Zabel: House Bill 2102 would cap executive bonuses for companies in bankruptcy
News of the Philadelphia Energy Solutions oil refinery explosion on the morning of June 21, 2019, was frightening, first and foremost as we worried about the safety of the plant’s employees and neighbors, and then about the short-term and long-term effects on those same employees, neighbors and the environment.
But what happened in the boardroom aftermath of that explosion should also make you sick.
PES executives pocketed roughly $4.59 million in retention bonuses after the explosion and fire led to the plant’s closure, the golden parachute money paid out mere weeks before the company filed for bankruptcy.
Stunningly, according to the Philadelphia Inquirer and others this week, PES is seeking an additional $2.5 million in bonus payments as part of the plan to reorganize or sell the company.
Meanwhile, the majority of the company’s 1,100 employees was laid off in rapid-fire succession, with minimal or even zero severance pay, and nary an offer of health insurance coverage because PES terminated its group health insurance plan.
What’s more, seven years ago, PES accepted $25 million in taxpayer money to support its dealings. That’s in addition to environmental liability waivers, plus local and state tax breaks.
So while the company’s chief executive officer, Mark Smith, figured out how to spend his $1.545 million retention bonus – and various other executives did likewise with their six- and five-figure bonuses – the men and women who showed up to work every day, who regularly risked their safety on behalf of the company, were recklessly tossed aside to fend for themselves, to wonder how their next electric bill would be paid, or how they might afford life-saving prescription drugs, or when they might actually be able to fix the muffler on their vehicle.
But this isn’t designed to be a specific attack on Philadelphia Energy Solutions.
Instead, what happened last summer with PES was the impetus for change. The disgust and anger I felt after reading about the undeserved retention bonuses paid to already highly compensated executives while the workers were figuratively kicked to the curb, inspired me to do something about this ugly practice, which certainly is NOT limited to PES.
After months of research to coordinate the best plan of action, this week I introduced legislation that would put caps on executive bonuses while their companies go through bankruptcy.
No more should mismanagement be rewarded. It’s unfathomable to even consider that this is a regular practice, but it is. And, through House Bill 2102, I demand we change that.
It’s especially egregious when those corporations previously received some type of public benefit – like grants, loans, subsidies or tax credits – to help them stay in business.
It’s common decency to first consider the livelihood of the employees on whose backs the executives built their companies.
And since it’s obvious so many of these executives won’t do the right thing on their own, my legislation would prohibit companies from paying bonuses to highly paid employees and insiders – those whose annual compensation exceeds $250,000 – when those same companies benefited from public monies in the preceding 10 years.
Simply stated, wealthy corporate executives and insiders should not be permitted to cash out during bankruptcy while workers are laid off and struggle to survive.
Within hours of circulating this memorandum last week, I am happy to report I was already collecting bipartisan support. Because this should NOT be a political issue, I anticipate continued support from my Democratic and Republican colleagues in the Pennsylvania House of Representatives.
I also encourage all Pennsylvanians who agree it’s time to cap these ridiculous payouts to contact your own representatives and implore them to co-sponsor this legislation.
You can take action here: www.pahouse.com/Zabel/EndTaxPaidBonuses/ActNow/.
Rep. Mike Zabel
163rd Legislative District