In the wake of Delphi Corp.’s Chapter 11 filing a week ago, chief executive officer Steve Miller said on Monday that he is cutting his annual base pay from $1.5 million down to $1, reported Reuters. In addition, president Rodney O’Neal will take a 20 percent pay cut, and a score of other top Delphi executives will take a 10 percent cut.
The reductions will be effective from January 1 until the company emerges from bankruptcy.
Miller stressed that he couldn’t take his full pay while asking thousands of hourly employees to agree to wage and benefit cuts, according. “I just couldn’t find a way to look them in the eye and tell them I should be paid a million-dollar salary for delivering that message,” he said in a conference call, according to the wire service.
Although Miller will also forgo his bonus, severance, and pension, he reportedly added, he’ll keep the $3 million signing bonus awarded to him in July, when he succeeded J.T. Battenberg III as CEO.
Crain’s Detroit Business also pointed that just before filing for Chapter 11 protection, Delphi fattened the severance package that executives would receive if they are laid off. Under the new plan, the severance would include up to 18 months of salary and a portion of their bonus, compared with a previous maximum of 12 months of salary. After the bankruptcy filing, the newspaper added, Delphi also filed a key-executive compensation program to encourage executives to remain with the company.
The new bankruptcy law, which went into effect on Monday, puts severe limits on these arrangements, and it gives bankruptcy courts greater power to unwind pre-bankruptcy transfers to individuals, even within the scope of their employment agreements.
Most notably, for these transfers to survive scrutiny, the company must successfully argue in court that the individual’s services are “essential to the survival of the business,” and that the transfer is “essential to the retention” of the individual because he or she has a competing job offer at the same or greater rate of compensation.
Companies also must prove that the payments are part of a program available to all full-time employees and do not exceed 10 times the mean severance payment to non-management employees during the prior calendar year.