Monday, November 19, 2012
Election / Economy The Truth About Hostess
Posted by Charles Mudede on Mon, Nov 19, 2012 at 8:36 AM
Noting to do with the workers; everything to do with the bankers...
Hostess Brands’ demise is a recurring story that should be well-known after Americans learned the predatory private equity tactics of Bain Capital during Willard Romney’s failed run for the White House. In fact, union president Richard Trumka pointed out that Wall Street investors that own Hostess were disinterested in the company’s success and cited similarities to the situation of Bain Capital and KB Toys in 2000. As a reminder, Bain Capital’s scheme was leveraging companies with crushing debt, cutting workers’ wages and benefits, and when the company can no longer repay their loans they go into bankruptcy, often more than once. Hostess is in bankruptcy for the second time since 2009 and a major factor in their inability to succeed is that over the past eight years, they were owned by Wall Street investors that were restructuring experts, managers from other non-baking food companies, and now a liquidation specialist. There was no plan for Hostess to succeed and it appears that was the objective all along.In the 70s, the owners of capital were able to blame our country's economic troubles on high labor costs. The 80s saw the removal of all sharp teeth from the labor force. The 90s saw the end of substantive welfare for the poor. By the 00s, the owners of capital could not blame any of the massive economic troubles on labor. Those economic problems, which exploded in 2008, still persist to this day, and labor still has nothing to do with them, and yet the owners of capital (or borrowed capital—which in our age amounts to the same thing) have the nerve to blame the collapse of Hostess entirely on labor, a long-defanged labor, a labor force that hasn't had meaningful protections or representation since the 70s.Hostess’s failure was compounded by having six CEO’s in 8 years who had no experience in the bread or cake baking industry, and despite their financial woes, the company’s CEO got a 300% salary increase from $750,000 to $2,250,000, and other top executives received raises worth hundreds-of-thousands of dollars; all while the company was struggling. Instead of acknowledging the lack of competent leadership and exorbitant executive salaries as contributing to the company’s decision to close its doors, CEO Gregory Rayburn issued a statement saying, “We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike.” However, Rayburn and Hostess management claimed the strike would be responsible for closing plants even before there was a strike, and they had made plans to close plants whether or not workers accepted the Draconian wage and benefit cuts the company offered, or if they went on strike.
What is clear in all this is that capital longs for the restoration of its legitimacy. It has been operating in the open since 2008 and is now desperate for some kind of idealogical cover, some way to justify ("the market has the best solutions for social problems") its exploitive practices. This exposure cost Romney the election—indeed, the exposure was so bright he couldn't show his tax returns in any real way. He knew that nothing covered the fact of how he and his kind make lots of money.
They're not capitalists, they're toadies and suck-ups who hide the favors they've been granted behind lies about market forces and invisible hands.
The union didn't fail the Hostess company. The union failed the Hostess workers.
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Perhaps the union failed the workers, but since the union isn't actually running the company, they don't have their hands on certain levers of control that the management team does.
Now if Hostess were run as a co-operative, or better: a worker-owned collective, things would be very, very different.
http://www.zerohedge.com/news/2012-11-16…
Let's say Hostess wasn't unionized and its un-unionized workforce decided, en masse, to up and quit when faced with wage and benefit cuts. What, effectively, would be different than what's happening now? Hostess can't replace thousands of employees overnight. And, had their unionized workers continued to strike, there was nothing keeping Hostess from hiring scabs, since labor protections in this country are a joke. But they couldn't do that, because workers aren't as disposable and replaceable as conservatives like to pretend.
And the irony isn't lost on me that it's conservatives and libertarians who go on and on about how workers are part of the free market, and, if they don't like how their employers are treating them, they are free to move along. When the shit hits the fan, libertarian neofeudalism spills out for all to see.
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All of those things are completely outside the purview of labor contracts, which are, by law, limited specifically to the negotiation of wages & working conditions. Unions have no more right to dictate management practices than management does to dictate how a union is administered. Same with factory closures, which, by definition, would preclude there being any working conditions for which to bargain.
As for "anticipating the company's bankruptcy", that was already a known fact at the time negotiations began, since Hostess went into Chapter 11 - for the second time - back in January, so technically, there was nothing to anticipate.
What the unions COULDN'T anticipate was pretty much everything else that occurred after that, including: the generous bonuses the board would hand out to the then CEO and other executive staff; the hiring of a well-known liquidation specialist as the company's "Chief Restructuring Officer"; the subsequent resignation of the CEO nine days after that; the board's decision to appoint the newly-hired CRO as the company's new CEO; and the sequence of events that occurred as a result.
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