Executive Compensation in a Chapter 11 Restructuring

The rules of executive compensation change during the period leading to a restructuring. With third-party watchdog Institutional Shareholder Services (ISS) exiting the picture and bankruptcy court coming in, retention takes much a more equal footing with pay for performance. All parties are focused on keeping talent in place and orienting their actions toward emerging from bankruptcy in a restructured capacity.

In this issue brief, we cover the different types of restructurings and the general timeline for each. These set the stage for what the compensation program will generally look like during the restructuring, how the program might be different under different types of restructurings, and finally what the strategic decisions will be for the program. We also have two case studies at the end to show these principles in action.