Bankrupt nuclear firm Westinghouse Electric Co. is seeking up to $8.4 million in bonuses for top executives and select employees in order to convince them to stay at the company over the next year.
The Cranberry-based firm filed documents with U.S. Bankruptcy Court of the Southern District of New York on Wednesday outlining a “key employee incentive program” that would be largely tied to the company hitting certain earnings targets within the next eight months.
Twenty-six employees — 10 senior executives and 16 non-executives — would be eligible to receive between $4.2 million and $8.4 million in bonuses.
In addition, the company is seeking to bump up the base salary of CEO Jose Emeterio Gutierrez from $627,000 to $1 million, and that of acting CFO Dan Sumner from $234,000 to $375,000. According to the consultant that Westinghouse hired in July to evaluate compensation, both executives get paid well below their peers at other companies.
“Mr. Gutierrez and Mr. Sumner are not paid salaries commensurate to their responsibilities,” Lisa Donahue, Westinghouse’s chief transition and development officer, wrote in a declaration to the bankruptcy court, adding that both add “great value to the debtors in executing their respective job responsibilities and are especially critical to the success of the debtors’ restructuring efforts.”
It’s common to see such petitions in bankruptcy dockets, where companies argue that in order to keep the people who will give the firm the best shot at a good outcome, they must be paid above their current levels. Often, part of their incentive is based on hitting performance goals that involve cost-cutting, such as layoffs and asset sales.
Westinghouse announced last month that it would layoff around 1,500 employees across the globe.
Achieving the target earnings outlined in Westinghouse’s business plan means shedding some $147 million in costs, according to the documents filed Wednesday. Most of that will come from “simplifying Westinghouse’s operating model and organization to increase effectiveness, clarify accountability, minimize redundancy, and reduce overhead costs.”
Westinghouse filed for bankruptcy in late March after cost overruns at two nuclear construction projects, in Georgia and South Carolina, pushed it into insolvency.
Since then, the company has worked to reorganize around its money-making businesses — providing nuclear fuel and maintenance services to existing power plants — while trying to keep some new construction possibilities afloat. Two nuclear power plants in Georgia are still under construction, while the two in South Carolina have been canceled.
In August, Westinghouse’s board of directors approved a business plan for the organization, one that included an earnings target. The company has not disclosed what that target is, but Westinghouse would need to reach at least 85 percent of it for the select 26 to get their bonuses.
A quarter of the possible incentive compensation will also be linked to the company’s safety metrics, as measured by the rate of injuries at its sites.
Last month, the bankruptcy judge approved a $13.8 million bonus program to retain more than 226 “key” Westinghouse employees.
The 16 non-executive employees who would receive the incentive bonuses under the plan included in this week’s documents were initially part of this larger group but the U.S. trustee overseeing the bankruptcy objected to their inclusion because they were all either senior vice presidents or had formerly served on the board of directors. With the U.S. trustee’s approval, the 16 were transfered to the incentive program.
Ms. Donahue wrote that the targets set in incentive program are “ambitious and will be challenging to attain.”
The employees included “cannot achieve these goals simply by ‘showing up,’” she said.
Anya Litvak: firstname.lastname@example.org or 412-263-1455.
Correction: This story was updated to clarify the reason that non-executive employees were not included in a previously approved compensation program.