The recent decision by Hostess Brands, Inc. to commit corporate hari-kari has become a sort of cultural Rorschach test over the past month, with people seeing the reflection of their preconceived notions in the issue.
Some lay the blame for the loss of the beloved Twinkie at the feet of the labor unions. The argument seems to be that, since business was struggling, the workers needed to take a hit for the survival of the company. And it was supposedly their intransigence that led the reluctant executives to take the extreme step of dissolving the company.
But over the past decade, Hostess has been run into the ground by a series of management teams whose “expertise” was mainly in the inflation of executive compensation, rather than operating an international baking company. The balance sheets were crammed with debt, as executive salaries rose to “I’m rich, bitch!” territory, all the while ignoring the principles of running a successful business—marketing, product and manufacturing modernization, etc.
And when the inevitable bankruptcy came in 2004, the executives claimed their bonus money, and the company floundered, closing plants and forcing union concessions.
In 2009, a capital equity firm called Ripplewood bought the company, promising to bring Hostess back to its former glory as a staple of American culture. They even brought Dick Gephardt—former heavyweight congressman and perceived hero to labor—into the fold to convince the unions that they were on the up and up.
Instead, the inflation of executive compensation continued (while Gephardt’s son got himself a seat on the board, along with a $100K annual salary), more debt was added, and the company continued to lose market share. And, of course, deeper concessions were demanded from the workers.
When the baker’s union balked at the prospect of watching their compensation decline to near poverty wages, the executives decided to burn the whole damn place down through bankruptcy. And sought multi-million dollar bonuses for themselves while they were doing it.
Hostess was essentially given roofies and repeatedly raped by Wall Street, then dumped in a ditch when they were finished with her. Metaphorically speaking, of course.
It is irrational for the executives of a company in the process of losing money to see their compensation increase. And it is absolute ethical and financial lunacy to then demand the workforce bear the brunt of the hard times which the executives themselves were largely responsible for.
But that’s the reality of today’s corporate world. People often rail against greedy corporations that put profits above all else. But nowadays things have devolved to the point where it’s not even about profits anymore—at least not for the business.
It’s about the musical chairs that our 21st century aristocrats play with executive positions, and the ways they use those positions to enrich themselves at the cost of the company and its workforce.
With the example of Hostess, it was likely assumed that the strength of the Twinkies and Wonder Bread brands would keep the money rolling in based on inertia alone, so it was the perfect target. CEO after CEO would take the helm, amass ridiculous sums in compensation, then blow out of town with obscene bonus in hand.
The thinking is similar to what draws gangsters to strip clubs. You don’t have to really be a business genius to make money with a strip club. You just have to provide the people with what they want, and the cash flow will usually be sufficient to compensate for shitty business practices.
And like gangsters, the key for the executive class is to play by the rules of the game. Never do anything to hinder the revolving door or upset the system. Never publicly acknowledge that it’s all a hustle. As long as you do that, you can nosedive the company straight into the ground and still walk away with a new summer home in the Hamptons.
Meanwhile, the media will look down their noses at the poor suckers who actually expect a wage job to provide something approximating a living, and portray them as unwilling to compromise. A sufficient number of people will buy into this deception so as to further degrade the public perception of organized labor, and so the game goes.
And the only people that really lose are the workers. The executives involved in this sorry mess aren’t going to have any trouble making their car payments, the rabid Twinkie fans will no doubt find their precious sugar pill restored by some other company soon enough, and the media shills who are participating in the smearing of the baker’s union will continue to spout their talking points for cash.
But for the men and women who actually produced the products sold by Hostess, there is no silver lining. Their jobs, which used to support their families, are gone. The company that they put years of work into is dead, its corpse looted by aristocrat bandits.
