Asarco requests court OK of three-part employee compensation program

By Caroline Salls

Pittsburgh, March 31 - Asarco LLC requested court approval to implement a three-pronged compensation program, including a salary increase, incentive program and employee retention plan, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

According to the motion, the retention and recruiting plan is necessary because Asarco has lost, continues to lose, and is having difficulty replacing experienced salaried personnel in vital operating, technical and supervisory positions.

For example, Asarco said it has lost 134 salaried employees with an average of 11.4 years of service from resignations and retirements in the last two years, and almost 30% of the company's workforce will be eligible for early or normal retirement by the end of 2006.

Under the competitive salary component, the company will add a 3.5% increase for inflation over the past 12 months and a 3.5% premium to reflect industry competitive pressures and the impact of Asarco's bankruptcy filing.

The competitive salary component also allows for individual salary adjustments based on performance ranking, current salary and tenure.

This component is expected to cost $2.6 million on an annual basis.

The employee retention component applies to 100 participants, with each participant qualifying for a total payment amount equal to 25% or 35% of the employee's salary, depending on job grade.

Under the retention component, 10% of a participant's total payment amount is payable upon approval of the plan, and additional 10% payments will be made at six-month intervals up to a maximum of 60% of the total payment amount before the completion of Asarco's Chapter 11 case.

The remainder of the total payment amount is payable in two equal installments upon confirmation of the company's chapter 11 plan of reorganization and upon the effective date of such plan.

If a participant resigns or is terminated by the company for cause, then any unpaid bonus is forfeited. If, however, a participant is terminated by the company without cause, the participant will receive the balance of any unpaid bonus provided that the employee executes a general release.

The employee retention component is expected to cost $2.4 million for current employees and an additional $400,000 discretionary pool for new hires.

Under the variable incentive component, all salaried employees will be paid from an incentive pool with target bonuses calculated by 70% on the achievement of defined business objectives for senior corporate personnel and on unit cost targets for operating personnel and other corporate personnel and 30% on the company's overall EBITDA performance.

The company's board of directors will set the targets.

If the targets are met, the variable incentive plan is expected to cost $3.4 million and would pay higher amounts for performance in excess of targets up to a cap of $4.9 million.

The plan also includes $1 million for salary, incentive and retention payments to be used at the discretion of the board of directors.

Asarco, a Tucson, Ariz., mining company, filed for bankruptcy on Aug. 9, 2005. Its Chapter 11 case number is 05-21207.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.