In a motion defending its decision to recommend as much as $8.3 million in bonuses and other payouts to top and key Borders Group executives, a partner with the compensation services firm Mercer said that when Borders emerges from bankruptcy it expects to have annual revenue of $1.5 billion. The projection was used to justify the awards package, with Mercer saying that the cost of the package as a percentage of post-bankruptcy sales for Borders is .56%, just slightly above the median of .47% of comparable companies that have gone through the bankruptcy process.

The proposed bonus plan has been challenged by the unsecured creditors committee, partially on the grounds that the plan is premature, and a hearing on the matter is set for tomorrow, April 14.

The Mercer partner, John Dempsey, said quick action is needed because if retailers are to survive a Chapter 11, they must move quickly to emerge from the process. With that in mind, the bonus plan was designed to create incentives for restructuring quickly with no rewards if Borders is forced to liquidate. The proposed plan is consistent with recent bankruptcies and is designed to create a competitive pay scale for critical Borders employees, Dempsey said.

Mercer notes that over that last two years, Borders has reduced its headcount by 55% and during that period over 85 directors and officers have left the company and that 70% of the 17 executives recommended to receive the bulk of the payout have been with the company less than 18 months. Without incentives, Mercer argues, it would be difficult to retain people “whose future careers and reputations are less directly linked to Borders’ survival, but who are critical to that survival." As for the need to give bonuses to the directors who oversee the day-to-day operations, Mercer said it would be impossible to replace any who left the company, leaving Borders with leadership and talent gaps.

The filing lists the base salaries of the top five executives and the bonuses they are eligible for over a period of time. CEO Mike Edwards base is $750,000; CFO Scott Henry has a base of $600,000; CMO Michele Cloutier $500,000; evp of store operations James Frering $350,000l and human resources svp Rosalind Thompson $275,000.