According to a plan being hatched by the overseers of the bankrupt MF Global Holdings Ltd.,
three of its highest-ranking executives would receive big bonuses to help with the process of winding down the firm.
When I first heard of this proposal, I felt angry.
Now I find the brazen greed and total disregard for investors laughable.
The plan to reward the people responsible for the mess is the brainchild of Louis Freeh, a former FBI director, who is serving as a trustee to MF Global, which filed for bankruptcy protection Oct. 31. About $1.6 billion disappeared from MF Global customer accounts after a fury of transactions during the company's final days.
Mr. Freeh will ask the bankruptcy court judge in charge of the case to approve lucrative bonuses for the three, who are still working at what is left of the firm. Additionally, about 20 other MF Global employees working with Mr. Freeh also would be eligible for bonuses.
This proposal calls for each of the three top executives to receive cash in the amount of six figures.
I have a better idea.
Rather than rewarding these executives to help find the missing cash, how about placing that bonus money into a fund to help repay those people whose trust was betrayed? That trust, I might add, also was put into the hands of those three executives who stand to receive an unwarranted payout.
It is mind-boggling to think that those executives, Bradley Abelow, chief operating officer, Laurie Ferber, general counsel, and Henri J. Steenkamp, chief financial officer, should receive incentives to unravel a mess that they helped create.
The value of enlisting those three to recover assets outweighs the cost to retain accountants and consultants to sift through MF Global's financial statements, those familiar with the case have stated in published reports.
GIVE MONEY TO CUSTOMERS
That is fine; so don't hire outside experts. Simply insist that as a form of penance, the three should work harder at finding the money than they did at “misplacing” it.
Mr. Abelow earned $7.6 million in total compensation last year. How much more money does he deserve for doing a lousy job?
Rather than divert money that belongs to customers by rewarding faulty stewardship, let the trustees and banks sort through the mess and find ways for customers to recoup what belongs to them.
The proposed fat bonuses would not only deliver an insulting message to the firm's customers, they also could rattle other investors.
Federal bankruptcy laws restrict rewarding “retention” bonuses to executives who kept their jobs at a failed company. They were written to ensure that company executives involved in the fall of a company because of fraud or mismanagement aren't eligible for bonuses.
Mr. Freeh's plan calls for the executives and other MF Global employees to receive performance-based target bonuses staggered over a period of time. By doing so, he is making a case to the judge that the bonuses are part of an “incentive” plan rather than a “retention” plan.
Mr. Freeh needs to come to his senses, reconsider his plan altogether and start a customer relief fund.
Jim Pavia is the editor of ¬InvestmentNews.
