By Peg Brickley, The Wall Street Journal

Judge Mary Walrath cleared the company to pay up to $1.5 million to three unnamed senior executives over the protests of a federal bankruptcy watchdog, who called the bonus proposal unfair.

With an estimated $400 million worth of merchandise to sell and hundreds of stores to close in a few months, Sports Authority’s bankruptcy sparked one of the largest retail liquidations, the company said.

“That does not necessarily earn them a prize,” said Hannah McCollum, lawyer for U.S. Trustee Andrew Vara, the Justice Department officer who argued against the bonuses.

Many suppliers of the defunct athletic-gear seller are getting only fractional recoveries for the goods they shipped to Sports Authority. The Englewood-based company filed for bankruptcy in March and shut the doors on hundreds of stores for good at the end of July.

Senior executives who are collecting full pay are seeking to be paid extra for doing “what they are required to do,” McCollum said at Wednesday’s hearing in the U.S. Bankruptcy Court in Delaware.

Vara defeated an earlier version of the bonus proposal, which called for payments of up to $2.85 million to four top executives.

One executive left the company in the wake of that ruling, and Sports Authority came back with renewed pleas for extra pay for three people left in the shrinking executive ranks.

Sports Authority’s former chief executive, Michael Foss, left in June. According to his online profile, he remains chairman of the company’s board. Chief financial officer Jeremy Aguilar left in July. The heads of Sports Authority’s merchandising, marketing, supply chain and distribution center also have left the company, said Stephen Coulombe, an outside restructuring executive hired to shepherd the company through chapter 11.

About 250 to 300 people remain on the job at Sports Authority, along with restructuring specialists. McCollum said those people will be wrapping up the company’s affairs.

Bonuses for a few at the top are likely to damage morale generally, McCollum said.

“If my manager was going to be handed $600,000 for a task that I was going to be primarily responsible for, I would be a little upset,” she said.

Judge Walrath disagreed. Among the remaining tasks are tough negotiating sessions with liquidators that will determine how the proceeds of going-out-of-business sales are divided.

“That requires senior management,” she said.