Tribune Union Opposes $46 Million in Manager Bonuses

By Steven Church, www.bloomberg.com with additional material by Michael Oneal, Tribune reporter

Jan. 26 (Bloomberg) -- Tribune Co. should be blocked from paying managers as much as $45.6 million in bonuses, The Newspaper Guild, one of the bankrupt newspaper publisher’s unions said in court papers.

The proposed bonus pool is “excessive by any measure,” because it comes when the company is experiencing a historic low in cash flow, attorneys for the Washington-Baltimore Newspaper Guild wrote in an objection filed today in U.S. Bankruptcy Court in Wilmington, Delaware.

“It seems way too generous for the circumstances this year,” said Bill Salganik, a past president of the guild and a member of a committee of unsecured creditors involved in Tribune’s bankruptcy.

Lawyers for the company are scheduled to be in court tomorrow before U.S. Bankruptcy Judge Kevin Carey to defend the so-called management incentive plan, part of an annual bonus paid out since at least 1997, according to court papers.

Acting U.S. Trustee Robert DeAngelis also opposes the bonus plans, lawyers for DeAngelis said today in a court filing. The trustee’s office is an arm of the Justice Department that oversees bankruptcy cases.

Tribune, based in Chicago, filed for bankruptcy court protection in December 2008, about a year after real-estate billionaire Sam Zell’s $8.3 billion purchase of the publishing and television company. Tribune owns the Los Angeles Times and the namesake Chicago newspaper among other properties.

In July, Tribune Co., owner of the Chicago Tribune, petitioned the U.S. Bankruptcy Court in Delaware for permission to pay from $21.5 million to about $67 million in bonuses through three separate performance-based plans.

The biggest was a continuation of Tribune Co.'s normal incentive bonus plan for both top and middle managers. The other two would reward a group of around 20 top managers for either navigating the bankruptcy process or "transforming" their business units.

A group of company unions objected to the request at a September court hearing, calling the bonuses top-heavy and too easy to earn. U.S. Bankruptcy Judge Kevin Carey has yet to rule as he prepares a formal opinion on the matter.

Tribune Co. had originally requested that Carey rule on all three plans together. But on Wednesday, the company said it would be willing to have the court "bifurcate" its ruling so that the larger group of more than 700 managers could be rewarded in February for their 2009 performance.

In a separate note to employees Wednesday, Tribune Co. CEO Randy Michaels said that the company generated almost $500 million in cash flow during the year "thanks to a stronger-than-expected performance by both the broadcasting and publishing groups in the fourth quarter." The results owe much to cost-cutting efforts, but Michaels noted that lower newsprint costs and a slightly better economy also helped.

A spokesman said that level of cash flow exceeded the 200 percent threshold, meaning bonuses for the group of 720 would come in at a maximum of $45.6 million if approved. If the judge also approved the other two plans, they would pay out around $21 million to a much smaller group.

Tribune attorney Jonathan D. Lotsoff didn’t immediately return a call seeking comment.

The bonuses are part of a broader incentive package that includes three separate pieces that could cost the company as much as $66 million. The union has opposed all three components since they were first proposed last fall.

The bonus proposal is tied to annual cash flow and could drain almost 11 percent of Tribune’s operating cash, the union said in court papers.
At a hearing in September, Tribune lawyers said the bonuses were necessary to keep managers motivated during troubled economic times.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.

Other unions with collective bargaining agreements with Tribune are expected join the Newspaper Guild in protesting the Tribune executive bonus plans. It is easy for corporations to generate a short term cash flow increase, if you layoff thousands of employees and don't care about the damage this and other operating cost cutting initiatives do to your products.

This bonus plan is a slap in the face to the people who produce the newspapers and keep the TV stations on the air to create the income that Tribune is distributing as bonuses to management.

Contact Judge Kevin J. Carey at:

Chambers of the Honorable Kevin J. Carey, Chief Judge
U.S. Bankruptcy Court Wilmington, Del
5th Floor, Courtroom #5
824 North Market StreetWilmington, DE 19801
Call the Judge at: 302-252-2927

Don't wait, Judge Carey plans to make a decision on whether to allow Tribune to pay $45 million dollars in executive bonuses by the end of this week.

In solidarity,

Bob D