Clippings: Job creation not exactly Job One
The impending demise of Hostess Brands Inc. is good for a few cheap laughs.
To start with, Hostess’s signature product, the Twinkie, is inherently funny. It has been theorized that only rats, cockroaches and Twinkies would survive the end of the world as we know it. My niece Carrie forwarded a George Takei tidbit about a looming December prediction of doom and noted the timing of Twinkies’ demise: “Well played, Mayans.”
Then there’s the news item that a Mexican company may buy out the failing firm. Of course, the sale of sweet snack foods would offer a certain synergy with one profitable cooperative Mexican-American venture, marijuana smuggling.
But even better is that the firm in question is named “Grupo Bimbo.” As our esteemed humor columnist Jessie Raymond noted, don’t they already own Hooters?
Of course, there is another hope Twinkies (and Wonder Bread and Drake’s Cakes) will survive. This week a judge ordered Hostess management and its balking union bakers into mediation after refusing to immediately grant the company’s latest bankruptcy request.
Those negotiations and actions of Hostess management are where things become considerably less amusing.
The company survived a 2004 bankruptcy, but filed again earlier this year. News stories tend to blame the uncooperative bakers union, which represents 18,500 workers in 33 plants and turned down an offer, according to cnn.com, that called for an 8 percent wage cut, a reduction in health benefits, and a freeze in pension plan payments for more than two years.
Ah, but what happened just before that spring bankruptcy filing? According to several sources, including thinkprogress.org, Hostess tripled then-CEO Brian Driscoll’s pay (from about $750,000 to $2,550,000), and “increased other executives’ compensation by as much as 80 percent.”
One could call it savvy income protection by the executives. Or looting the company because they knew it would fail. Take your pick.
Sadly, this example of major raises in CEO pay while workers lose their jobs is far from isolated.
Take Citigroup CEO Vikram Pandit, for one. According to multiple sources, Pandit earned $261 million for his just-completed five-year tenure leading Citigroup, including the $165 million that Citigroup paid to buy his former company, which his new firm then dissolved.
During Pandit’s tenure, Citigroup required federal support, lost almost 90 percent of its stock value, and, what is most important here, shed more than 100,000 jobs.
Or look at Bank of America CEO Brian Moynihan. In 2011, BOA quadrupled Moynihan’s pay, including stock options and perks, to about $8.1 million. In 2011, BOA stock plummeted 58 percent, and — you guessed it — laid off 30,000 workers.
Not only struggling companies put the wood to their workers. Caterpillar, despite coming off a record $4.9 billion profit in 2011, got striking employees in August to ratify a deal that included a six-year wage freeze and a pension freeze.
If anyone thinks Caterpillar executives feels the same way about their pay, well, I’ve got some slightly wet land in Cornwall you might want to buy.
Caterpillar CEO Douglas Oberhelman got a 60 percent raise to $16.9 million in 2011, a figure that according to chicagotribune.com includes “salary, bonuses, stock and option awards and retirement plan contributions.” I’m sure he feels his workers’ pain, though.
A couple other notes here:
• According to the Economic Policy Institute, in 1978 American CEOs’ pay stood at 26.5 times that of an average worker.
In 2011, American CEOs’ pay stood at 206 times that of an average worker.
• According to a Tax Justice Network study described on The Guardian online (www.guardian.co.uk/business/2012/jul/21/offshore-wealth-global-economy-t…), “The world’s super-rich have taken advantage of lax tax rules to siphon off at least $21 trillion, and possibly as much as $32 trillion, from their home countries and hide it abroad — a sum larger than the entire American economy.”
A couple of thoughts:
• American CEOs were motivated to create jobs and make money in the 1970s, not to mention 1990s, 1980s, 1960s and 1950s, when their tax rates were higher than they are now.
• None of that cash stuffed in Cayman Islands banks is creating jobs, except for Cayman Island bankers.
• Anybody who thinks that the ongoing “fiscal cliff” debate about tax rates for the rich is really about job creation, see all of the above.
And call me about that swampland in Cornwall.
Andy Kirkaldy may be reached at [email protected].
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