Yellow Corp. coughed up $4.6 million in bonuses to its top executives for failing to skirt around a sudden Chapter 11 filing, a person familiar with the bankruptcy — which left the trucking giant’s 30,000 employees out of work — told Fortune show.
The multimillion-dollar payout wouldn’t have been so lofty had Yellow made more detailed plans leading up to its liquidation, the source said, according to the outlet.
The last-minute decision to go out of business was reportedly made after key lenders shot down the option of selling Yellow’s logistics business as a going concern rather than shutting it down, said the source — who asked not to be named discussing private deliberations.
Thus, after the company fell victim to mounting debt despite receiving $700 million in pandemic-era loans from the federal government, it was left with no other option but to dish out eye-watering bonuses.
Of the bonuses disbursed, Yellow’s board approved of nearly $2 million in June, when the company was in trouble but hadn’t yet decided to liquidate, the unnamed source told Fortune.
The so-called retention bonuses went to Chief Restructuring Officer Matthew Doheny, Chief Operating Officer Darrel Harris and Chief Executive Officer Darren Hawkins, who received $1 million, $1.08 million and $625,000, respectively, according to court papers.
Yellow also reportedly paid retention bonuses totaling about $249,000 to its former Chief Commercial Officer and $23,000 to a former exec in human resource, Fortune reported.
Though it’s unclear how the company landed on the hefty sums, which offset severance payments totaling about $306,000 and $296,000, the person told Fortune.
The bonuses were paid out in mid-July.
Such handouts are commonly granted during major restructurings as an incentive for employees to stay and help their failing employer.
By the end of the month, the embattled company’s board dished out an additional $2.6 million after Yellow decided to move ahead with the bankruptcy filing, which would be used to repay creditors and wind down, according to the outlet.
As part of the bankruptcy, Yellow sold off its freight of 42,000 trailers, trucking terminals, 12,000 tractors and other assets, which was valued at roughly $2.1 billion, according to Fortune, though a quick selloff could have seriously reduce the prices they received.
Former Yellow customers and shippers may face higher prices as they take their business to competitors, including FedEx or ABF Freight, experts say — noting Yellow historically offered the cheapest price points in the industry.
Yellow, formerly known as YRC Worldwide Inc., is one of the nation’s largest less-than-truckload carriers. The Nashville, Tennessee-based company had 30,000 employees across the country.
The Teamsters, which represented Yellow’s 22,000 unionized workers, said last week that the company gave legal notice for a bankruptcy filing and shut down operations in late July following layoffs of hundreds of nonunion employees.
Representatives for Yellow did not immediately respond to noti.group’s request for comment.
Though Yellow’s bankruptcy was sudden, it didn’t come as a shock to the industry.
Teamsters general president Sean O’Brien called the news “unfortunate but not surprising” in a July 31 statement — pointing to the financial chaos at Yellow. “This is a sad day for workers and the American freight industry,” he said.
Teamsters — America’s largest union, which also represents UPS workers and public school staffers — represented 22,000 of Yellow’s unionized workers, and reportedly caught wind of the company’s Chapter 11 filing just days after Yellow averted a strike from Teamsters amid heated contract negotiations.
A pension fund agreed to extend health benefits for workers at two Yellow-operated companies, avoiding a planned walkout — and giving Yellow “30 days to pay its bills,” notably a total of $50 million owed to the Central States Health and Welfare Fund.
Yellow had request a short-term deferral of the pension contributions plus interest, but the funds denied that request.
The Nashville, Tenn.-based company blamed the nine-month talks with the union for its demise, saying it was unable to institute a new business plan to modernize operations and make it more competitive during that time.
[Notigroup Newsroom in collaboration with other media outlets, with information from the following sources]
