Kodak plans to use bonuses to entice critical employees to stay.
A version of this article initially appeared on our US site, Fool.com.
I'm nearly convinced that if Eastman Kodak wants to handle its bankruptcy proceedings like a daytime TV drama, then we should just let Judge Judy handle the proceedings from here on out.
Since declaring bankruptcy in January, things have been turbulent for the former king of film. Eastman Kodak announced that it will abandon the digital imaging business altogether and instead go toe-to-toe with Hewlett-Packard (NYSE: HPQ.US), the company where many of its top executives originate, in printers.
To jettison the hundreds of digital imaging patents it has for maximum value, the company has turned to suing Apple (NASDAQ: AAPL.US) and Research In Motion (NASDAQ: RIMM.US) on numerous occasions, claiming that the Apple iPhone and RIM BlackBerry device infringes on its preview imaging technology. In true "he hit me first" fashion, Apple offered its own lawsuit to Kodak, claiming the once-great film pioneer absconded with its original digital-camera idea without Apple's knowledge.
Today, we can add a new chapter to the Kodak made-for-TV saga. The company filed paperwork with the bankruptcy court seeking permission to dole out $13.5 million in bonuses to approximately 300 executives and employees who it believes are critical to getting Kodak back on its feet. The bonuses are meant to discourage crucial team members from going to another company. The filing further lumped these crucial components into petri-dish-like groupings: group 1 and group 2. Although no names were identified, group 1 would receive bonuses equal to about 50% of their salary, while group 2 would receive bonuses totalling 25% or less.
This wouldn't even be news -- had it not been that Kodak is bankrupt and seeking permission to hand out bonuses with money it really can't afford to spend.
In a separate filing last week, Kodak withdrew its motion to end supplemental health benefits for some 16,000 retirees currently eligible for Medicare. That's right ... had Kodak not withdrawn this motion, it would have been simultaneously asking for $13.5 million in bonuses to be doled out while cutting off benefits to 16,000 former employees. Nice, right?
Kodak has made some meaningful steps to strengthening its balance sheet, such as selling its online photo platform to Shutterfly (NASDAQ: SFLY.US) for $23.8 million, and licensing a portion of its cinematic patents to IMAX (NASDAQ: IMAX.US) for up to $50 million in royalties, but it has a long way to go before I would consider its balance sheet anywhere near safe to pay out bonuses.
What I wouldn't give to see Judge Judy rip into CEO Antonio Perez and the Kodak board. But that's just wishful thinking, I suppose.
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