![handle is hein.tera/crser0199 and id is 1 raw text is: Order Code RS22427
April 20, 2006
CRS Report for Congress
Received through the CRS Web
Executive Compensation in Bankruptcy:
The Fairness and Accountability
in Reorganizations Act
Robin Jeweler
Legislative Attorney
American Law Division
Summary
S. 2556 and its companion bill, H.R. 5113, 109th Congress, 2nd Sess. (2006),
introduced by Senator Bayh and Representative Conyers, respectively, are entitled the
Fairness and Accountability in Reorganizations Act of 2006. The legislation, according
to its sponsors, is intended to ensure that workers are treated more fairly during
[bankruptcy] reorganizations by limiting executive compensation deals and requiring
corporations to provide a more accurate picture of their holdings before attempting to
modify collective bargaining agreements or promised health benefits.' This report
surveys the bill's provisions.
Background. When a corporate debtor files for reorganization under chapter 11
of the U.S. Bankruptcy Code, 11 U.S.C. § 1101 etseq., corporate management oversees
the reorganization. Although a trustee is always appointed in chapter 7, chapter 11 is
premised on the supposition that a reorganization is most likely to be successful and
creditors and the public are most likely to benefit from continued operation of the
business by existing management.2 Under chapter 11, management may be removed for
cause, including fraud, dishonesty, incompetence, or gross mismanagement[.],,3 Thus,
' Bayh, Conyers Introduce Legislation Ensuring Greater Fairness for Workers in Corporate
Bankruptcy Proceedings, Press Release (April 6,2006) at [http://bayh. senate.gov/releases/2006/
04/06APR06pr.htm]. See also 152 CONG. REC. E545 (daily ed., April 6,2006) (statement of Rep.
Conyers).
2 H.Rept. 95-595, 95h Cong., 1t sess. 233 (1977), comprising part of the legislative history of the
1978 bankruptcy law. Moreover, the need for reorganization of a public company today often
results from simple business reverses, not from any fraud, dishonesty, or gross mismanagement
of the part of the debtor's management.
' 11 U.S.C. § 1104. Pursuant to amendment by the BAPCPA, the U.S. Trustee shall seek
appointment of a trustee if there are reasonable grounds to suspect that current members of the
(continued...)
Congressional Research Service oe The Library of Congress](ViewImageLocal?handle=hein.tera/crser0199&div=1&collection=&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most