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Is Corporation's Demise Due To Its Striking Union... or To Greed?

Hostess's latest woes took hold when thousands of employees in its bakers union went on strike Nov. 9 in protest of a court-imposed labor contract that cut wages, commissions, and health care benefits and changed the structure of pension plans in a way that could reduce payouts to retirees.

The company's burdensome debt traces back to Hostess's first trip through bankruptcy in 2004. Missteps by a private-equity firm, hedge funds and managers since burdened the company, despite its more than $2 billion in annual sales.

As a powerful company, Hostess evidently did not believe that it should voluntarily share some of its profits with its rank-and-file workers or pay them more than it absolutely had to. Hostess felt, as many businesses do these days, that they were entitled to make as much money as they could possibly make and that the financial well-being of their employees was not something that they should be concerned with. In short, while viewing "shareholders" and "customers" as the only two corporate constituencies that matter, Hostess neglected the idea that great companies should also serve a third constituency: their own "employees".

Hostess evidently didn't understand that one company's employees are another company's customers. Instead of spreading the country's wealth to more citizens and expand the purchasing power of the country as a whole, and in so doing, helping the overall economy, Hostess's decision only expands our faltering economy.

Specifically, Hostess's move helps to usher in an age in which the middle class is shrinking while our country's overall poverty expands. This lack of spending power in the middle class crimps overall economic growth, while corporate profits as a percent of the economy are at an all-time high and wages as a percent of the economy are at an all-time low.

In a letter posted on a new site set up to communicate with employees and suppliers through the liquidation process, CEO Gregory F. Rayburn instead pinned the blame on its striking union.

Edit: In a surprise move Monday in Federal Bankruptcy Court, the presiding Judge did not approve the liquidation that Hostess wanted and instead postponed consideration and ordered the company and the union to go to mediation. The presiding Judge will be the mediator.

Judge Robert Drain asked Hostess and the Bakery Confectionary and Tobacco Workers Union to join him Tuesday for a mediation session where he will try to broker a new contract. If Tuesday's session fails, then the company will be able to return to court Wednesday to try to move ahead with its plans to close down.

"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Drain. "Not to have gone through that step leaves a huge question mark in this case."

One thing that bothers the unions is that while the company maintains it can not afford to continue funding the pensions of its workers, it is asking the court’s permission to pay its executives $1.75 million in bonuses. Hostess is following the practice of failed Wall Street Banks that when they were on the verge of collapse in 2007 due to bad management and business practices, they still paid obscene bonuses to the executives that bankrupted them.

The workers will bear the brunt of this situation however it turns out. If the long-shot mediation works and a new contract is negotiated, workers will pay for those bonuses through wage and benefit concessions. If a new buyer comes forward, it is a certainty that concessions from workers will be part of the deal.

http://www.examiner.com/article/bankruptcy-judge-sends-hoste...
http://blogs.wsj.com/corporate-intelligence/2012/11/16/the-e...
http://www.businessinsider.com/henry-ford-salary-increase-20...



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Their demise

is attributable to debt.

Lets view this objectively

Lets view this objectively shall we, instead of the socialist viewpoint I see a lot of people spouting here. This is a business that has been in bankruptcy court TWICE in the past decade...thats enough to show that it is a struggling company. In an attempt to avoid bankruptcy for a third time(who knows what all these bankruptcies do for their borrowing ability but I am sure its not good) they decide they have to cut wages and/or benefits....they sit down with the union leaders and lay out the numbers....after refusal to meet the terms the unions strike. Hostess, now seeing no way to make a profit decides to file for a third time, and this time fed up with the union crap they decide to just liquidate. That is what happened. As for the 1.75 million in bonuses, that is money owed to those executives...or at least promised. Companies use the bonus method because doing so allows them to get out of a constant high dollar salary for poor performing executives...maybe the executives only make 30k a year without hitting their sales mark...we just dont know.(besides who knows how many execs that is divided between,if there are say 20 of them...thats only about 75k or so apiece)..but in short the bonus money is already promised for services rendered, unlike the pension money....I am a union member myself...voluntary unions are fine....but the biggest thing that annoys me is the benefits package....its a significant cut in pay for a worthless(or almost worthless) package. Like all ponzi schemes the pension package depends on a higher ratio of working members than drawing members and just like social security is unsustainable because the birth rate in the nation is barely able to keep up with the death rate...and population decline will start soon. Once the current generation starts working and the baby boomers all retire you will see a collapse of both social security and pension plans.

Greed.

"One thing that bothers the unions is that while the company maintains it can not afford to continue funding the pensions of its workers, it is asking the court’s permission to pay its executives $1.75 million in bonuses. Hostess is following the practice of failed Wall Street Banks that when they were on the verge of collapse in 2007 due to bad management and business practices, they still paid obscene bonuses to the executives that bankrupted them."

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"Stand up for what you believe in. Even if you stand alone."
~ Sophie Magdalena Scholl
"Let it not be said that we did nothing."
~ Ron Paul
"You must be the change you want to see in the world."
~ Mahatma Gandhi

It has always seemed strange

It has always seemed strange to me... the things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And while men admire the quality of the first they love the produce of the second.
- John Steinbeck

-
"Stand up for what you believe in. Even if you stand alone."
~ Sophie Magdalena Scholl
"Let it not be said that we did nothing."
~ Ron Paul
"You must be the change you want to see in the world."
~ Mahatma Gandhi

For most, if they don't unionize, they get crap pay

Yeah, this is a free country, they can always quit....but this is a free country, they can always collectively bargain too...and they did...and Hostess was fine for a long time. Who's to say exactly why Hostess went down the tubes now.

Also, if a company thinks the union is asking too much, then the company can quit just as much as the employee.

Anyway, if workers knew how much value they provide compared to what they are paid, there would be a lot more unions. As the economy scales up so too does the amount of money flying around; however, compensation has stayed static...and with inflation, that means workers actually get paid less every year, even though they provide the same or more value.

True, many unions are horrible themselves...often being a revenue-generator for the very corporations they claim to be against. But, frankly, the only way for employees to get more than horribly-below-value pay is through collective bargaining.

Look at it this way, good business people CONSTANTLY organize to look out for their interests. However, who says that you HAVE to be an employer to be a good business person?

Savy companies make the most in the market they are in. But a company is itself a market/an economy...where savy employers sheer workers for their value, put vending machines everywhere, offer trap-filled compensation plans (401ks, medical reimbursements, pensions), etc. Well, workers can and SHOULD play that market too. You don't have to "shrug"...you can make your case for better compensation.

Also, just because a union's demands may lead to a company's demise doesn't mean the union was bad. It's FAR better to be compensated well for a few years than get crap pay for a lifetime.

==========================

Hmmmm, one of the biggest faults of the Ron Paul revolution was to not use its large base to conduct productivity and consumer strikes. Strikes by the people is one of the few actual powers they have (Rosa Parks bus consumer strike, illegal immigration strikes, Ghandi's productivity strikes, etc).

In fact, the war has been used to break many unions and strikes in the middle east and here in the USA. Israel was have a ton of strikes to get better compensation, but then the war broke out and striking was deemed unpatriotic and illegal in parts of the middle east.

================================

Why all the anti-union mentality? Our government has relentlessly worked to make the people think that they have more power than they actually have (the vote) AND to think that unions are horrible. The chief union-basher are the neo-con show hosts...which is the height of hypocrisy as they are in unions themselves: http://www.youtube.com/watch?v=LJY5arX2q4Q

If the union is to blame for destroying jobs, then...

let this serve as a lesson that unions aren't necessarily good for workers in the long-term.

To workers, if your job makes you miserable due to lack of pay or bad working conditions, you should voice your grievances, and if that goes nowhere - quit. You are not a slave to your employer. If enough people feel the same way and act appropriately, over time the employer will be left with an unqualified, less productive workforce.

People put up with too much. They are willing to complain individually but are unwilling to act individually.

Now, these workers are making no wage at all. What kind of victory is that?

Isn't that what the workers

Isn't that what the workers did by joining a union? They used a tool of the market to enhance their own compensation.

What I would say isn't that they are earning no wage at all. They just showed that "twinkies" cannot be produced at an economically attractive price.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Cyril's picture

"What kind of victory is that ?"

"What kind of victory is that ?"

Er...

... beyond the jobs, is the union dead, TOO ?

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

The liberal unions

are killing this country just as much as the politicians and the media.

Cyril's picture

You haven't seen anything.

You haven't seen anything.

One of the main french trade union receives more than 30% of its revenue from government SUBSIDES (tax payer money).

http://www.impots-economie.com/combien-coutent-les-subventio...

It didn't take long for fraud schemes to settle down :

http://www.impots-economie.com/fraudes-aux-subventions-a-la-...

("subventions" is the french for "subsides")

"Some members enjoy more committee benefits at Montreuil than others. The elected CGT, minority staff of the mayor, are those who benefit most from the committee social work grant at Montreuil.

In 18 months, 4 elected CGT persons spent 153,024 euros for family travel at the expenses of the committee allocated grants. An elected CGT has even paid himself at the expense of taxpayers, 10 trips in 2009 (Egypt, Morocco ...), 9 in 2010 (Kenya, Crete ...) and 8 in the last 6 months (Quebec, Méribel, Thailand ...) for a total cost of 44,000 euros."

Welcome to the wonderful socialist world and its statist RENT-SEEKING :

http://en.wikipedia.org/wiki/Rent-seeking#Possible_consequences

P.S.
Oh, and I forgot to mention :

Montreuil is just ONE CITY where that union has "business", and in A SUBURB of Paris.

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

Why would a union worker care

Why would a union worker care if they strike and force the company to close when they know they will get 2 years unemployment. People in unions act like they are entitled to more because they have a "union". The reality is they are just like everyone else and need to think rationally and reasonably. If the wages and benefits are unfair, quit. But they shouldn't get unemployment for it.

Food for thought

It’s being unquestioningly repeated on various fake alternative sites that shall go unnamed (Prison Planet) that Hostess Brands Inc. went under taking their Twinkies with them, due to the big bad evil unions. Hostess CEO Gregory F. Rayburn went on NBC and promptly declared that they just couldn’t weather yet another nationwide strike. The war on the middle class continues. Any opportunity for big business to demonize and further marginalize organized labor and collective bargaining is readily jumped upon by the petty bourgeoisie. Unfortunately these ridiculous and unsubstantiated claims will go unexamined by our “alternative’ media honeypots like Prison Planet for example.
Here’s the real story: The Unions gave and gave and gave… it was General Electric, Monarch Alternative Capital and Silver Point Capital that ate your Twinkie.
Hostess Brands Inc. struck a deal with their largest union, the Teamsters, this week. A smaller union called for a strike due to the fact that Hostess wanted to cut their wages and benefits AGAIN this past September. They had already stopped paying into their pension plan last year.

http://willyloman.wordpress.com/2012/11/16/the-unions-didnt-...

"If this mischievous financial policy [greenbacks], which has its origin in North America, should become endurated down to a fixture, then that government will furnish its own money without cost. It will pay off its debts and be without debts. It will hav

People are all flipped out about Twinkies

Ding Dongs and Ho Hos were much better IMO

Interesting that this guy

Interesting that this guy increased his pay over 300% from 750,000. to well over 2 million.

If you walk blindly through life, you will run into a lot of walls.

Not "interesting" at all...

...shareholders...through their boards try to acquire and maintain material talent...as they prefer to identify it...all the time. To do this they create employment contracts that spell out all sorts of incentives and benchmarks for CEO's and other managerial functionary's to acheive. Nothing new here. That some of these guys pooch the shark is hardly new either...nor is it something that shareholders looking for a return expect or want to have happen...at least not before their from the shareholders role!

When it happens that the shark is being pooched...investors and creditors flee...and companies get in trouble. This is Business Management 101 and aside from being part of a nefarious bank/foundation owned economic system, pretty much par for the course. So what is so interesting?

Wha? .....hey....who stole my country?

Shareholders by and large

Shareholders by and large part are not doing their job. They are not holding the managerial teams accountable.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

I get what you are saying...

But then we'd have to know the distribution and managerial interaction of the majority to figure that out...as it is the majority block that acts to maximise ROI as per their plans...the rest of us go along for the ride.

Wha? .....hey....who stole my country?

Its because shareholders are

Its because shareholders are largely content with short term gains. They do not care about the long-term interests of the company because they are not long-term investors. Forget about the fact that they only care about maximizing profit.

Moreover, shareholders just seem to be stupid.

The best form of regulation for all these sub-prime loans would have been if shareholders of the big banks had fled the banks after seeing these kinds of assets on the books. But they didn't. They bought everything hook-line-and-sinker. They took all that loss in value. They continued to support, through not selling their shares, huge salaries and bonuses to corporate managers.

And they continue to do it today. They continue to invest in junk, pump-and-dump companies. They are lured in by false promises and never seem to learn.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Well...some are surely as you describe...

I am one of them. I never "buy and hold". In fact, I no longer even buy stocks...preferring to play in the S&P Futures market and have my money returned to my pocket by the end of the day. I have awaken to losses too many times and refuse to subject myself to the whims of a market that I am not presently seated in front of.

With this said, there are many who do "buy and hold" and who want and do have a say in the daily operations of a publicly traded company. Don't believe otherwise. It is this block of majority shareholders who make the lion's share of the managerial decisions as to leadership, debt-structure and direction. Alas, I will never be one of them...know what I mean?

So, while the "shareholders" playing in markets from their proverbial basements are surely lax in their "operational responsibilities" these are simply speculators buying and selling the float. They, even if they voted as one, would typically have little say in organizational theory and design.

The "responsible" people/entities are surely present and operating in EVERY publicly traded company. For lack of a better description or identifier...let's call them Big Money. In many, and across sectors that are intertwined, they very often consist of the same criminal cabal that we "theorize" about in this very blog. The same cabal that, by the initiation of the world monetary/banking system, requires that you, Joe Shmo, must take part in their system and open yourself for periodic sexual assault just to try and keep up with their constant debasement of your purchasing power.

I guess what I'm trying to say is that participation in markets is NOT a passive activity to be engendered...and employment within the economic system that it embodies carries with it great risk as well...so slumber is not a choice here...ever.

Understanding the implications of the establishment of the "Foundations" and extrapolating America's greatest Fortunes acting in concert and growing virtually tax-free for more than 120 years, it isn't hard to see that America is now a wholly owned subsidiary of these powers. You can't do crap about it but learn how the game is played and how to maneuver within it. It's not really all that hard, but watching TV and Football isn't very efficacious to learning.

Try Norman Dodds Interview with Griffen...it's what woke me up.

Someone once said, "Life sucks and then you die". I guess he was pretty much right.

Wha? .....hey....who stole my country?

If Hostess management was ripping off its workers

then why did their workers still want to work for them?

THIS is how the free market

THIS is how the free market works. If you are being ripped off you leave. If someone wants the job at a low wage and no benefits, that is up to them. I believe you have a right to strike and bring awareness to any injustices you endure. But to expect the corporation to just give in, is nonsense.

The massive mistake Hostess

The massive mistake Hostess made was all the debt they put on their books, thinking that they could service that indefinitely.

Blaming the unions is an easy way out.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Corp America is like a swarm of locusts

They've consumed the wealth of this country and left us indebted to the tune of...does anyone really know how much? When you include the bailouts and shifting of Social Security and medicare $$, it's an ungodly amount. Corporations are by far the greatest consumer of welfare dollars. Big business hates free markets, that's why it lobbied the govt. for horrendous treaties like NAFTA which sent our best jobs overseas, so corp. CEOs and share holders could make $billions while they receive mountains of US cash in "foreign aid" spent on overseas land development for their new relocated factories and still more for research and development. They continue lobbying for heavy taxation and regulation at home to kill their competition and what jobs remain in our country. Wars are fought in the interests of Corporate America. The "revolving door" indicates that govt. & coporations are basically one and the same.

Not sure what all the particulars are with Hostess, but I'm surprised how many people defend corporations. In a free market, I could understand it. But could corporations really be part of a free market? There would be no corporations without a state to grant incorporation. Govt. & corporations will always be in bed together. And how can anyone deny that CEO's are overpaid?? Does anyone really think it's just that a corrupt guy in a suit gets paid $multi-millions per year for, in many cases, taking risks that make their share holders richer but also wrecking their own companies and then begging for and getting bailouts, making the share holders still richer at our expense? And at the same time, paying employees who work and sweat doing all the heavy labor, get paid minimum wage or if they're overseas, making 50 cents an hour? There is a greed problem and I'd think everyone on the DP would be sickened by it.

The problem here is...

...that you (or some) assume that all corporations operate like demons from hell, and the defenders assume that all corporations are just like any mom and pop business...wherein the truth lies somewhere in the middle of both extremes.

Nothing says that mom and pop (whatever their size and makeup) care about employees, and nothing says that corporations (a legal artifice) don't. All is situational and transcends any ability to generalize.

In fact, labor is simply a resource in the business process, one that can be either over or undervalued when the personal druthers of the employees are taken into consideration.

In the case of Hostess, it matters not what personal concerns where brought to bear because labor was negotiated as a collective...without personal desires or goals included in the equation. In fact, the proper outcome was reached as the collective decided not to sell their time and effort for less than demanded, and management (capital) decided not to continue on this course of business as the capital could be put to better use elsewhere.

I'm sure Management's detractors wouldn't be so high and mighty about losses, or reduced gains, in their own investment/retirement accounts would they?

Wha? .....hey....who stole my country?

Looks like maybe Hostess did operate like a demon

from hell. See this article: http://www.patheos.com/blogs/philfoxrose/2012/11/hostess-die...

I've favored capitalism all my life, though I never had a very deep understanding of economics and business. Free markets sound good to me, but have they ever really existed? Can they? This country started out pretty close to a free market, but as certain companies got bigger, they gained influence over govt. and the "free market" gradually changed into fascism through heavy lobbying by big business.

I'm very much opposed to socialism, though I can understand why many people find it attractive under present circumstances. I don't know what the answer is, but I know that big business hates competition and will do anything to stifle it. I know there are smaller mom & pop corporations who are just trying to eke out a living, but when they become successful and rich, they seem to always turn corrupt and turn against the idea of competition. While people excitedly defend the corporation and it's right to make it's shareholders and CEO's wealthy beyond belief and shaft their employees, corporations are using their wealth to buy our govt. and turn America into a 3rd world country. Remember the quote by John D. Rockefeller: "Competition is a sin."

Check out this essay by Sam Wells on Power Elites in America: Oligopoly and Political Pull (or, Beware the Regulatory-Industrial Complex): http://www.laissez-fairerepublic.com/monopoly.htm

If there was freedom, there would be jobs.

If there were jobs there would be competition for workers.

As it is, the economy is rotting from the inside, and everyone is clinging to what they have and unable to make a move. The govt is the hero, throwing around food stamps and unemployment extensions. and business is more than happy to take advantage of all the fear.

Govt is at the root of all this my good friend. There are not 50 thousand lobbyists in D.C. for nothing.

Don't be a smuck. What do you do if you work for a tyranical company? You walk out the door?

But what do you do if you live under a tyrannical government? Well then, you are screwed.

"Political pull" has two sides. Don't forget the Govt side as you ring your hands over big bad business.

Missy here is a shot at an answer

Corporations as they grow will seek to expand their influence to grow their profits.

In a free market the best way they can do that is by providing better and less expensive products and services.

If they do that consumers will vote with their money and continue to purchase the goods and services from companies that best satisfy their needs.

The problem comes in when companies realize they can use the profits they have made to influence government to get subsidies, bailouts, preferential tax treatment, protective tariffs, favorable legislation that operates to squeeze out smaller competitors etc.

The result here is companies start to make their money not because they are serving the customers best but because the government is now an ally in helping them maintain their profitable position. In turn the companies in exchange for the political favors donate to politicians' campaign ensuring that the politicians maintain THEIR positions.

The solution: Shrink the size of government, slash regulation, eliminate subsidies, bailouts etc. If you do that companies won't have anywhere to go to produce profits other than to the customer. If they don't do a good job a competitor will take their place.

Big government is not the answer to big corporations- at that point you have two leviathans working against you.

Please subscribe to smaulgld.com

I'm sure you could find likening examples...

Wherever you look within the publicly-traded spectrum and then some more in the private-equity alley. The monster lies in the concept of "limited-liability" incorporation which has, "For Corruption and Evil", etched into the corner-stone of its edifice...(probably right under the Masonic Square and Compass).

It used to be very difficult to get a corporate charter...it was only available for a specific purpose, and for a specific amount of time...all supposedly in the service of "Government and the People"...and presumably for infrastructural projects.

Rockefeller and Delaware opened up this can of worms and it is one that, should revolution ever come, should be put in the crusher for ever..right along with fiat printing presses.

Alas...don't hold yer breath on that one.

Wha? .....hey....who stole my country?

No the f***ing problem is unions and their gotta have it mentali

Nothing but trouble , chasing companies out of the US or out of business. Now the workers can be part of Obama's entitlement society.

Is this the Daily Lenin?

This article is written like a screed you'd find in the Progressive Populist.

I would like to see certain anti-worker practices made illegal, notably getting out of pension and benefit obligations through bankruptcy. As far as I'm concerned, a pension is not a "promise," but is deferred compensation--therefore property already owned by the employee, not merely a debt owed to the employee. Thus walking away from pension obligations is outright criminal larceny. Laws should reflect this, giving proceeds from liquidation to pensioners first, before owners, creditors, bond holders.

But that's different topic from the reality that workers can indeed implode a company (kill their own golden goose) by making it non-profitable, or by striking and killing cash flow thus making it instantly non-viable.

Take back the GOP and Restore America Now.