When Twinkie-making bakery Hostess Brands, Inc. announced that it was shutting its doors due to union greed, the company was interjected into a larger debate about American labor practices and if organized workers should be treated the same as their corporate counterparts. Conservatives quikcly latched onto this story as a means to push their anti-labor agenda. After all, look at Michigan, which recently saw a lame duck congress ram right-to-work legislation straight to the governor's desk, or really any Republican-controlled legislature working to diminish the strength of unions while granting corporations unprecedented powers. So what makes Hostess an interesting case for organized labor? The fact that after years of mismanagement and concessions from the workers, corporate executives froze worker pay while granting themselves massive pay increases by stealing worker pension contributions, and then getting a judge to approve millions in bonuses for the top executives to help disassemble the company they helped ruin.
Let's look at the facts surrounding the labor contracts with Hostess.
During the 2004 bankruptcy of Hostess, the unions took significant wage and benefit concessions bringing Hostess' employee compensation below their national competitors saving the company around $110 million annually. The first bankruptcy also saw a reduction in union represented employees by half, from nearly 10,000 to around 5,000 union employees.
Post-bankruptcy Hostess saw a supposedly streamlined company run by private equity firms and hedge funds promising an investment into newer equipment and technology. Instead, they demanded more concessions from the workers (including things like elimination of the 8-hour work day!) and eventually filed for bankruptcy a second time in less than ten years, and in those proceedings Hostess demanded even more wage cuts and increase employee contributions to benefits packages. Hostess also unilaterally stopped paying its pension obligations in violation of federal law. Meanwhile the corporate executives quickly gave themselves pay increases and asked for a judge to grant bonuses to the executives.
Despite being mismanaged for years, labor unions, which have conceded to the corporation in the past, were continually being blamed, even while the executives were looting the company. What makes the executives' actions even more egregious is the fact that they had been diverting money paid by the employees for their pension plan to pay for other things... like pay increases for the top executives. That's right - the company, which wanted increased employee contributions for their benefit packages, was taking those employee contributions to pay for god knows what. And do you know what the CEO's excuse was?
"Whatever the circumstances were, whatever those decisions were, I wasn't there," CEO Gregory Rayburn told The Wall Street Journal, evoking The Shaggy Defense.
Rayburn's comments are very interesting because the CEO of the company that asked a judge for bonuses for top executives and even more concessions from the workers while undoubtedly knowing that the company he is running stole millions from the workers in the past - money that the employees paid out of their own pocket for their retirement. And this is in addition to their recent illegal cessation of payments for their pension obligations.
Now after that, do you think that the sale of Hostess' valuable brands would go to replenish the stolen funds from the workers or would it go to the mismanaging private equity and hedge fund executives who have already ripped-off the company to insure their payday?