Although many large public companies still operate after filing for bankruptcy, many employees lose their jobs, and
Question:
Although many large public companies still operate after filing for bankruptcy, many employees lose their jobs, and the other stakeholders suffer the consequences noted. However, some employees actually get cash bonuses, and typically, the only employees in the "some" category are executives. Such decisions are made by the company's boards of directors, as one of their key responsibilities is to determine the compensation of top executives. Some boards of directors decide before filing to pay the CEO, and occasionally other executives, large cash bonuses. For instance, during the economic devastation due to COVID-19, J. C. Penny paid its CEO $4.5 million; Whiting Petroleum paid $6.4 million to its CEO and nearly $15 million to other executives; Neiman Marcus' CEO received $2 million, and Hertz paid $16.2 million to 340 director-level and above executives, and $700,000 to its CEO. It is worth noting that the actual practices are legal and have been common for years. Nearly one-third of large companies filing for bankruptcy due to the coronavirus awarded bonuses to executives within a month of filing for bankruptcy
1. Since the practice is so common, do you think executives even see this as a potential ethical issue? Why or why not?
2. What is the responsibility of an executive receiving such a bonus?
3. Consider a CEO who has accepted a pre-bankruptcy bonus and assume that this same CEO thinks that this practice is inappropriate. Now analyze that CEO in terms of Kohlberg's Model of Moral Development
4. Repeat #2 but assume the CEO thinks the proactive is inappropriate. How does your moral development analysis change?