Tops Markets is dropping its controversial proposal to pay up to $3.6 million in bonuses to the supermarket chain's five highest-ranking executives.
The decision to withdraw the bonus plan, which could have paid Chairman and CEO Frank Curci as much as $1.3 million if Tops exceeded its financial targets in bankruptcy, is part of a deal struck by the Amherst-based company to resolve a bitter, four-year pension dispute involving workers at its Lancaster warehouse.
That pension settlement, reached last month with Teamsters Local 264 and a separate Teamsters union pension fund, still must be approved by U.S. Bankruptcy Court. It is a key part of Tops' efforts to restructure its business and emerge from bankruptcy.
Both the Teamsters union, which represents more than 680 Tops warehouse workers, and the Teamsters pension fund that provides retirement benefits to those workers, had objected to the bonus plan, calling it a way to reward highly paid executives at a time when the business was in bankruptcy, preparing to close stores and trying to reduce its pension obligations to employees.
Instead, Tops agreed to use the money earmarked for the executive bonus plan to fund most of its $4 million contribution to a new $15 million retirement fund that is being established for the warehouse workers to partially reimburse them for pension benefits they have not accrued since the pension dispute began in December 2013.
The union and the pension fund also agreed, as part of the settlement, to drop their objections to a separate incentive plan that seeks to pay up to $3.6 million in bonuses to 115 key non-union employees who stay at Tops and not seek new jobs elsewhere as the chain moves through the bankruptcy process.
The retention plan would offer bonus payments of $10,000 to $100,000 apiece to the 115 Tops employees who the chain considers to be "critical, non-insider, hard-to-replace employees who are not members of senior management," Michael Buenzow, the financial consultant who is Tops' chief restructuring officer, said in court documents.
With the Teamsters union and the pension fund dropping their objections to the retention bonus plan, its chances of gaining Bankruptcy Court approval are improved when the court takes up the issue at a hearing scheduled for June 8 in White Plains.
But the retention bonuses still face opposition from the United Food and Commercial Workers union, which represents more than 12,000 Tops workers and is embroiled in its own talks with the supermarket chain over the company's desire to reduce its payments to a badly underfunded pension plan for those employees.
"The [retention] plan is a joke. I'm never going to drop my objections to that," said Frank DeRiso, the president of UFCW Local One. "These labor agreements didn't put the company in bankruptcy. What put this company in bankruptcy was corporate greed and bad management."
The UFCW Local One Pension Fund already is classified as being in "critical" condition by federal pension regulators because it only has enough assets to cover a little more than 50 percent of the benefit payments that have been promised to the plan's participants. It is underfunded by more than $390 million, according to Bankruptcy Court documents.
Bonus plans aimed at retaining and rewarding top executives are common – even at companies that have filed for bankruptcy. Buenzow previously said that the bonus plans are "essential" to the company's reorganization efforts by creating incentives to keep employees from leaving and rewarding them for doing a good job.
But the bonus plan for Tops' five highest-ranking executives had become a lightning rod for Tops' critics, especially as it pushed forward with plans to close unprofitable stores and reduce its worker pension obligations.
The bonus plan for Curci and four other top executives would have entitled them to bonus payments only if Tops came close to meeting its financial targets.
For instance, if Tops met its financial target, Curci would have been eligible for a bonus of $651,288. But if Tops exceeded its financial targets by 10 percent during each of the final three quarters of this year, Curci's payments could have top $1.3 million. Even if Tops' performance fell 10 percent below its financial targets, Curci would have been eligible to receive $162,822. If Tops missed its financial goals by more than 10 percent during a given quarter, no bonuses would have been paid for that three-month period.
A Tops spokeswoman said the company had no comment on the elimination of the executive bonus plan.