If you think that bonuses are supposed to reward success, you’re not alone, but the reality is more bizarre. While Energy Future Holdings, formerly TXU, of Dallas continues its downward spiral toward bankruptcy, it’s handing out millions in bonuses to its executives.
The bonuses are called retention bonuses and are supposed to keep executive from fleeing the company as its prospects worsen. At first glance, that makes some sense. Recruiting replacements might be difficult. After all, who is going to want to take charge of a failing company? But then, who would want to hire an executive whose last job was running a company that failed so spectacularly? And if bonuses increase as the company does worse, what incentive is there to improve performance? Against the basic principle of capitalism, this system actually provides an incentive to fail.
Meanwhile, Energy Future Holdings is still making huge payments to the private equity holders that are responsible for over leveraging the company in the first place. Henry Roberts Kravis, CEO of KKR received $30 million and his cousin and co-CEO, George Roberts received $29.9 million in compensation for 2011. Clearly, the survival of Energy Future Holdings is not the main concern of either these private equity barons or the executives at the company, or else they wouldn’t be squeezing personal profit out of it when it’s floundering.
While employees at Energy Future Holdings and its subsidiaries may be worrying about what the future holds, those at the top are cashing in big. No government payments or loans to the company or altering of the energy market will change that dynamic.
Don’t let your money be used to line the pockets of failing executives and private equity CEOs.
If you live in Texas, please sign our petition urging all Texas Legislators to oppose any public or ratepayer-funded bailout of Energy Future Holdings.
