Bankruptcy Court Orders Tribune To Withdraw Executive Bonus Plans

By Susan R. Hobbs

A federal bankruptcy court judge in Delaware has dismissed a motion by Tribune Co. to implement a $21 million management incentive bonus plan, to which the Washington-Baltimore Newspaper Guild (WBNG) Local 32035 had objected, an attorney for the union told BNA April 5 (In re Tribune Co., Bankr. D. Del., No. 08-13141 (KJC), 3/23/10).

Judge Kevin Carey of the U.S. Bankruptcy Court for the District of Delaware March 23 directed the Tribune Co. to dismiss its request of the court for authorization to implement the transition management incentive program (TMIP) and key operators bonus (KOB) components of the company's three-part 2009 management bonus plan, Robert Paul, a partner in the Washington, D.C., firm Zwerdling, Paul, Kahn & Wolly PC and attorney for the guild, said. The guild is affiliated with the Communications Workers of America.

In January, however, Carey granted the Chicago-based media company's request to implement the third component of the plan, known as the management incentive program (MIP), and bonuses totaling $45.6 million were paid to 720 mid- and upper-level Tribune Co. managers in February, Paul said. At that time, Judge Carey reserved judgment on the TMIP and KOB bonuses.

While the Tribune Co. has withdrawn the TMIP and KOB bonuses from consideration, the company could reconsider them after it emerges from bankruptcy, the judge said.

Newspaper Guild's Objections Led to Bonus Plan Withdrawal

Tribune Co. filed for Chapter 11 bankruptcy protection on Dec. 8, 2008 (237 DLR A-12, 12/10/08). WBNG was named as one of nine members of the creditors' committee in the Tribune Co.'s bankruptcy filing.

On July 22 Tribune petitioned the bankruptcy court for permission to pay bonuses in 2009. The company said it needed the funds to retain and encourage key personnel during a period of unprecedented challenge. In its petition, Tribune said, "doing so is difficult enough in the bankruptcy context, and those difficulties will be compounded if the Debtor cannot offer a competitive and appropriately incentivizing compensation structure."

According to court documents, the Tribune Co. had sought to provide $45.6 million in bonuses to managers under the MIP. In addition, the company sought to provide $10.6 million to 21 members of the company's "core management team," plus $1.3 million for 50 other employees under the TMIP. Finally, the Tribune had proposed to pay $9.3 million in "pay-for-performance" bonuses to 23 employees under the KOB plan.

In August, the WBNG questioned the wisdom and fairness of the $66 million three-part incentive plan in light of the financial crisis undermining the Tribune Co. (154 DLR A-10, 8/13/09). The guild represents editorial and commercial employees of the Baltimore Sun, which is owned by the Tribune Co. The Tribune Co. owns and operates several of the nation's largest newspapers including the Chicago Tribune, the Los Angeles Times, and the Hartford Currant.

During the Aug. 11 hearing before Judge Carey, representatives of the "Official Committee of Unsecured Creditors" and the Tribune's senior lenders commented on the company's bonus program. Representatives of both groups told Carey they had no objections to the MIP. The only objection came from WBNG, which serves on the unsecured creditors committee and dissented during that group's review of the MIP.

The company's problems stem in part from declining newspaper circulation and recessionary factors cutting advertising revenue. Its troubles are complicated by a $13 billion debt load accrued in 2007, when Chicago real estate titan Sam Zell took the company private.

Text of the order may be accessed at http://op.bna.com/dlrcases.nsf/r?Open=vros-849ubz.