By: Rmuse
November 17th, 2012
Source: PoliticsUSA
A scapegoat is a person or group made to bear the blame for another’s actions, and usually they are easy targets to assign blame for something they had nothing to do with. Republicans have attempted to blame union labor for much of the nation’s economic woes in recent years and, yesterday, the Hostess Brands took a page right out of Republicans’ playbook and blamed a union strike as the reason they were shutting their doors and liquidating their assets costing 18,500 employees their jobs. However, much of the responsibility for Hostess shutting down lies with the company’s management and the private equity firm behind them, and yet union workers are the ones bearing the blame and subsequently will suffer the consequences of the shutdown.
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.
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.
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There is no question the Union model for company growth is the way to go. The Post Office is a great example…Or how about the City of Detroit…or How about California, they seem to have a great business model.
Richard Trumka is the voice of reason?
I don’t have all of the facts about Hostess, maybe they were run into the ground by management, maybe demand for their product isn’t there to the point that they can make money. but blaming Romney for this is a biased, close minded, loser way of looking at things.
An article like this that is so close minded is an embarrassment to this website that is supposed to be an open minded, observant type of forum for discussion and sharing of ideas from well intentioned contributors.
Annie I’ve seen that look so often! Just ask people to face almost anything about the reality they are in and their eyes glaze over. Someone once said it is like they are abused children hoping that if they wait the good parent will return. They don’t want to know that things aren’t okay and will make excuses so as not to lose their faith in the system. If they lose faith in the system…they are really lost because they have never been taught that there could be another system.
I give my students a project every year where they have to design a country from the ground up. They are given an island nation to work with. They can print their own money and create any kind of society and economy they want. What is the first thing they always do when addressing the issue of housing….They create low income housing. When I ask them why they intend to create poverty…no answer…Scary.
I worked in various corporations from 1989-1999 as a computer consultant. What I saw blew my mind. I’d heard of companies going under because of “bad management” and had wondered, how is that even possible?
But what we see here, management that knows nothing about the work they’re managing, a high turnover in CEO’s, and crushing the employees in terms of salary and benefits, is definitely the norm in my experience.
It looked to me like the main reason they crush the employees is actually less about willfully keeping the masses down, and more about the fact that, to get a nice fat bonus, upper management needs to show cost-cutting. And since they know next to nothing about the departments they’re managing, the only way to do that is to fire people or lower wages or withdraw benefits.
You know what was the worst part, though? You’d think it was seeing how poorly things were run, or how badly the workers were treated. But no. It was seeing that most employees bought into it. The “Emperor’s New Clothes” syndrome has never, EVER been so real for me. It was staggering; if I mentioned how disempowered they were made, or how insultingly treated, their faces would glaze over at best, and I’d be called a conspiracy theorist (even though I was talking clear facts) at worst. I had to get out of there. It was a good education, but an unbelievably deadening little world.