Bankruptcy for automakers would make public executive compensation: The Real Reason for avoiding bankruptcy

For the past few months I've been wondering why the Big 3 automakers have assiduously avoided any thought of filing bankruptcy.

The stated reason is that it would undermine their market share since consumers wouldn't buy cars from companies in bankruptcy.

I find their reasoning a little off and have for awhile. Bankruptcy would allow the auto makers to renegotiate ALL their contracts with the unions while providing some protection for the already retired workers. This falls under 11 U.S. C. Section 1113 of the Bankruptcy Code.

After thinking about it, I've figured out the real reason the car companies don't want bankruptcy.

Executive Compensation.

Under the bankruptcy code, when a company enters Chapter 11, all executive compensation must be approved by the Bankruptcy Court. Insider compensation must be disclosed in the bankruptcy too so the public would find out the extravagant pay packages paid out.

With the economy in such shape and their companies in such a state, these executives know the court will deny them millions of dollars a year after balancing that with layoffs and bad business decisions.

Of course the public would rise up in anger over the millions of dollars paid for executives who made bad decision. That's ultimately the reason why the big 3 would lose market share. I'm sure the creditor's committees in these bankruptcies would also complain about the excessive salaries too.

This begs the question: What's more important? The bottom line for the executives or their fiduciary obligation to their companies and the economy as a whole?