Hertz, the major rental car company, has struggled to stay afloat since the arrival of the coronavirus. Its business model is heavily reliant on tourism, and with most people staying at home, their revenues have plummeted. However, these financial difficulties did not stop the company from paying its executives $16 million in bonuses right before filing for bankruptcy, a move that has received criticism from employees and shareholders alike.
The coronavirus, also known as COVID-19, is the single greatest health crisis to face the United States in more than a century. To contend with the spread of the disease, most states implemented quarantines of varying levels of severity, forcing people to stay home except when necessary. Naturally, this caused a significant decline in tourism, and businesses like Hertz that rely on travelers for their business have suffered as a result.
To cut their costs, Hertz has laid off more than 14,000 employees, with more than 2,000 employees still owed severance pay from the company. However, these financial difficulties did not stop Hertz from paying $16 million in “retention bonuses” to approximately 300 executives right before filing a motion to restructure under bankruptcy. The timing is particularly suspect, as under bankruptcy law, the company would typically be exempt from paying most severance pay while undergoing restructuring.
The move has drawn a great deal of controversy, both from employees still waiting for their own severance pay, and from shareholders who see the company prioritizing executive pay over financial solvency. While Hertz has filed a motion to be able to continue paying severance to employees who were let go before the bankruptcy filing, there is no such luck from employees who were fired after the filing. And with more layoffs expected soon, fortunes are not looking up for Hertz or its employees.
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