Unions kill the twinkie?

[granfire]

Where is the "success threshold" where all my hard work, personal investment and sacrifice to start a business turns into my being hated because I make too much?

When did the American dream of working hard to be a business success...making computers in my garage and then become a billionaire...become a punishable offense?

How successful do you have to become to reach the point where your employees have the power to destroy everything you worked to build up?

:BSmeter:

the CEOs are not building a business.
Most of them were a mere twinkle in their daddy's eyes when the companies they are supposed to pilot were founded.
There is no hardship in driving Bentleys and flying first class!

The bosses who actually sacrifice don't seem to be anything but respected.

Don't muddle the waters!

 

[Tgace]

So Hostess started out as a huge corporate monster? Nobody put the business together? Nobody worked hard and invested in making it a success (when it was a success)?

 

[granfire]

So Hostess started out as a huge corporate monster? Nobody put the business together? Nobody worked hard and invested in making it a success (when it was a success)?

we are not talking about the beginning.
We are talking about this corporate giant it has become.
Stick to the problem, will you!

 

[Bob Hubbard]

As a CEO I must say the hatred of successful businessmen is a bit offensive.

Let me remind people that the job of labor is to labor. That's work. Management doesn't owe them anything more than an honest wage for an honest days work. In the case of Hostess, how much is a fair wage for mixing water and flour and applying heat?

As to the evil managers and their outrageous bonuses, how much was their salary before those bonuses? Many CEO's and execs earn massive $1 salaries, and get their compensation in the form of annual bonuses if the company does well.

How many of those Union people would work under those terms? Not many I suspect.

I see "They were gonna cut our benefits". Woe is you. Benefits are an extra. A perk. An incentive. Not a guarantee.
I see "They wanted me to take a pay cut.". Yes, because when costs go up you cut costs. Labor is a cost. Labor is overhead. Your -job- as labor is to produce more than it costs to keep you. When you cost more, you get cut. This is a job, not a charity.
I see "They cut my retirement". So set up your own 401k and savings account. Anyone can do that. Why is it the companies responsibility to do this? (Hell, why is it the governments too, but that's a different argument).

What I see here is Overhead got upset with being treated as such, and walked off work. Because Overhead wasn't working, it created a situation where the Company was unable to meet their Obligations. This resulted in the Company no longer needing Overhead.

Now if my labeling workers as overhead offends anyone, then you do not understand business.

In my company I work. As such I am overhead. If it costs less for me to do something than hiring someone else, I do it. If I can hire someone else to do it better than me, faster than me, or cheaper than me, then business logic says to go with the lesser overhead. Lower overhead = profit.

Now according to this Snopes article, the Hostess execs DID raise their salaries significantly. That was incredibly stupid on their part.
http://www.snopes.com/politics/business/hostess.asp

Salary Increases at Hostess

Brian Driscoll, CEO, around $750,000 to $2,550,000
Gary Wandschneider, EVP, $500,000 to $900,000
John Stewart, EVP, $400,000 to $700,000
David Loeser, EVP, $375,000 to $656,256
Kent Magill, EVP, $375,000 to $656,256
Richard Seban, EVP, $375,000 to $656,256
John Akeson, SVP, $300,000 to $480,000
Steven Birgfeld, SVP, $240,000 to $360,000
Martha Ross, SVP, $240,000 to $360,000
Rob Kissick, SVP, $182,000 to $273,008

While the total amount in question is not a huge change (Aprox $5M annual), taking a pay increase of -ANY- amount while demanding your workers take significant cuts, is not a smart move. There have been many times I haven't gotten paid, but I made damn sure the folks working for me were taken care of.

 

[Sukerkin]

As ever, we seem to end up talking about two different things here - fed up with trying to explain things so I'm not even going to try :bye:.

 

[Bob Hubbard]

Suk,
If a company's BOD thinks someones worth superstar money, that's their call.
Not ours.

There shouldn't be any cap on earnings. Who has the right to tell you "sorry, thats all". If I can earn a Trillion dollars, you can bet your katana I'm gonna do it. Then I'll change my name to Elmer J Fudd, Trillionaire, and tell people I "Own a mansion and a yacht".

 

[cdunn]

And then it is over. I fail to understand why you think the executives will continue to draw salaries after the company is shut down. I get that you're hostile to business and hate executives. That's very clear. I'm sure you think companies run themselves somehow and executives are unnecessary. How you think they'll magic themselves paychecks after the company no longer exists is beyond me. Hatred like that, I guess, defies logic.

I do not, in general, hate the concept of executives. However, there is a flip side to a half-million dollar plus salary - Accountability. The executives at Hostess, with the support of their owners, sunk the company hundreds of millions of dollars deeper into debt during bankruptcy, despite $150 million per year of concessions from their workers. They failed, completely, to invest in efficency, to streamline the business, and to compete for the customer's dollar. By all appearances, they did not even attempt these things They repeatedly shorted their suppliers. They stole tens of millions of dollars from their employees, straight up, and then placed them in a position where they would collect more money from unemployment insurance than they would be paid if they accepted the new contract.

A company must satisfy five obligations to stay in business. It must satisfy its customers well enough that competitors do not take them away. Hostess executives failed. It must satisfy its suppliers well enough that they are willing to work with the company to ensure it is capable of delivering to its customers - from raw materials to equipment vendors to the banks that supply the credit you need to operate at all. Hostess executives failed. It must satisfy it's labor well enough that it's supplies are turned into product. Hostess executives failed. It must satisfy the communities in the locales where its production is performed well enough that they don't get rioted out of place. Hostess excutives succeeded here. Then, and only then, can a company deliver on its obligation to provide a profit to its owner. Not unsurprisingly, Hostess executives failed miserably here, because they failed three of the four legs that this delivery is built on. Therefore, I want the executives held accountable.. not paid the millions in bonuses they told their bankruptcy judge they wanted to pay themselves.

 

[granfire]

As a CEO I must say the hatred of successful businessmen is a bit offensive.

Let me remind people that the job of labor is to labor. That's work. Management doesn't owe them anything more than an honest wage for an honest days work. In the case of Hostess, how much is a fair wage for mixing water and flour and applying heat?

As to the evil managers and their outrageous bonuses, how much was their salary before those bonuses? Many CEO's and execs earn massive $1 salaries, and get their compensation in the form of annual bonuses if the company does well.

How many of those Union people would work under those terms? Not many I suspect.

I see "They were gonna cut our benefits". Woe is you. Benefits are an extra. A perk. An incentive. Not a guarantee.
I see "They wanted me to take a pay cut.". Yes, because when costs go up you cut costs. Labor is a cost. Labor is overhead. Your -job- as labor is to produce more than it costs to keep you. When you cost more, you get cut. This is a job, not a charity.
I see "They cut my retirement". So set up your own 401k and savings account. Anyone can do that. Why is it the companies responsibility to do this? (Hell, why is it the governments too, but that's a different argument).

What I see here is Overhead got upset with being treated as such, and walked off work. Because Overhead wasn't working, it created a situation where the Company was unable to meet their Obligations. This resulted in the Company no longer needing Overhead.

Now if my labeling workers as overhead offends anyone, then you do not understand business.

In my company I work. As such I am overhead. If it costs less for me to do something than hiring someone else, I do it. If I can hire someone else to do it better than me, faster than me, or cheaper than me, then business logic says to go with the lesser overhead. Lower overhead = profit.

Now according to this Snopes article, the Hostess execs DID raise their salaries significantly. That was incredibly stupid on their part.
http://www.snopes.com/politics/business/hostess.asp


While the total amount in question is not a huge change (Aprox $5M annual), taking a pay increase of -ANY- amount while demanding your workers take significant cuts, is not a smart move. There have been many times I haven't gotten paid, but I made damn sure the folks working for me were taken care of.

even you take it out of context.
It might be that the workers are only overhead, but like electricity, without them, no twinkies.

It is one thing to ask for concessions from the workers, it is quiet another to do so while loading up your own plate.
As you said, you have to make sure the machinery is in working order, paying the work is part of that.

Should the execs actually do their work, nobody will begrudge them their income. However, in the last couple of decades there has been a development that is nearer the institution of Raubrittertum than decent work ethics. The Robber Barons take what they can before moving on. And nobody learned from K-Mart or Enron.

If I screw up in my job, I will be held accountable.
Currently, the CEOs do not have to stand by their work, no matter how criminal or at least morally apprehensive.

 

[Steve]

Where is the "success threshold" where all my hard work, personal investment and sacrifice to start a business turns into my being hated because I make too much?

When did the American dream of working hard to be a business success...making computers in my garage and then become a billionaire...become a punishable offense?

How successful do you have to become to reach the point where your employees have the power to destroy everything you worked to build up?

I said earlier in the thread that this only works if we presume that the executives are working toward a goal of building a healthy, thriving, profitable business. They're not. It's a different paradigm, where a group of people not involved in building a business assume positions of leadership and then strip mine the company for all its worth, after which they file for bankruptcy and let the tax payers deal with the fallout. In some cases, we bail them out. In others, someone else buys the company brands and assets and does the hard work to rebuild the business. And in others, the company folds completely.

If you build a company and make your fortune, good on you. But we're not talking about that. This is a situation where you build the company, make your fortune, and then your company is sold (or taken over) by people who are not at all interested in your company as anything more than a quick buck. It's the corporate version of flipping a house, and while it takes a little longer to flip the corporation, the potential profit to a few people is worth it.

This is the (not so) new business model.

 

[cdunn]

As a CEO I must say the hatred of successful businessmen is a bit offensive.

Let me remind people that the job of labor is to labor. That's work. Management doesn't owe them anything more than an honest wage for an honest days work. In the case of Hostess, how much is a fair wage for mixing water and flour and applying heat?


I see "They cut my retirement". So set up your own 401k and savings account. Anyone can do that. Why is it the companies responsibility to do this? (Hell, why is it the governments too, but that's a different argument).

Labor supplies productivity. When your customers do not pay you the agreed upon rates, you do not supply them. When labor is not paid its agreed upon rates, labor does not supply productivity.

Now, the problem with the pension plans is this: The agreed upon rate of pay was, for example, 13.00/hr, of which the employer would deposit 3.00 in an account for later, leaving the employee 10.00 now, and a 401(k) equivalent account with 3.00 in it for later. Now, in roughly July/August, Hostess started disbursing a 10.00, and the equivalent of a post-dated check for the 3.00, then recently announced that it was stopping payments on the checks. As a businessman, do -you- extend full faith and credit to customers who bounce checks?

 

[Xue Sheng]

I was going to say how do they do that when the company no longer exists and no one, including the executives, have a job?

Bill we never seem to be able to communicate well in these things. It was a response to steve's post based on a hypothetical outcome if they had taken the terms offered

 

[Xue Sheng]

From Snopes

How much of this is true?

"I wonder when the media will start reporting that while Hostess was trying to cut Bakers pay by 8% & benefits by 32% the CEO gave himself a 300% raise (750,000 to 2,550,000). 9 Executives received 60% to over 100% raises WHILE filing their 2nd bankruptcy. But yeah let's blame the 18,000 workers making less than $20 an hour for Hostess closing."


Origins: Amidst the dire November 2012 news for snack lovers that Hostess Brands Inc. was going bankrupt and shutting down, possibly spelling the end of the beloved Twinkies snack cake, came charges and recriminations over exactly who put Hostess out of business. Company representatives maintained Hostess was forced into bankruptcy because it was unable to withstand prolonged and ongoing strikes by its workers; union representatives countered that employees were being asked to accept "draconian wage and benefit cuts and give up their pension" in order to enrich the company's executives and investors:
Hostess, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. The baker's union rejected the offer and decided to strike.

Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The baker's union said the company's demise was the result of mismanagement, not the strike. It pointed to the steep raises executives were given last year as the company was spiraling down toward bankruptcy.
One of the pieces of information circulated to support the latter point of view was the claim that several Hostess executives received hefty pay raises even as the company was preparing a Chapter 11 bankruptcy filing, raises which included a tripling of then-Hostess CEO Brian Driscoll's salary. Court filings and company statements indicate that Hostess did approve large salary increases for its top executives, but how much additional pay those executives may actually have received is unclear, as many of them subsequently left the company, renounced some or all of their raises, or agreed to steep pay cuts.

According to an April 2012 report by the Wall Street Journal, Hostess' creditors claimed that in July 2011 the company had manipulated executive pay by approving large salary increases for top executives (in place of performance-based bonuses) in order to skirt bankruptcy rules:
Creditors of Hostess Brands Inc. said in court papers the company may have "manipulated" its executives' salaries higher in the months leading up to its Chapter 11 filing, in what the creditors called a possible effort by Hostess to "sidestep" Bankruptcy Code compensation provisions.

The committee representing Hostess's unsecured creditors alleges that information it has gathered suggests "the possibility" that the company converted a chunk of its top executives' pay from performance-based bonuses to salary, "at least in part to sidestep" rules designed to ensure that companies in bankruptcy aren't enticing their employees to stay on board with the promise of cash, according to documents filed with the U.S. Bankruptcy Court in White Plains, N.Y.
A Hostess spokesman asserted that the raises in question were routine ones based on merit rather than manipulation:
According to the creditors' court papers, lawyers for Hostess maintain that modifications to compensation before a filing aren't subject to the bankruptcy provision regarding incentive compensation.

A spokesman for Hostess said the company doesn't believe the creditors' "theory has any basis in law." He said the executives' salaries were increased at a routine compensation review "to align them with industry standards and because the executives were being asked to take on significant additional responsibilities associated with trying to restructure the company outside of bankruptcy proceedings."
That article also provided a chart of Hostess executive salary raises which had been approved the previous July, while noting that court documents stated CEO Brian Driscoll had "renounced a portion of the increase":
Salary Increases at Hostess

Brian Driscoll, CEO, around $750,000 to $2,550,000
Gary Wandschneider, EVP, $500,000 to $900,000
John Stewart, EVP, $400,000 to $700,000
David Loeser, EVP, $375,000 to $656,256
Kent Magill, EVP, $375,000 to $656,256
Richard Seban, EVP, $375,000 to $656,256
John Akeson, SVP, $300,000 to $480,000
Steven Birgfeld, SVP, $240,000 to $360,000
Martha Ross, SVP, $240,000 to $360,000
Rob Kissick, SVP, $182,000 to $273,008


Five days after that article was published, the Wall Street Journal reported that Hostess' new CEO, Gregory F. Rayburn, had announced he was slashing executive compensation, and that the company's top four executives had temporarily agreed to cut their annual salaries to $1 while four other executives had agreed to return to their previous salary levels:
The chief executive of Hostess Brands Inc. said he is slashing executive compensation in the aftermath of creditor allegations that the company may have pushed management's salaries higher in the months leading up to its Chapter 11 bankruptcy filing in an effort to skirt bankruptcy rules.

Gregory F. Rayburn, a restructuring expert who took the helm at Hostess last month, said in an interview that the top four executives working under him had agreed to cut their annual salaries to $1 until the company emerges from bankruptcy or Dec. 31, whichever comes first. The executives — Gary Wandschneider, John Stewart, David Loeser and Richard Seban — had seen their salaries increase by 75% to 80% last July, at a time when the baking company had already hired restructuring lawyers, according to creditors.

Further down the totem pole at the Twinkie maker, four additional executives agreed to return to the salaries they were receiving before the July increase.
For now, the fate of Hostess (and the Twinkie) are up in the air, as the company and their striking baker's union employees have agreed to make another attempt at reaching an agreement:
Hostess Brands Inc. and its second largest union have agreed to try to resolve their differences after a bankruptcy court judge noted that the parties hadn't gone through the critical step of private mediation. That means the maker of the spongy cake with the mysterious cream filling won't go out of business yet.

The news comes after the maker of Ho Ho's, Ding Dongs and Wonder Bread moved to liquidate and sell off its assets in bankruptcy court. Hostess cited a crippling strike started on Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents about 30 percent of Hostess workers.

"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case."

 

[arnisador]

Unions funds are usually quite limited of course, which is why in the protracted miners strikes of the 80's, people like myself would contribute to various funds to help the miners families out. I am guessing that doesn't happen in America from comments I read here on these pages?

When I was a kid growing up in a blue-collar town you'd see donations of groceries by neighbors to strikers in times like those. Cash, not so much. Nut my father was a Teamster and they had a pretty big fund.

 

[arnisador]

And then it is over. I fail to understand why you think the executives will continue to draw salaries after the company is shut down. I get that you're hostile to business and hate executives. That's very clear. I'm sure you think companies run themselves somehow and executives are unnecessary. How you think they'll magic themselves paychecks after the company no longer exists is beyond me. Hatred like that, I guess, defies logic.

It's common for some of them to be paid to manage the bankruptcy. Some of them will get large checks to oversee the dismantling and sale and such.

 

[arnisador]

hating management, executives and business?
You hvae to admit that the bad apples are making way too many headlines, and it has not gotten any better!
There is absolutely no accountability in the ranks of top management, they keep their million dollar mansions, boats and luxury cars after the company went belly up, after they pillaged resources and the financial assets and - last but not least - the financial security of the workers, like their retirement funds.
If that does not get your blood boiling, I don't get it.

How does the saying go? "Capitalism is the worst form of economic system, except for every other one that has ever been tried."

We have John Galt on one side of this discussion and Eugene V. Debs on the other. If you start a small business and grow it, you deserve what you get--that's the American dream. The problems come in with a large bureaucracy--c.f. the govt.--and going public, so that your fiduciary duty is to the stockholders, who are pensioners and rich traders who just want money out of the system. Management is necessary--if for no other reason than workers will slack off if not watched. (I sure would.) Who here has a truly better idea?

 

[Bob Hubbard]

Labor supplies productivity. When your customers do not pay you the agreed upon rates, you do not supply them. When labor is not paid its agreed upon rates, labor does not supply productivity.

Now, the problem with the pension plans is this: The agreed upon rate of pay was, for example, 13.00/hr, of which the employer would deposit 3.00 in an account for later, leaving the employee 10.00 now, and a 401(k) equivalent account with 3.00 in it for later. Now, in roughly July/August, Hostess started disbursing a 10.00, and the equivalent of a post-dated check for the 3.00, then recently announced that it was stopping payments on the checks. As a businessman, do -you- extend full faith and credit to customers who bounce checks?

Good point.

 

[granfire]

It's common for some of them to be paid to manage the bankruptcy. Some of them will get large checks to oversee the dismantling and sale and such.

sure.

But I think not usually the bankruptcies they caused...

 

[granfire]

Your hatred is palpable. It's really distasteful.

yes.
I hate unethical thieves.

How about you?

 

[arnisador]

sure.

But I think not usually the bankruptcies they caused...

You might be surprised there...but in a liquidation case like this it could also be a court-appointed individual that oversees it. Still, I'd expect some of them to be kept on. Who better to know what to do with the Peoria factory and what's in it?

 

[Scott T]

Suk,
If a company's BOD thinks someones worth superstar money, that's their call.
Not ours.

There shouldn't be any cap on earnings. Who has the right to tell you "sorry, thats all". If I can earn a Trillion dollars, you can bet your katana I'm gonna do it. Then I'll change my name to Elmer J Fudd, Trillionaire, and tell people I "Own a mansion and a yacht".

Bob, you say there shouldn't be a cap on earnings, yet you decry the negotiated wages of the unionized bakers, and you call them 'overhead'. Well, now it's overhead that Hostess no longer has to pay.

Management should be thanking them for cutting that 'overhead' from their operating budget.