occurred before the incentive plan was even submitted.

"The notion that a bonus program designed to reward employees for past accomplishments could be considered an 'incentive' is simply disingenuous," says the Official Committee of Unsecured Creditors, essentially those whom Midway owes money to, according to a report from game weblog The Cut Scene.

The second milestone hopes to deliver a bonus of $1,292,500 for either the sale of the studio's Mortal Kombat franchise or for submitting a reorganization plan. The third point could reward $1,965,000 for the completed sale of Mortal Kombat or the court approval of a reorganization plan.

The Trustee points out that the second and third milestones have no stipulations on when the events could take place or what results they might achieve, and notes, "Senior management should not be paid incentive bonus payments... to perform duties required to be performed by their obligations under the Bankruptcy Code."

The agency adds that the proposed payment is over four times the total incentive bonus payments distributed to the same group in 2008, before the company filed for bankruptcy, and that the payments are an average 64 percent of the employees' annual salaries, with some bonuses as high as 140 percent.

"[This] constitutes an outrageous request and is not justified by the facts and circumstances of the case," says the U.S. Trustee.

The Official Committee of Unsecured Creditors also found that examined against the compensation plans proposed in some 20 comparable and recent bankrupt cases, Midway's plan is "by far, the richest compensation plan that has been proposed, despite the unusually poor conditions of the current economy."

Heeding the groups' criticisms, Midway already plans to file a revised version of the Key Employee Incentive Plan today.


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