Just weeks before closing its doors and laying off thousands of employees, Yellow Corp. awarded millions of dollars in bonuses to executives so they wouldn’t leave the trucking company during its chaotic unraveling, court documents show.
Yellow paid bonuses totaling about $4.6 million to eight current and two former executives in the weeks before the company filed for bankruptcy with plans to liquidate, according to company disclosures in Delaware bankruptcy court. The figure is higher than it would have been if Yellow had managed to avoid a sudden bankruptcy filing, according to a person familiar with the matter.
Of the bonuses paid out, nearly $2 million, paid on July 14, was approved by Yellow’s board in June — when the company was in trouble but before it was considering filing for bankruptcy, the person said. Yellow’s public feud with a union representing much of its workforce escalated days later when a strike announcement prompted the company’s customers to take their business elsewhere, Yellow said.
The remaining bonuses paid on July 31 then became necessary as Yellow planned a bankruptcy filing that would be used to repay and wind down creditors, according to the person, who asked not to be named in private deliberations. The company’s fleet of trailers, truck terminals and other assets — all of which should be sold quickly and at the highest possible prices — was previously valued at about $2.1 billion. A fire sale could seriously reduce the prices they fetched.
So-called retention bonuses are common in major restructurings because they incentivize employees to stay and help bankrupt companies clean up. It is less common to pay them prior to a bankruptcy filing when, as with Yellow, the company in question is closed for good.
The bonuses underscore a counterintuitive logic that emerges time and time again when companies fail: The executives who lead companies into bankruptcy are often the people best equipped to repay their debts, if only because the institutional knowledge they possess. Creditors, lower-level employees and even regulators often view retention bonuses as unfair or unnecessary, but federal judges and restructuring advisors routinely conclude that they help creditors affected by bankruptcy more than they otherwise would.
The July payouts included a $1 million retention bonus to Yellow Chief Restructuring Officer Matthew Doheny, $1.08 million to Chief Operating Officer Darrel Harris and $625,000 to Chief Executive Officer Darren Hawkins, according to a court filing.
Yellow also said it paid retention bonuses totaling approximately $249,000 to its former chief commercial officer and $23,000 to its former senior vice president of human resources. The company paid those bonuses because, when it went bankrupt, it explored the possibility of selling its logistics business as a going concern rather than closing it, the person said, but key lenders did not support that idea. The bonus payments were therefore used to offset severance payments totaling about $306,000 and $296,000, the person said.
Geel did not return a message seeking comment. Doheny, Harris and Hawkins did not respond to LinkedIn messages seeking comment.
Sean O’Brien, executive chairman of the International Brotherhood of Teamsters, said in a statement that the bonuses should be addressed by reforms in Congress “that workers in this country desperately need.” O’Brien criticized Yellow for making the payments while skipping payments for employee benefits.
Congress in 2005 restricted companies in Chapter 11 from paying executive retention bonuses, prompting companies to pay out such rewards before going bankrupt. In recent years there have been calls to restrict such bonuses before bankruptcies. In 2021, the Government Accountability Office recommended that Congress require judicial oversight of executive retention bonuses after more than two hundred executives received about $165 million before their companies filed for bankruptcy.
Disputes over executive pay in bankruptcy court can become especially heated when a union is involved, says Jared Ellias, a professor at Harvard Law School who has researched Chapter 11 bonuses. “Given what happened here, I understand why they paid out the bonuses before filing,” Ellias said on the phone. Typically, they are paid without controversy, with court approval, after a liquidation is completed, he said.
Yellow filed for bankruptcy on Aug. 6 with long-term debt of $1.2 billion, including a U.S. government bailout loan worth about $700 million, debt the company said it expects to repay in full. According to a previous company statement, the closure will ultimately leave Yellow’s approximately 30,000 employees unemployed.
But the liquidation, now well underway, has sparked intense competition from lenders and rival trucking companies that see value in Yellow’s assets. Lenders led by Apollo Global Management initially offered to finance the company’s wind-down, a proposal that was ultimately supplanted by a better deal with Ken Griffin’s Citadel and hedge fund MFN Partners LP. Since then, Estes Express Lines and Old Dominion Freight Line Inc. bid against each other on Yellow’s truck terminals, with Estes recently bidding $1.525 billion.
The case concerns Yellow Corp. 23-11069, US Bankruptcy Court for the District of Delaware (Wilmington).