Do you know why it’s always a better idea to be the owner of capital as opposed to the dispensable widget in a corporate vehicle?
Well besides the marked appreciation of the stock market over the last 20 years which has seen the widest discrepancy of wealth between those who own equity and those who are forced to sell their soul to the owners of equity at bargain prices, there’s now another reason why being a common worker really doesn’t make sense anymore.
That’s right, when it’t time to go and be fired you get a free pass to the unemployment welfare line whilst your bosses who made grave errors in judgement which caused you to lose your job nevertheless get to walk away with fat bonuses and their highly paid jobs preserved for another year. Why? Cause that’s just the way capitalism works, which raises the interesting question, who said it should work that way in the first place?
Which of course leads us to the interesting case study of Hostess, the soon to be former maker of yummy goodies including Twinkies, Ding Dongs and Ho Hos.
usatoday: In a hearing in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y., company lawyers said the bonuses are needed to retain the 19 corporate officers and “high-level managers” during the wind down process, which could take about a year.
Two of those executives would be eligible for additional rewards depending on how efficiently they carry out the liquidation. The compensation is in addition to regular pay.
The bonuses do not include pay for CEO Gregory Rayburn, who was brought on as a restructuring expert earlier this year. Rayburn is being paid $125,000 a month.
In court Thursday, an attorney for Hostess noted that the company is no longer able to pay retiree benefits, which come to about $1.1 million a month. Hostess stopped contributing to its union pension plans more than a year ago.
Unable to pay retiree benefits, or unwilling to pay retiree benefits? And that of course is after all them pay cuts employees were asked to take as well. Can we also assume that executives have also suffered the ‘misfortune’ of having their salaries and pension payments cut off last year, or would that be simply asking for way too much?
Although Hostess sales have been declining over the years, they still come in at between $2.3 billion and $2.4 billion a year.
The company’s demise came after years of management turmoil, with workers saying the company failed to invest in updating its products. In January, Hostess filed for its second Chapter 11 bankruptcy in less than a decade, citing steep costs associated with its unionized workforce.
Although Hostess was able to reach a new contract agreement with its largest union, the Teamsters, the bakers union rejected the terms and went on strike Nov. 9. A week later, Hostess announced its plans to liquidate, saying the strike crippled its ability to maintain normal production.
So let’s get this straight, management makes critical errors in its operations, decides in order to preserve favorable equity returns a cut not in their own salaries but rather demand cuts in worker’s salaries and then a complete annihilation of their pensions (how convenient right?). And when one miserable union dares to hold bosses accountable for their bad decisions, management decide to have a tizzy fit by announcing that they’re going to close down instead.
The implied message being, next time anyone in America dares stand up for their rights they will be surely risking their own and everyone else’s economic viability, so best to put up with a cut in your wages and of course a complete denouncement of your pension whilst bosses ‘reconstruct’ the company to work in such a way that really makes lots of economic sense. Economic sense for themselves that is…
Making the final coup d’etat for the owners of equity is the planned sale of the company to an impressive array of 110 ‘very committed’ buyers (impressive right? – but then again, now you wont have to give workers pensions in the new company) who are all too happy to step in and buy this too good to pass opportunity whilst your fired useless self can go along with another 18 500 souls (save for a handful who will remain to help oversee operations) to put it kindly and all go to hell…
And then there was this comment on the web that caught my attention as well;
It is interesting that when things go well executives demand high salaries because they are the ones responsible for the company’s success. However, when things go badly it is not the executives’ fault but someone else’s and they demand high salaries.
In the case of Hostess the unions had already given up $100 million in benefits and salaries to help the company survive. During that time the executives got massive pay raises (the CEO’s salary went from $750,000/year to $2.5 million).
If you look at the salaries and benefits of Hostess employees they were nowhere near out of line or overly generous.
Hostess was in business for over 80 years and only now did the evil unions screw everything up? Or was it Ripplewood, the private equity firm that took control of it and mismanaged it into the ground?