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Bankrupt Revlon Execs Getting $36 Million in Bonuses

Revlon

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Revlon may have been forced to declare bankruptcy, but, for some reason, its executives are still getting paid a bundle in bonuses. Revlon execs are getting paid $36 million in bonuses.

Revlon, one of the best known cosmetics brands in the world, went bankrupt in June. The company –controlled by investor Ronald Perelman – was forced to seek protection under America’s Chapter 11 bankruptcy laws. And as Investopedia explains, “Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets, and for that reason is known as “reorganization” bankruptcy.” It lets a company stay in business and restructure its obligations.

So, this means that Revlon is continuing to conduct its business operations; however, a judge must sign off on its business transactions as well as major expenditures including paying out high bonuses to senior management. And Revlon reportedly had $21.1 committed to pay out in bonuses to its senior execs top executives, including $10.6 million set aside for CEO Debra Perelman. The bonuses could add up to a total of $36.1 million over the next 18 months.

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The payouts will come in spite of objections made by US Treasury officials who argued that this will not serve to provide any incentive for the executives to work harder at improving Revlon’s business operations. But the executives themselves would argue that this was money that they already earned. US Bankruptcy Court Judge David S. Jones, however, rejected the position of the Treasury officials saying, “In fact the metrics imposed are indeed tall orders and serious challenges for a business in the posture that the debtor finds itself in.”

So, in other words, the money was already earned and if it were to be denied to the executives then they would simply quit, or not bother to work harder since they would not foresee getting any further bonuses.

But to the average Joe on the street, this is all absurd. These are the very same execs who oversaw Revlon’s failure. And most other major companies have not gone bankrupt because of the economic crisis. So, people are asking, why should the execs get paid millions in bonuses if when an average person declares personal bankruptcy their lives are generally ruined?

The collapse of Revlon was complex. Before it became official, the worldwide financial crisis had long gripped the corporation held by billionaire Ron Perelman, leaving it with only the court-supervised Chapter 11 process as a means of survival.

According to the company, the bankruptcy filing was not caused by a lack of demand for its beauty goods, or high competition, but rather by supply chain glitches, inflation, and labor interruptions, which left it short on cash and working capital.

After declaring bankruptcy, Major player Mittleman Brothers Investment Management divested itself of Revlon stock.

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