Holding back bankruptcy: the very survival of a troubled company that is approaching—or in—bankruptcy can depend on how well HR gathers information, trims costs, retains key people and communicates with stakeholders - Cover Story

According to the Alexandria, Va.-based American Bankruptcy Institute, a 9,100-member research and educational organization of various types of bankruptcy and insolvency specialists, there were 38,540 business filings in 2002 and 40,099 in 2001, counting businesses of all sizes.

Of the 12,000 larger publicly traded companies that must file yearly with the Securities and Exchange Commission, an estimated 1 percent file for Chapter 11, according to Lynn LoPucki, a law professor at the University of California, Los Angeles, and a leading authority on bankruptcy who has maintained a database of filings since 1980. Total business bankruptcies are declining, he reports, but the numbers of megacases are skyrocketing. "For the big players, the levels of filing in the last three years are more than double the numbers of any year in history." LoPucki says. "The nature of the cases shifts from time to time. In the early '80s it was predominantly oil and gas companies; in the late '80s, airlines. The early '90s featured retailers, and most recently It's been telecoms."

Largest Public Company Bankruptcies, 2002

Company                             Assets in Billions

WorldCom Inc.                             $103.9
Conseco Inc.                                61.4
Global Crossing Ltd.                        30.1
UAL (United Airlines Inc. parent)           25.2
Adelphia Communications Corp.               21.5
Kmart Corp.                                 14.6
NTL Inc.                                    13.0
US Airways Inc.                              7.9
XO Communications Inc.                       7.9
Williams Communications Group Inc.           6.0

Source: BankruptcyData.com.

Bankruptcies of Public Companies With Assets of $100 Million or More

1996  14
1997  15
1998  30
1999  43
2000  79
2001  95
2002  79

Note: Table made from bar graph

ROBERT J. GROSSMAN, N, A CONTRIBUTING EDITOR OF HR MAGAZINE, IS A LAWYER AND A PROFESSOR OF MANAGEMENT STUDIES AT MARIST COLLEGE IN POUGHKEEPSIE, N.Y.