For my friends who wonder why Hostess employees refused to take a pay cut in order to keep the company afloat, here are some factors you may not be aware of:
Hostess demanded that workers accept wage and benefit cuts amounting to more than 25%, including massive increases in health insurance payments. Meanwhile, as Hostess was about to enter bankruptcy last year, its top ten executives gave themselves massive raises. Among those:
* One executive got a 75% raise, from $375,000 to $656,000.
* Another executive’s salary went from $500,000 to $900,000.
* The CEO received a 300% increase, from about $750,000 to $2.5 million.
While the executives were rewarding themselves for their poor stewardship of the company, they unilaterally ended contractually-obligated payments to the employee’s pension plan, and reneged on promises to invest in the company’s future. Those promises were made during a previous bankruptcy as part of the exchange for employee pay cuts.
And for the past eight years, the CEO’s office has featured six different people, none of whom had any experience in the mass-market baking industry, each of whom was put in place by Wall Street investors who were more interested in stripping money from the company and cutting worker pay than in restoring it to profitability.
Hostess failed because executives enriched themselves at its expense and by stealing from their employees while running the company into the ground through ignorance and active mismanagement.
But by all means, let’s blame the workers for the company’s demise because they were “too stupid to take a pay cut.”