Circuit City Seeks Incentives to Retain Employees

Richmond, Va. Circuit City Stores Inc. is asking a U.S. Bankruptcy Court judge to allow it to give incentives to executives and other workers to stay with the company during the wind-down process, according to court filings.

The company said the bonuses are needed to dissuade the employees from leaving before the retailer closes for good.

Employee turnover threatens the wind-down plan and the company's ability to "maximize value for their estates and stakeholders," Circuit City said in the filing.

Circuit City has already had some key employees leave, including former CFO Bruce H. Besanko, who will start in a similar role at OfficeMax Inc. on Feb. 16.

The company filed for Chapter 11 bankruptcy protection in November as it faced pressure from vendors, heightened competition and waning consumer spending. Last month, Circuit City announced it would liquidate its 567 U.S. stores, cutting more than 34,000 jobs.

Under the company's proposal, 16 executives would split up to $2.3 million if they achieve specific target tasks such as staying within the wind-down budget and obtaining the sale of Circuit City's Canadian and Internet assets. The remaining non-managerial workers would share no more than $1.62 million.

The company, which will present the plan to U.S. Bankruptcy Judge Kevin Huennekens at a hearing in Richmond, Va., on Feb. 25, also is seeking a discretionary bonus pool of an additional $750,000 to distribute to the non-management workers and others who aren't covered by the program.

Circuit City said the total amount of $4.63 million that would be paid if all target tasks are reached would help the company realize about $250 million of additional value.