Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.
Published on November 18, 2012 By Draginol In Politics

I’ve been watching the fall-out from the destruction of Hostess.

I’m not going to get into the “blame” game other than to say it’s kind of dumb for people who go on strike to be shocked that they lose their jobs.

What I will get into is the never-ending stupidity of complaining about CEO pay.  Americans have no problem with paying athletes and entertainers tens of millions of dollars annually. But they rage about people getting paid a couple million for running a multi-billion dollar company.  Frankly, it just amazes me.  Our society just seems to have its priorities totally messed up.


Comments (Page 1)
on Nov 18, 2012

Agree totally.  It's infantile, but fed by an infantile press, whose CEO's seem somehow to think they are worth every penny they get, since I've not read of any of them sending checks to laid off Hostess employees.

on Nov 18, 2012

Yea, and what will really irritate those who sympathize with the Union employees and rail on about the pay of CEOs is that we will get our snowballs and twinkies (possibly called something else) but they'll be produced in Mexico rather than Maine.  

on Nov 19, 2012

Well, I complain, because they tripled the salaries of the upper management and still didn't attract any sort of talent, and they had to hire people as advisors to run the company as well, at the same time as they were cutting the salaries of the union workers.

Spending on crappy upper management is not going to help a company.  Spending and getting good upper management can save a company.

Hostess is an example of the former.

on Nov 19, 2012

Jythier
Well, I complain, because they tripled the salaries of the upper management and still didn't attract any sort of talent, and they had to hire people as advisors to run the company as well, at the same time as they were cutting the salaries of the union workers.

Spending on crappy upper management is not going to help a company.  Spending and getting good upper management can save a company.

Hostess is an example of the former.

Certainly.  They probably should have invested in better upper management earlier.

I predict we'll see Twinkies in the future. There's a market for them and there's value to them. But I predict it'll come from a non-union place, probably Mexico (thanks to NAFTA).

on Nov 19, 2012

They didn't triple the salaries. It was shot down not only by the court but also by the hedge fund managers which hold the majority of debt in the company.  Hostess is a private-equity owned company.  They can blame their situation all they want on labor but there is much more to this story than meets the eye. Looking at the financials on Hostess I guarantee you the hedge fund managers want the company broken up and sold.


I’ve been watching the fall-out from the destruction of Hostess.
I’m not going to get into the “blame” game other than to say it’s kind of dumb for people who go on strike to be shocked that they lose their jobs.


Maybe you haven't been watching closely enough.  The union and its members knew exactly what the consequences would be.  The ones I saw interviewed at the Maine facility knew it would lead to a bankruptcy, and stated that it was worth forcing knowing that their facility was modern and profitable and it was worth the risk of hoping a buyout would occur. The ones in the older facilities knew that their jobs were already being sacrificed as part of the concessions. Laborers aren't as  dumb and uninformed as you suggest. And the union knows that when one company asks for concessions others soon follow.


What I will get into is the never-ending stupidity of complaining about CEO pay.  Americans have no problem with paying athletes and entertainers tens of millions of dollars annually. But they rage about people getting paid a couple million for running a multi-billion dollar company.  Frankly, it just amazes me.  Our society just seems to have its priorities totally messed up.

Hostess is not a good example for such discussion. it is a private-equity owned company and what most people rant about is publicly traded corporations in which the CEO fills their board with cronies and then gives themselves unjustified compensation packages which cannot be denied. New laws now allow the shareholders to vote on such things and even though these votes are not binding there have been several cases so far where the execs did bow down to shareholder pressure. The CEO compensation for hostess is about two million which is well below the average of ten million for a large US publicly traded corporation.   Big difference in compensation when the bankers own the debt  from what they allow when they are publicly traded corporations and the average Joe is a shareholder and the banker sits on the board collecting his  piece of the pie.

 

on Nov 19, 2012

The complaint was - during all of these cutbacks the CEO's gave themselves fairly substantial raises. That's a pretty serious issue, and I don't blame the workers wanting some accountability for this. Hostess makes toxic trash food, and probably deserves to go away anyway. 

CEO pay is out of control in my opinion, few (other than the CEOs themselves) doubt this. I give a lot of my money(as a shopper) to Costco, and one of the reasons is the CEO/Founder of Costco refuses to take anything more than a 350K a year salary because he feels it would be setting a bad example for his employees. The new CEO takes closer to 650K, but still - that's pretty amazing considering they are the number 3 retailer in the world and he could be milking the company out of 10-20 million a year if he was a greedy bitch.

What do people do with millions a year in salaries? Not only does it seem exceptionally greedy, I cannot fathom what they would spend it on. Declining returns on money starts to become an issue much over 200-250K these days. Anything beyond that and someone starts to appear like they are hording money at the expense of others.

Also, grossly overpaid(compared to employees) CEO crushes the morale of his employees. Folks making 30,40, even 50-60k a year slaving in the pits while their CEO boss pulls up in a Porsche is pretty crushing to most people. I think the acceptance of this is growing thin in this day and age, and people are beginning to question what is happening around them more, and learning to not tolerate the nonsense they used to tolerate.

As I said in another post, times are changing, the big shots are losing their shorts, and the little guys are rising up.  Minecraft was programmed in a garage, and made what, 230mil? Don't Starve isn't even out yet, and will be hitting half a million and was programmed by a couple dudes in a studio. Big companies with fat cat CEO's soaking up millions are disappearing, karma. Didn't elemental teach you anything? If that didn't humble you, nothing will, so until you learn the lessons will keep coming.

BTW: FA is a nice game, but not worth $40.. It's on sale for $20 on a website right now, I won't ever purchase a new game anymore, wait a couple months and get em for half off! FA is good, not great, several indy or bargain bin games are better IMO.. Warlock for $3.00 blows FA away IMO. Stardock needs to more to cutting edge IMO, nothing coming out lately is cutting edge, it just seems dated. No offense..

 

on Nov 19, 2012

I’m not going to get into the “blame” game other than to say it’s kind of dumb for people who go on strike to be shocked that they lose their jobs.

Wow, really? Not getting into the blame game eh? That reads as exactly placing blame.

 

Americans have no problem with paying athletes and entertainers tens of millions of dollars annually.

Don't know what gated zip code that's from. I have never met anyone that thinks that, if anything, it is very much the opposite.

 

Personally, I don't think any CEO type will be happy until their work force is in chains working for food. As of now they are quite happy with Chinese labor living 30 to a room, working up to 80 hours a week. If a different country pays less and treats their workers worse, CEOs will be on it like flies on shit, along with their shareholders. 

So now we have large numbers of unemployed, due to outsourcing and automation, which causes employers to place more and more demands on the ones that still are working knowing there is a thousand resumes on file of people that will do anything for work. Couple that with wages going nowhere but down since the 70s, where does the tax revenue come from? Who's supposed to pay for your grand wars when the 98% are inching closer and closer to poverty status? Not from the 1% eh? Rather close up shop and go live on a beach and watch the country that gave you everything crumble into 3rd world status...

Don't let the door hit you on the way out.

 

 

CEOs love capitalism, Haiti style

 

 

on Nov 19, 2012

bodhi2010
The complaint was - during all of these cutbacks the CEO's gave themselves fairly substantial raises. That's a pretty serious issue, and I don't blame the workers wanting some accountability for this. Hostess makes toxic trash food, and probably deserves to go away anyway. 

CEO pay is out of control in my opinion, few (other than the CEOs themselves) doubt this. I give a lot of my money(as a shopper) to Costco, and one of the reasons is the CEO/Founder of Costco refuses to take anything more than a 350K a year salary because he feels it would be setting a bad example for his employees. The new CEO takes closer to 650K, but still - that's pretty amazing considering they are the number 3 retailer in the world and he could be milking the company out of 10-20 million a year if he was a greedy bitch.

What do people do with millions a year in salaries? Not only does it seem exceptionally greedy, I cannot fathom what they would spend it on. Declining returns on money starts to become an issue much over 200-250K these days. Anything beyond that and someone starts to appear like they are hording money at the expense of others.

Also, grossly overpaid(compared to employees) CEO crushes the morale of his employees. Folks making 30,40, even 50-60k a year slaving in the pits while their CEO boss pulls up in a Porsche is pretty crushing to most people.
 

You are best to go back and check your "facts".  First off Hostess is mostly a bread baking company. The Hostess brand products are a small portion of its total business.  

It is a privately held company which is being systematically sucked dry by its hedge fund owners. My guess is the actual source of equity came in from one of the Mexican companies that tried to buy them out during their last bancruptcy. Interstate Bakeries bought Taggert in 1995 which owned the hostess brands and Interstate only changed its name to Hostess in 2009. This is vulture capitalism at its best where a couple of ex Goldman Sachs employees are sucking this one dry and trying to put the blame on the employees. Hostess is facing tough circumstances. We have an overcapacity of bakeries, and commodity prices went up during this last recession instead of down. Add in skyrocketing transportation costs and the fact that the majority of this companies facilities are outdated and you will understand why they are going to fail. The companies debt and liabilities exceed the value of its assets and they have debt that carries interest rates as high as 15%.

 

You should also check your "facts" on Costco. The previous CEO had a compensation package worth about 12 million Per year. So you may think the lower salary is amazing but the devil is in the details. 

on Nov 20, 2012

I agree with you.  But I think part of the problem is that CEOs are invisible (the good ones are never noticed by the common man).  Stars and athletes are always in front of the public.  Good CEOs generate a lot more wealth for everyone than any jock or actress ever could.

on Nov 20, 2012

Frogboy


I predict we'll see Twinkies in the future. There's a market for them and there's value to them. But I predict it'll come from a non-union place, probably Mexico (thanks to NAFTA).

Sad thing is its not the labor costs that would send the production to Mexico. The added transportation costs would easily outweight any saving in labor costs. It's the savings from sugar costs due to US sugar tariffs that would make the difference. (Not NAFTA)

The company is failing because they have mostly older less productive facilities and have an older inefficient transportation fleet. They hired a liquidation expert to run the company so it should be OBVIOUS what the outcome will be and that the problem is not labor. They are simply trying to change the terms of the pension liability prior to liquidation so that the assets are worth more when they sell off the parts and then hand over the tab for the pension liability to YOU, the taxpayer, through the Pension Benefit Guaranty Corporation.

 

on Nov 21, 2012

Not saying courts/judges are always right, but this one said liquidate.  And I think the incremental increase in unit shipping cost would be negligible & more than offset by the reduction in raw material & labor costs.  But that's just my guess.

on Nov 21, 2012

Not saying courts/judges are always right, but this one said liquidate.  And I think the incremental increase in unit shipping cost would be negligible & more than offset by the reduction in raw material & labor costs.  But that's just my guess.

The change in unit cost of shipping would be more much than negligible. What rock are you living under? Keep in mind that you still need regional distribution centers, and more miles of shipping means more fuel and more Teamsters. DOH!

As far as raw materials like I said before the sugar would be a lot cheaper in Mexico because of our tariffs but the wheat and corn wouldn't be. The raw material costs of food is generally less than 20% of  the wholesale price.

Mexico is a net importer of wheat and corn from the US so there again they would have additional transportation costs. 

Take a look at Grupo Bimbo. They are the largest bread baking company in the US and they use US domestic bakeries labor for the majority of the markets they serve in the U.S. even though they are a Mexican company. Its all about transportation costs these days. 

If you take a look at some of Hostesses regional competitors you will see they are not only mostly profitable, but also their labor force is organized under the very same unions that Hostess' labor force was organized through. DOH! 

There is no guessing game here.  The writing was/is on the wall!

on Nov 21, 2012

The market usually works, after all.  Nothing magic about Hostess.  Sounds to me like both sides failed.  The dust will settle but in the meantime lots of folks will be losing jobs.  That's just the price one pays for taking risks.  Management risked and failed.  Labor risked and failed.  There are countless similar stories which play out every day; we don't hear about them because they are on too small a scale, but those stories are what make an economy.  I sure can't predict winners and losers, but I can guarantee there will be both.

on Nov 21, 2012

The market usually works, after all.  Nothing magic about Hostess.  Sounds to me like both sides failed.  The dust will settle but in the meantime lots of folks will be losing jobs.  That's just the price one pays for taking risks.  Management risked and failed.  Labor risked and failed.  There are countless similar stories which play out every day; we don't hear about them because they are on too small a scale, but those stories are what make an economy.  I sure can't predict winners and losers, but I can guarantee there will be both.

Neither management nor labor failed. If you follow the entire story going back to their last bancrupcy it is obvious that the hedge fund who bought the debt at a discount and hence control of the company wanted liquidation from the start. Management was being paid to try to set things up to get the owners the highest profit upon liquidation not to save the company. If you look at what the provisions of the contract that was being presented to the bakers union were, then it would be obvious to you why more than 90% of the members voted to strike.

Labor didn't risk anything. The company was trying to shed some of it's debt onto the union In the contract they were trying to peddle. Unions are not that stupid.

 

People do hear about them every day. You simply have to tune into Bloomberg instead of FOX.

 

on Nov 22, 2012

Smoothseas
You simply have to tune into Bloomberg instead of FOX.

Not having cable, I 'tune in' to neither.  Usually good to avoid assumptions.