We have seen marked acceleration in the pace of corporate restructuring and bankruptcies in the past several years. We also have seen heightened scrutiny of all aspects of compensation programs and practices by large groups of stakeholders, including equity holders, secured and unsecured lenders, private equity sponsors, hedge funds and other entities that have specific views about employee pay.
This scrutiny has created an increasing need for organizations to design and deliver employee compensation programs that motivate, incentivize and retain critical executives and employees in an environment filled with uncertainty, anxiety and turmoil. In the context of a restructuring, it is important to have a market-leading partner that understands how to effectively address stakeholders’ concerns while balancing the need to manage talent. At WTW, we bring decades of such experience to every engagement.
Why compensation is different in distressed environments
Organizations going through restructuring or bankruptcy have a unique set of compensation challenges. Every stakeholder in a distressed organization stands to lose value, and that directly affects how compensation is considered. Multiple reasons will change the way distressed organizations approach employee pay:
- Employee retention and motivation become critical challenges
- Incentives often are refocused on the key objectives of the turnaround
- Certain negotiations can give creditors a greater say on executive compensation
- If bankruptcy is a possibility, bankruptcy laws establish rules and precedents that influence creditor views on employee pay as well as guide court judgments
- In court-assisted processes, an employee designation of “insiders” is created, and the bankruptcy code limits flexibility in the level and design of compensation for these individuals
Managing employee pay through uncertainty
For more than two decades WTW has led the market, working with hundreds of clients on their approach to employee pay in a corporate restructuring or bankruptcy.
How we support distressed organizations
Working closely with legal counsel and key stakeholders, we:
Through this process we develop plans that reflect our clients’ specific restructuring timelines, which may include:
- Pre-petition retention strategies geared toward top executives and insiders
- Key executive incentive plans requiring court approval
- Key employee retention plans (typically a non-insider retention plan)
- Board of director pay
- Emergence equity plans
When you partner with WTW’s team of experts, we are with you every step of the way, from initial restructuring plans to preparing for and participating in expert testimony, including depositions and live testimony. Experience the WTW difference.