Liberty House
tries to keep
key execs

The retailer wants
pay incentives to keep
employees on board

By Peter Wagner
Star-Bulletin

Faced with large-scale defections, Liberty House has asked the U.S. Bankruptcy Court to allow bonuses, benefits, and other incentives to keep top employees -- including the company's president -- from jumping ship.

The package, to be considered by Bankruptcy Judge Lloyd King July 23, targets about 170 of the department store chain's 3,306 employees. At the top of the list is Liberty House President John Monahan and three vice presidents, followed by key mangers, buyers, computer programmers and sales personnel.

"The program is designed to retain key employees both by eliminating reasons why they might leave and by giving them good reasons to stay," says a court document filed by Liberty House last month.

Liberty House officials yesterday declined comment on the package, saying it is under discussion and could change before being taken up in court next week.

Under the current proposal, top executives would receive monthly bonuses of 4 percent of their annual salaries while other employees would get bonuses ranging from 1.5 to 3 percent. The bonuses would accrue for up to 25 months beginning March 19 -- when Liberty House filed for Chapter 11 bankruptcy -- to be paid in lump sums thereafter.

Company officials yesterday would not disclose employees' salaries and would not say how much the package would cost the company.

Attorneys representing secured and unsecured creditors in the bankruptcy case say Liberty House has made some concessions to their undisclosed concerns.

In its request, Liberty House cited "an unusual level of attrition" due to its bankruptcy, competition from new stores, and an ongoing dispute between two boards of directors over who is in charge of the company.

According to court documents, a total of 1,206 employees have left Liberty House since last December -- some by layoffs or attrition and some recruited by local and mainland companies.

The situation apparently overran the company's efforts earlier this year to whittle its work force to cut costs. Liberty House in February announced plans to lay off 162 employees, part of a program to eliminate about 300 positions.

Among competitors on the horizon are Neiman Marcus, Nordstroms and Saks Fifth Avenue. Neiman Marcus plans to open a 160,000-square-foot store at Ala Moana Center in September, Nordstroms after the year 2000. Saks is in negotiations with Victoria Ward Ltd. to open a store in a planned mall on Auahi Street in Kakaako.

Under Liberty House's retention package, Monahan also would be forgiven for an undisclosed personal debt to the company and would be entitled to two years of severence pay.

Lower-level employees would be offered serverence ranging from one to 18 months.

Also to be offered bonuses are 10 computer technicians, working to correct "Year 2000" problems in the company's data-processing system. Computer programmers are in high demand to combat the possibility of widespread computer failure at the turn of the millennium. Under the incentive program, computer specialists would be offered periodic bonuses based on annual pay.

Branch managers and sales clerks would be offered a lump-sum bonus of 33 percent of annual salaries plus sales incentives, to be paid one year after the opening of the Neiman Marcus store.

"Prompt implementation of the program is essential to its effectiveness because key people are most vulnerable at this time," the court filing says. "If a key person is lost, it is likely that others in the organization will be affected."