USG Corp. is asking a federal bankruptcy judge to approve a compensation plan intended to encourage its top management to remain with the company while it undergoes Chapter 11 reorganization, according to court documents filed Friday.
The retention plan would cover 217 employees and would cost the company $19.3 million a year, or 0.5 percent of company revenue of $3.8 billion.
The nation’s No. 1 maker of wallboard filed for bankruptcy June 25, succumbing to mounting multimillion-dollar asbestos claims. Such costs have forced 41 companies to file for bankruptcy, according to the California-based Rand Institute for Civil Justice.
Although it is fairly common for companies wading through financial reorganization to seek permission to offer management incentives, USG may be on firmer ground in its request than other companies because its financial troubles are related to asbestos litigation, not mismanagement.
USG officials said they have developed the plan with the assistance of its creditors’ committees, which are expected to support court approval of the plan.
In its filing, USG noted that in the past year Industry Week named USG one of the “100 best managed companies” in the United States, and Fortune recognized USG as one of the nation’s “most admired companies.”
But, the company said, its ability to remain an industry leader hinges on its ability to “provide meaningful, competitive incentives and other compensation” to its management team.
USG noted that the bankruptcy, and the accompanying drop in the company’s stock, has made it unable to reward its executives with stock options as it had in the past. As a result, USG senior management’s compensation is less than half that of the rest of the industry. The company’s stock closed Friday at $5.05, up 3 cents.
“Without an adequate retention program in place … competitors and other prospective employers in other industries would quickly target [USG’s] most qualified employees and offer them new career opportunities. Exacerbating the risk, is the acknowledged high quality of [USG’s] current management team,” the company said.
