The discovery that Hostess tripled CEO pay (and boosted the pay of other senior executives) while blaming overpaid unions for the end of the company is a great example for yesterday's point. It would be fine to blame everyone involved. But some of the issues, like under-funded pension obligations, strike me as more of a management issue than a worker issue. But, regardless, it is striking that the narrative is all about the striking bakers and not the huge cash grab at the executive level.
EDIT: See Thoreau as well.
The problems at Hostess have been decades in the making. The company went into bankruptcy in 2004 and left in 2009 with numerous labor concessions, but without major reform to the pension system. Some people liked to blame that on the unions, but it is up to management to decide what is profitable or unprofitable. Now three years later, management has deemed their old agreements aren't profitable and that would be correct given how much money Hostess has been bleeding. And people still wonder why some union leaders were skeptical of management.ReplyDelete
Skepticism is warranted, especially in light of Hostess having left bankruptcy in 2009 with more debt than it had in 2004 with falling sales. 2011 sales were down 28% from 2004. Of course, this is the union's fault that sales have dropped and not a failure of the company's leadership.
On top of that, management comes to the labor unions demanding 8% pay cuts and slashes to the pension, while the top executives increase their own pay--what a nice goodwill gesture. Some unsecured creditors actually filed suit over the pay raises.
Yes, pensions and work issues needed to be addressed. The unions had to make concessions, but it's difficult in light of what has happened for anyone to have any faith in what management has been doing at Hostess.
Now, enter two hedge funds, who hold the majority of secured debt, and they're likely looking to get out. After all, the business model isn't working; it's time for a showdown.
The Teamsters actually finally agreed to the wage and benefit concessions. Some of the other unions, including the Bakers' Union, didn't. Of course, I have a suspicion that some of the unions were acting in the best interest of all their union workers and not the union workers who were working at Hostess. Though, I also have suspicions that even if the unions capitulated to the hedge fund demands (they're the ones driving the show), Hostess would have likely been sold or have been back in bankruptcy in a few years.