By now everyone’s heard much about the demise of Twinkie-maker and sugar-enabler, Hostess Brands. This week, a bankruptcy court granted permission to the company to initiate the selling of its assets, a move that punctuates 10 years of economic decline for the company. And though executives like CEO Greg Rayburn have been quick to blame the bakers' union in particular for its financial difficulties, recently revealed numbers about executives' money management choices tell a different story.
According to WSJ, in 2011 when the company was mired in almost a billion dollar debt, then-CEO Brian Driscoll tripled his own salary, while other top executives received 35-80% raises as well. Creditors griped that it was the company's way of "side-stepping" bankruptcy laws. Though Driscoll was replaced by Rayburn earlier this year, workers complain that this type of money mismanagement was par for the course at the snack manufacturer.
As if trying to prove that fact, the Washington Post reports that this week the company not only asked the bankruptcy court for permission to immediately liquidate 15,000 factory workers’ jobs, but also for permission to grant its current executive board $1.75 million in bonuses.
In contrast, according to Reuters, full-time bakers, including those who've been at the company for decades, were as of late, making $35,000 per year (with overtime), which was down from the $45,000 they were making five years prior.
But the pay cuts were scheduled to continue; factory workers were recently asked to take another 8% cut in pay and a 17% cut in health benefits. That's hardly a small matter when you consider that employees had already accepted a round of pay cuts several years earlier, which were supposed to have saved the company $100 million annually. The fact that those savings seem to have disappeared have many pointing back at executives for gross mismanagement.
Spreading ill-will seems to have stretched beyond just money. Employees also report that at the same time the most recent round of pay cuts were being proposed, executives were also handing down mandates to increase production levels beyond what was reasonable. Several told Reuters they were often threatened with factory closure by the executive board if those increases were not met.
Hostess' financial choices may be sound reason for their workers' revolt, but they're all too common in modern American business where, according to the Economic Policy Institute, workers' pay has stagnated since the 1970s, while CEO pay has increased by 725 percent. Think that's a typo? It's not.
And according to ThinkProgress, the impetus to protect management over workers, even during executive-led financial misery, is now simply standard protocol. At the manufacturing company Caterpillar, workers pay was frozen while the CEO received a $17 million raise. And at Citigroup, CEO Vikram Pandit received more than $260 million in compensation even after his company’s stocks lost 88 percent of their value while he was in charge.
In the most telling news of all, despite the almost billion dollar debt held by Hostess, and the ten years it failed to battle back from it, on the homepage of its website, the company still contends that it was its bakers' union's refusal to take another pay cut that finally closed the company.
Do you think the success of Hostess hinged on circumventing this workers' strike, or was management too out of touch to save it? Let us know in the Comments.