Retention bonuses in the context of bankruptcy:
Retention bonuses, also known as pay-to-stay bonuses,
have become common practice since the early 1990's and
have been heralded by courts, debtors, and creditors
alike as an important and useful way to help
reorganization by maintaining those most valuable
employees. Following a corporation’s filing for Chapter
11 protection, key employees, generally executive and
top-level management, are considered likely to leave for
more secure and less stressful opportunities in the face
of uncertainty. Debtors argue that retention plans for
key employees are essential to help alleviate employees’
fears, reward employees for hard work and dedication,
prevent the exodus of critical employees, and save the
cost of replacing key employees. Bankruptcy courts have
agreed with this reasoning for years, and judges have
used their judicial discretion to liberally award such
retention plans.
