Thursday, January 28, 2016

I think we need to think more carefully about how to make situations like this one less unfair

This is Joseph.

I always find stories like this one amazing.  From the Trustee report:
Alpha Natural Resources, Inc. ... filed the KEIP Motion requesting, inter alia, authority to pay 15 of its most highly compensated executives bonuses totaling over $11.9 Million in 2016. Alpha seeks this relief while at the same time incurring more than $1.3 Billion in losses for 2015. Alpha seeks this relief while at the same time seeking to cut off the health and life insurance benefits to some 1,200 rank-and-file retirees because it claims it desperately needs to save $3 Million a year. Alpha seeks this relief after demonstrating to this Court that it is so hopelessly insolvent that its shareholders have no chance of seeing any return on their investments into the companies.
Can you guess the ending:
Sadly, the Trustee's biting prose was for naught. In a closed courtroom, a bankruptcy judge approved the bonus plan.
I am not against being compassionate to executives.  Like it or lump it, it is very hard to shut down a company and it is very unpleasant work.  What I find more painful is that the same compassion doesn't seem to be present towards workers, who are also making a painful adjustment.

I can't but think that there should be some approach to make the pain either lesser or more equally distributed.

[p.s. from Mark:

I wanted to add a couple of quick points to Joseph's post. First, this observation from Scott Lemieux:

This is an extreme case, but it pretty much defines how the wealthy define incentives differently for themselves and for ordinary workers. For the latter, a middle-class salary will make them lazy and in any case is an unnecessary expense. For those at the top, a multi-million dollar salary isn’t enough incentive to do your job. Note, too, how contradictory ideas about responsibility seamlessly replace each other depending on what’s necessary to justify the looting of the workers and shareholders. When the company goes into bankruptcy less than a five years after you take it over, doesn’t that suggest that you’re massively incompetent and don’t even justify a six-figure salary, let alone a seven-figure one supplemented by performance bonuses(!)? Why no, because the market for coal collapsed, so ¯\_(ツ)_/¯, not our fault. But when it comes time to get de facto retention bonuses, these same people become absolutely indispensable supermen with irreplaceable skills. Obviously, Alpha’s executives can’t simultaneously by caretakers who preside over a company whose profits are determined almost entirely by factors beyond their control and people with unique skills the company absolutely cannot afford to lose and must be retained at any price, but whatever it takes.
Second, we're talking about the latest incarnation of these guys.]

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