Eastman Kodak Co. has filed a request with the district court overseeing its Chapter 11 bankruptcy asking for permission to pay around $13.5 million in bonuses to approximately 300 employees to keep them on board during and after the restructuring. 

This pay-to-stay practice was ostensibly quashed by bankruptcy reform legislation years ago. But the onetime imaging giant wants the court to grant an exception. It contends that these employees are critical to the company's turnaround and will quit without the incentives.

Historically, the problem with big bonuses in bankruptcy was that conferring them often came at the expense of rank-and-file workers. In 2001, Polaroid filed for bankruptcy and eliminated severance and insurance payments — then turned around and gave top brass $4.5 million in bonuses. Congress made changes to the corporate bankruptcy code in 2005 aimed at preventing this kind of lopsided treatment of executives and ordinary workers, but Kodak wants an exception.

In court documents, the company argues that because the portion of executives' compensation consisting of company stock had become nearly worthless, these employees had taken what amounted to a pay cut by continuing to work there. Without the bonuses, it contends, these workers are likely to be poached by competitors who can offer them more money, and finding people with the knowledge and skills to take their places will be time-consuming and expensive.

Kodak spokesman Christopher Veronda said the bonuses were a necessary response to what he described as an "increased amount" of people leaving the company. "We haven't quantified it but certainly there have been departures," he said.

The Eastman Kodak Retiree Association, which previously clashed with the company over a proposal to cut retiree healthcare benefits, expressed a degree of support for the bonus plan. "Our view on this is that Kodak has to do what it thinks is necessary to make the company competitive by retaining good people," spokesman Bob Volpe said via email. "If these people can help make Kodak successful, maybe there will be less pressure to cut retiree benefits." 

The bulk of the money — $8.5 million — would go to 119 workers at the middle management level and above, with the remainder going to 200 employees further down the corporate ladder. Kodak's description of the employees on its bonus list was both sweeping and vague. It said bonus recipients "would be identified based on skills and leadership, on the one hand, and external marketability considerations, on the other hand."

"I'm not sure Kodak provides enough detail to justify the use of these moneys," said Katherine Porter, professor at UC Irvine School of Law. Porter said the large number of intended recipients didn't give her the impression of a cash grab by top brass, but she added that the creditors need to get more detail about who these people are and why they deserve extra compensation.

Veronda described the employees as "mission-critical people it would be really costly to replace if they left, and/or leave a real knowledge gap if they left." He acknowledged that the creditor committee might press for more details about who these people are and what they do before agreeing to green-light bonuses.

Ethan Bernstein, a Kauffman Foundation Fellow on leave from Harvard Law School, studied the "flight risk" of CEOs at companies that went through bankruptcy as compared with those that restructured privately, and found that bankruptcy wasn't any more or less likely to lead to a departure. "From a similar framing, the 'smell test' here is whether the bonuses being proposed at Kodak would be supported by those in control of a private restructuring," he said via email. "That's a much harder question to answer." 

Steven Kropp, professor at Roger Williams University School of Law, expressed skepticism that upper management would be in high demand, given Kodak's protracted and well-documented struggles to remain competitive. "You're left wondering why are these people so badly wanted, when they're the ones who have basically pushed the company into bankruptcy," he said. Kodak might be concerned about retaining lower-level workers with highly specialized technical skills — a group that could include the 200 non-managers in the company's proposal — but Kropp said these workers are less likely to have the financial means to relocate far from Kodak's Rochester, N.Y., headquarters.

Kodak's request to the court doesn't provide any documentation that these workers are being poached or are quitting, Porter added. "They say they've had employees leave and have had turnover, but they don't quantify that," she said.

Executives at MF Global wouldn't appear to be model candidates for bonuses. But if the former FBI official acting as the firm's bankruptcy trustee has his way, nearly two dozen high-ranking executives at the disgraced brokerage could rake in hundreds of thousands of dollars — each — as the government tries to sort through the company's chaotic, free-spending final days.  

Regulators have been trying to figure out what happened to as much as $1.6 million in customer funds since the company's implosion in October following a string of bad bets on European debts. The Wall Street Journal, citing unnamed sources, said trustee Louis Freeh plans to ask the judge overseeing the liquidation to approve bonuses for MF Global top brass including its COO, CFO and general counsel. Former Goldman Sachs chief and New Jersey governor Jon Corzine resigned as CEO in November without taking a severance package.

These executives would earn bonuses for hitting certain benchmarks in terms of squeezing additional value out of the collapsed company's assets. An advisor to Freeh told the Journal it would be cheaper to keep these workers on board than to hire outside consultants and accountants to sift through reams of sloppy or incomplete paperwork to track down missing funds.

Lawyers and consultants representing the interests of clients — some of who have received less than three-quarters of their invested funds back, according to the Journal — blasted the proposal, calling it a conflict of interest. They argued that customers, whose funds were supposed to be wholly separate from the troubled company's other assets, should be made whole before the other creditors — the ones who would benefit if the bonus benchmarks are met — get their slice of the pie. 

This practice of executives at bankrupt companies receiving huge payouts when stockholders, retirees and even current employees lose out is controversial; some experts say performance targets are set so low as to be meaningless and others say the bonuses incentivize executives to put the interests of increasingly activist creditors ahead of equity stakeholders. 

Orlando / Getty Images

A Fuller Brush salesman, circa 1950.

By msnbc.com news services

Fuller Brush, the company that popularized selling door-to-door in the U.S., has knocked on the door of bankruptcy court.

Decades after the company first sent out fleets of salesmen armed with suitcases full of brushes, personal care and cleaning products, Fuller has said it feels it must file for Chapter 11 bankruptcy as it is “a necessary step and the right thing to do for the future success of the company,” according to a statement from Chief Restructuring Officer Lawrence Perkins.

The move comes just two months after the company said it had overhauled its operations, declaring itself to be “rebooted” with a new website and a “whole new line of products specifically designed for today’s consumers.”

Started in 1906 by a 21-year-old from Nova Scotia, Alfred C. Fuller, the company grew into the Fuller Brush Company that today has just 180 employees, mostly at its Great Bend, Kan., headquarters.

Fuller Brush became synonymous with door-to-door selling, known for its brushes, brooms and cleaning products. Its sales staff traveled with suitcases full of products selling them directly to consumers.

In bankruptcy the company aims to maximize its revenue streams from its most popular products, while eliminating the production of other, less profitable items. It also aims to obtain the financing to reassure its employee, customers, and stakeholders that the Company is in business, Perkins said.

Fuller Brush’s assets and debts each amount to between $10 million and $50 million. Private equity firm Buckingham Capital Partners bought the company from CPAC in 1997. CPAC, which manages companies in the cleaning, personal care and imaging industries, is also filing for bankruptcy protection, according to The Associated Press.

Fuller filed for Chapter 11 bankruptcy protection on Tuesday in U.S. Bankruptcy Court for the Southern District of New York.

Is this the end of the road for the Fuller Brush Man? Discuss on our Facebook page.

GM posted its highest annual profit ever in 2011 -- $7.6 billion -- two years after it emerged from bankruptcy protection post a government-led bailout.

Msnbc.com wants to know what you think of this.

Investigators don't know where it is, but they know it's a lot more money than they originally estimated.

James Giddens, the trustee overseeing the broker's bankruptcy proceedings, said Friday in a statement e-mailed to news agencies that he estimates there's $1.6 billion of clients' money missing, $400 million more than original estimates. Giddens has been combing through the accounts of MF Global, which was headed by former New Jersey Gov. Jon Corzine, since it filed for bankruptcy protection on Oct. 31.

He noted in his statement that the figure could change again.

Reuters reported that Giddens said the new estimate stemmed from claims from customers who traded on both U.S. and foreign exchanges, with about $700 million still in dispute with the British administrators of MF Global UK Ltd.

The trustee's spokesman was not available for comment.

The statement said the trustee has so far returned about $3.9 billion in commodity customer funds, and said about 91 percent of outstanding claims were for less than $100,000.

"The Trustee is eager to make additional distributions to former MF Global Inc customers as soon as possible," the statement said.

"However, the Trustee is required by law to hold an appropriate reserve of funds until disputed claims are resolved either through negotiation or by the Court. At this time, the Trustee anticipates significant disputed claims against the MF Global Inc. estate by MF Global Holdings Ltd., MF Global UK Limited, and other entities."

Reuters and The Associated Press contributed to this report.

Financially troubled American Airlines on Wednesday announced it's looking to cut 13,000 employees and terminate the company’s defined pension plan as part of its restructuring strategy to emerge from bankruptcy and return to profitability.

“A difficult outcome of the restructuring process is our need to reduce our workforce to better align with a more efficient operation,” said Bruce Hicks, a company spokesman. 

The deepest cuts will come from fleet services and mechanics for a total of 8,000, followed by flight attendants with 2,300 proposed reductions; management with 1,400 and pilots with 400. American Airlines and American Eagle Airlines, both subsidiaries of AMR Corporation, employ a total of 88,000 full and part time employees, including about 68,000 workers covered by unions. 

Representatives of the Allied Pilots Association, Transport Workers Union, and Association of Professional Flight Attendants met with company officials in Dallas earlier on Wednesday to hear the restructuring plan.

Reached before details emerged about the proposal, Sam Mayer, a long-time American pilot who sits on the union's communication committee, said, "just because they ask for something today doesn't mean they're going to get it.”

AMR has been operating under bankruptcy protection since November and is in negotiations with its unions over cost-cutting measures. AMR reported a loss of $904 million in December alone.

In a letter to employees today, AMR CEO Tom Horton spelled out the sacrifices and investments the company is proposing including upgrading the airline’s infrastructure by investing about $2 billion per year in aircraft and $1 billion in network and product improvements.

As for belt tightening, Horton expects $2 billion in cost savings from “restructuring debt and leases, grounding older planes, improving supplier contracts and other initiatives, and necessary employee-related changes.”

The company is seeking “$1.25 billion in permanent annual cost reductions from all employee groups,” Jeff Brundage, American’s senior vice president of human resources told employees in an email today.

In addition to employee cuts, he wrote, the company will:

• “Seek court approval to terminate our defined benefit pension plans. If terminated, the plans would be replaced with a 401(k) plan with a company match.”
• “Seek to discontinue company-subsidized retiree medical coverage for current employees, but will offer access to these plans if employees choose to pay for them.”

Such changes, he acknowledged, will require “decisive action, difficult changes, and an unwavering commitment to our future success.”

It’s unclear how abiding American’s employees will be.

The company has had a rocky history when it comes to worker-management relations, and it’s unclear how much sway the newly minted CEO Horton will have getting employees to buy in.

Horton took the job after Gerard Arpey resigned late last year over objections to the bankruptcy filing. Arpey had spent years trying to turn the company around, and also mend fences with American’s unions that felt slighted by the CEO who had the job before him, Don Carty.

Before Arpey came on board in 2004, the company’s management got employees to agree to nearly $2 billion in wage and benefits cuts, but at the same time funding a pension trust and paying out lucrative bonuses to the company’s top executives, including Carty.

Now they go to the negotiating table yet again.

“The company makes their proposal and we begin negotiating with them,” Mayer maintained. “That's what will happen with all three unions."

 For other major airlines that went through bankruptcy, he continued, “the final agreement looked nothing like the original proposal by management.” 

Updated at 2:29 p.m. ET

American Airlines officials were meeting with their three major unions amid reports that the bankrupt airline company is making plans to eliminate up to 15,000 jobs.

Representatives of the Allied Pilots Association, Transport Workers Union, and Association of Professional Flight Attendants were meeting with company officials in Dallas, said Sam Mayer, a long-time American pilot who sits on the union's communication committee. The three unions represent about 54,000 total employees.

"Right now we have no idea what they're going to be asking for as far as pay cuts, work rules, job cuts, furloughs, etc.," Mayer said.

Reuters, quoting an unnamed source who was at the meeting, reported that AMR Chief Executive Tom Horton told the unions, "We will end this journey with many fewer people."

Horton also said the airline intends to emerge as an independent company, according to one of the sources who attended the meeting with the unions, Reuters reported.

American Airlines did not immediately return a call requesting comment.

Mayer added that "just because they ask for something today doesn't mean they're going to get it. The company makes their proposal and we begin negotiating with them. That's what will happen with all three unions."

For other major airlines that wen through bankruptcy, he continued, "the final agreement looked nothing like the original proposal by management."

AMR has been operating under bankruptcy protection since November and is in negotiations with its unions over cost-cutting measures.

Bloomberg, citing industry analysts, reported that American was preparing to offer contracts that would eliminate 10,000 to 15,00 jobs and freeze pensions.

American employs about 74,000 full- and part-time workers plus 14,000 at regional carrier American Eagle, Bloomberg said.

AMR reported a loss  of $904 million in December alone.

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The real estate listing alone is enough to make most New Yorkers green with envy: a 2,400 square foot, 2 bedroom, 3.5 bath penthouse with floor to ceiling windows overlooking the Hudson River and views of the Manhattan skyline.

The price tag might make them gag, however.

Former N.J. governor Jon Corzine, whose now-defunct brokerage MF Global is being probed for allegedly using clients' funds to shore up the firm after bad bets on European debt, has put his Hoboken, N.J., apartment on the market for $2.9 million, according to the listing at Halliburton Home Real Estate Services.

CNBC says the former head of Goldman Sachs and ex-Democratic Senator from N.J. bought the home in 2008, when he was governor, for $3.64 million. That kind of haircut would be called a high-and-tight.

The Wall Street Journal reported Monday that the $1.2 billion in missing MF Global customer money may have "vaporized" in the weeks before the company filed for bankruptcy protection on Oct. 31, 2011. 

When companies go bankrupt, the misery is shared among many: Bond holders are wiped out, retirees see their pensions and benefits vanish, and employees lose their jobs.

But some feel no pain at all: CEOs and other top executives of companies that go through Chapter 11 receive robust compensation in the form of salary, stock grants and other benefits.

In some cases, they earn even more money than they did before the filing, even while other stakeholders suffer. It's the most unlikely fast-track to a fat payout ever, and it goes on in spite of federal legislation meant to crack down on corporate honchos feasting while everyone else fights over crumbs. 

It wasn't supposed to be like this. In the wake of corporate catastrophes such as Enron, Congress passed legislation aimed at preventing companies from paying retention bonuses to executives at firms going through Chapter 11. 

"You can't pay someone for just staying at a bankrupt company," said Robert Jackson, an associate professor at Columbia Law School at Columbia University, and former advisory to senior Treasury officials on executive compensation during the financial crisis. "But that's different from paying them from doing well at a bankrupt company," he said. 

That distinction has become a loophole. Since the law allows performance-based incentives, huge executive payouts have morphed over the years to be little more than retention bonuses by another name, according to critics who say executives net outsized payouts even when they negotiate agreements that leave stakeholders out in the cold.

"There seems to be no sense of accountability at this level," said Steven Kropp, a professor at Roger Williams University School of Law. "In most of these cases, the unsecured creditors aren't being paid back in full, employees are being laid off, and in addition, they're finding their health insurance and pensions diminished." An investigation by The Wall Street Journal found that median compensation of CEOs at 21 companies that filed for bankruptcy was $8.7 million, just $400,000 less than the median compensation earned by CEOs at healthy companies. 

Companies are required to go to court and argue their case for big bonuses with the bankruptcy judge, explaining why the CEO deserves the set level of compensation and what targets they must meet in order to earn their bonus. The problem is that often the bar is set so low that even lackluster performance will be measured as success. 

"It's all fine and well to say you're going to pay people for performance, but the key is what kind of performance," Jackson said. "It's very hard for a judge to know if an earnings target is easy or hard to hit. Are they just window dressings?" To make this determination, the court has to rely on evidence from the company's executives and lawyers, who may have an incentive to give themselves easy assignments.

Judges also have to rely on the input of compensation experts — also hired by the company — to know if the bonuses being proposed are appropriate for the industry and the task at hand, which also raises the prospect of manipulation. 

To keep companies from taking advantage of this, Jackson said, bankruptcy courts could have their own industry-specific experts to vet the numbers being proposed by people on the company payroll. 

Critics of the current status quo say there are other legal ways to patch the ballooning-bonus loophole. "You could simply amend the bankruptcy code to preclude a company in bankruptcy from paying bonuses in excess of prior salary to its existing executives," John Coffee, a professor at Columbia Law School, said via email. "Or you could limit the amount of any additional income in excess of their prior compensation from the firm to some reasonable percentage." 

Kropp suggests using clawback provisions to cap executive compensation in the event of bankruptcy and funneling the recovered funds into employees' investment accounts. Even advocates of reforms like these, though, admit that they're a political no-go for lawmakers in today's contentious legislative environment. 

The argument in favor of big bonuses, even when they come at the expense of employees, retirees and other unsecured creditors, is that successfully guiding a company through bankruptcy and emerging on the other side is a challenging, risky job, and most CEOs would bolt without the promise of millions in cash and stock for their trouble.

But research done by Ethan Bernstein, a Kauffman Foundation Fellow on leave from Harvard Law School, shows that CEOs of financially troubled companies quit or are ousted at the same rate whether or not they file for bankruptcy or muddle through with private restructuring.

For some, this raises the troubling possibility that Chapter 11 has become a back door for CEOs to grant themselves raises, especially in light of the fact that the Journal's research found CEOs at some troubled firms actually earned more after filing for Chapter 11.

"My belief is that CEOs and other senior executives can panic a board with the implied threat that they might desert the sinking ship if some formula is not found to give them extraordinary pay for their service in a crisis," Coffee said. 

Pulling a teetering company back from the brink is hard, and it's an increasingly specialized job, which Bernstein said contributes to the high number — 37 percent — of CEOs brought on either during a bankruptcy reorganization or in the year leading up to it. 

He said key stakeholders want a "bankruptcy guru," and they're willing to shell out enormous sums for the services of a CEO they think can pull the most money out of a troubled company. The catch is that this slate of decision-makers increasingly includes big creditors, negotiating with the kind of clout once limited to shareholders. What a creditor sees as the best return on its investment may very well be a bloodbath for the company's rank-and-file.

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Gary Cameron / Reuters

Kodak invented digital photography, but was slow to recognize the shift away from film and even away from cameras.

January has been quite a month for iconic brands going belly-up. First Hostess Brands, maker of that oblong, crème-filled snack cake emblazoned in many a childhood memory, filed for Chapter 11 bankruptcy protection. And in the early hours of Thursday morning, so did Eastman Kodak Co., the 131-year-old stalwart that dominated the market for camera film until the advent of digital cameras crushed demand for it.

But all is not necessarily lost for Kodak, experts say. Like Polaroid before it, the Kodak name still has cachet with professional photographers and hobbyists who don’t want to go digital, and Kodak’s intention to sell some 1,100 digital patents and forge ahead with lawsuits seeking royalties from Apple, Research in Motion and HTC could be lucrative.

Still, its focus on rebuilding its business as one that sells printers and its pension obligations to retirees could bring the company closer to a death rattle. While it has $5.1 billion in assets, it owes a whopping $6.75 billion to creditors like Bank of New York Mellon, Sun Chemical, Sony Studios and Warner Brothers.

“It’s really up in the air at the moment,” said Rita McGrath, a professor of management at Columbia Business School and an expert in company growth and innovation. “There was this last ditch, hail Mary effort to sell the patents to generate enough cash to keep the place from cratering. Now that that’s happened, it’s an opportunity for a fresh look. If a new leader comes in who can do something really remarkable with the technology they have, then the employees might have a new place to go to.”

Kodak made $3 billion in licensing revenue from 2003 to 2010, but its patent portfolio earnings shrank to just $98 million in 2011. In its bankruptcy filing, however, Kodak stated that it “anticipates substantial future revenue from licensing its intellectual property for use in smartphones and tablets that employ digital cameras, as well as in next-generation products that utilize Kodak technology.”

And while 75 percent of its revenue in 2011 came from its digital business, which includes inkjet printers, commercial inkjet printing systems and self-service photo kiosks, Kodak operated at a loss for all but one year since 2005. They “spent several decades in denial, despite incredible scientific and technical prowess,” said McGrath. “The time to take action was back in 1980.”

Other experts say Kodak did what it could to enter the digital photography space but didn’t anticipate the speed with which the technology would take off, and in particular the way multifunction smartphones have usurped demand for standalone cameras and camcorders. Kodak was not the only company to feel the burn from iPhone and Android smartphones equipped with cameras. Just look at Cisco, which made the decision to discontinue its popular Flip portable video cameras, said Euromonitor research analyst Howard Telford. “It’s impacting a lot of companies that operate in the portable side of consumer electronics," he said.

Regardless of where Kodak went wrong, the fate of its patents depends on its bankuptcy case now, said McGrath. A bankruptcy judge could decide to unload the intellectual property quickly in a "fire sale" or the judge could decide that a commitment to restructuring is worth holding out for higher prices. 

Photoblog: Top photographer recalls Kodak's moments

And while many have criticized Kodak’s decision in recent years to focus on the already saturated printer market at the behest of Chief Executive Antonio Perez, who formerly headed up printing giant Hewlett Packard, not everyone agrees that it should pull out of that arena completely. 

Mark Kaufman, an independent analyst who covers Kodak, sees a silver lining in the fact that Kodak’s high-speed commercial inkjet printers are finally being purchased by publishers abroad. Kodak's proprietary technology allows publishers to print multiple versions of a book without changing the plates, a money-saver in times when publishers don't sell as many copies of print books as they used to.

And while the U.S. market may be all about iPads and e-readers, it’s not necessarily so in other countries, where Kodak is already embedded in business-to-business printing. “The world isn’t New York City,” he said. "Are you outfitting students in China and India with iPads? It’s still a very vibrant growth market.”

Below, NBC's Brian Williams reports on the Kodak filing.

Related:

Vote: Does Kodak still have a future?  
Top photographer recalls Kodak's fading moment

Spencer Platt / Getty Images

Hostess Brands Inc., the owner of such iconic brands as Twinkies and Wonder Bread, has filed for Chapter 11 bankruptcy protection.

Hostess, baker of Twinkies, Ding Dongs, Ho-Ho's and Wonder Bread, is hoping that twice-baked is the key to its future. The company said Wednesday that it filed for bankruptcy protection in an attempt to shrink a pile of debt amid soaring labor costs.

The Chapter 11 filing comes just two years after a predecessor company emerged from bankruptcy proceedings. Hostess blamed the current move on troubles with its pension and medical benefits obligations, increased competition and tough economic conditions.

The company's other problem is that health-conscious Americans favor yogurt and energy bars over the dessert cakes and white bread they devoured 30 years ago.

Last year, 36 percent of Americans ate white bread in their homes, down from 54 percent in 2000, according to NPD Group. Meanwhile, about 54 percent ate wheat bread, up from 43 percent in 2000.

Consumption of healthy snacks is growing, too. About 32 percent of Americans ate yogurt at least once in two weeks in 2011, for instance, up from 18 percent in 2000.

"We're less likely to be snacking on items that we shouldn't be snacking on," said Harry Balzer, chief industry analyst for The NPD Group, a consumer marketing research firm.

Hostess, which is a privately held, doesn't disclose sales figures. But analysts say the iconic brand has been hurt by Americans' changing eating habits.

To be sure, Hostess' snacks don't neatly fit into the U.S. trend toward a healthier lifestyle that includes a diet rich in whole wheat foods, fruits and vegetables.

The Twinkies fans out there shouldn't fret, however. The privately held Irving, Texas bakery company says it will be able to maintain routine operations to keep shelves stocked with the spongy, yellow snack and other Hostess pasteries thanks to a $75 million financing commitment from a group of lenders.

Reports had surfaced earlier in the week that the company was planning to make a bankruptcy filing.

Hostess said that it will look to restructure into a "strong, competitive" company. It will continue to run bakeries, outlet stores and distribution centers and deliver its goods during the process.

Hostess, founded in 1930, operates about 36 bakeries in the U.S. and employs about 19,000 people, a majority of whom are members of 12 unions.

The company listed the Bakery & Confectionery Union & Industry International Pension Fund, to which it owes $944.2 million, as its largest unsecured creditor.

To reorganize itself, the company must withdraw from multiemployer pension plans, address legacy health and welfare costs and secure new capital to modernize its production and distribution operations, Irving, Texas-based Hostess said.

The company had total assets of $981.6 million and liabilities of $1.43 billion as of December 10, 2011.

The privately held company said it had made efforts to sell its businesses and other M&A alternatives, including reaching out to companies like Smuckers, Kraft, Blackrock, KKR and others without any success.

"We remain hopeful that we can reach an agreement that will allow us to amend our labor contracts so that we can emerge from Chapter 11 as a highly competitive company that provides secure jobs for our employees," Chief Executive Brian Driscoll said in a statement.

The Associated Press and Reuters contributed to this report.