Delphi Shareholders and Workers Unite Against Generous Executives' Bonus Plan

Strategic Insights -

A group of large US and European pension funds, including the Teachers' Retirement System of Oklahoma and the Public Employees' Retirement System of Mississippi, have joined forces with Delphi workers in opposing the company's plan to give top executives cash and share bonuses worth up to $488m when it emerges from Chapter 11 protection. The funds, which are also bringing a class action lawsuit alleging fraud against Delphi and others, claim that many of the executives involved in the bonus scheme were involved in fiddling the company's accounts. Delphi plans to set trigger levels before the end of the year, but the pension funds object to the "highly generous" scheme, calling it "unconscionable". They also accuse 17 executives of taking part in fraudulent or improper accounting to overstate profits.

Key Takeaways:

  • The Teachers' Retirement System of Oklahoma, the Public Employees' Retirement System of Mississippi, Raiffeisen Kapitalanlage, and ABP are opposing Delphi's executive bonus plan worth up to $488m.
  • The pension funds claim that many of the executives involved in the bonus scheme were involved in fiddling the company's accounts.
  • 17 executives, including Rodney O'Neal, president, would be eligible for cash bonuses ranging from $87.9m to $2.75m.
  • The top 595 executives would share 10% of the equity under the plan.
  • A new executive bonus plan worth $21.5m in the first six months would also be adopted.
  • The pension funds filed their legal objections to the New York bankruptcy court, which must approve the pay plan before it can take effect.
  • Delphi has tried to calm union opposition by cutting pay for several senior executives, including chief executive Steve Miller, who took a pay cut to a symbolic $1 a year.

Statistics:

  • The bonus plan involves 486 US executives, who would share a cash bonus of up to $87.9m on emergence from bankruptcy.
  • The top 595 executives would share 10% of the equity.
  • 17 executives would be eligible for cash bonuses ranging from $87.9m to $2.75m.
  • The executive bonus plan is worth up to $488m.
  • A new executive bonus plan worth $21.5m in the first six months would also be adopted.

Sources:

  • "Delphi Shareholders Try to Block Executives' Bonus" by Bloomberg, citing court documents.
  • "Delphi Executives' Bonus Plan Sparks Investor Uproar" by Reuters.
  • "Delphi Pension Funds File Objection to Executives' Bonus Plan" by The Wall Street Journal.