WHITE PLAINS, N.Y. – The judge in A&P’s Chapter 11 bankruptcy case on Tuesday approved a short-term incentive program for some salaried employees but sent the retailer’s top executives back to the drawing board.
The decision simultaneously satisfied and disappointed both A&P and its creditors. Sam Martin, A&P’s chief executive officer, testified Tuesday that an immediate incentive plan was crucial to the company’s operational and financial turnaround but creditors successfully argued that top management should better align its goals with those of its constituents in the case. The matter was officially adjourned until a hearing in late April but the judge, Robert Drain, warned A&P’s attorneys he would likely reject the plan again if changes weren’t made.
The decision would allow 140 salaried employees of A&P, including the company's chief information officer, senior vice presidents, vice presidents, senior directors, directors, district managers and senior category managers, to earn bonuses of up to 100% of their base salaries if A&P can reach targeted levels of same-store sales and merchandise margins during a seven-month period beginning this month.
Drain rejected an accompanying plan that would pay up to 175% bonuses for three “Tier 1” executive vice presidents: Tom O’Boyle, executive vice president of marketing and merchandising; Carter Knox, senior vice president of human resources; and Paul Hertz, executive vice president of operations, for reaching the same benchmarks as the Tier 2 employees. Those three could have earned up to $1.2 million in cash bonuses under the proposed plan. (Both Martin, and Jake Brace, A&P’s chief restructuring officer, elected not to participate in the plan. Another senior executive, general counsel Chris McGarry, voluntarily dropped out of the Tier 1 group this week).
In other events Tuesday, Judge Drain rejected a request from DSD trade creditors to create an official committee to represent their interests in the case. An attorney for the group – which includes some of A&P’s largest creditors including Kraft Foods, Nestle, Pepsi and Coca-Cola – said its members were disappointed at having been left out of the retailer’s official committee of creditors. Drain, however, sided with lawyers for the official committee who argued the group had narrow interests that were already served by representatives of trade creditors on the official committee including C&S Wholesale Grocers, McKesson Pharmaceutical and Calip Dairies, a Bronx, N.Y.-based DSD ice cream vendor.
