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‘Shared Sacrifice’: Hostess Used Employee Pensions to Fund Itself
See if you can spy the “shared sacrifice” in this story.
While paying millions to its executives, Hostess took the money that was supposed to go into employees’ pensions and used it for other things.
Hostess just went bankrupt and got a judge to allow them to pay $1.75 million in bonuses to 19 of their executives. Yet… It turns out that Hostess took the money that was supposed to go into employees’ pensions and used it for other things. They say they spent it on company operations, but court records show them asking for permission to pay their CEO and other executives a lot of money.
Hostess hasn’t previously acknowledged that the foregone wages went toward its operations.
The maneuver probably doesn’t violate federal law because the money Hostess failed to put into the pension didn’t come directly from employees, experts said.
“It’s what lawyers call betrayal without remedy,” said James P. Baker, a partner at Baker & McKenzie LLP who specializes in employee benefits and isn’t involved in the Hostess case. “It’s sad, but that stuff does happen, unfortunately.”
The main baker pension fund alone is missing $22.1 million. Because the money didn’t come directly from employees, it may not technically be illegal (theft), even though the employees agreed to have a certain part of their wages turned into pension funds by the employer. See, it’s not just the employer contribution, but also employee wages earmarked for the pension fund. Wages.
In February, Hostess asked the bankruptcy judge to approve a base annual salary of $1.5 million, plus cash incentives and “long-term incentive” compensation of up to $2 million for its then chief executive. Furthermore:
If Hostess liquidated or Driscoll were fired without cause, he’d still get severance pay of $1.95 million as long as he honored a noncompete agreement.
Even as Hostess blamed the unions, creditors accused Hostess of manipulating executive salaries in an attempt to get around bankruptcy laws, with then-chief executive Brian Driscoll’s salary going to $2.55 million from around $750,000 while “other executives’ salaries were increased by from 35% to 80%.”
It’s hard to see how this is not embezzlement, but apparently this happens so often that award-winning investigative reporter for the Wall Street Journal Ellen Schultz wrote a book about it called “Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers.”
“Schultz uncovers decades of widespread deception during which employers have exaggerated their retiree burdens while lobbying for government handouts, secretly cutting pensions, tricking employees, and misleading shareholders. She reveals how companies: Siphon billions of dollars from their pension plans to finance downsizings and sell the assets in merger deals (and) Overstate the burden of rank-and-file retiree obligations to justify benefits cuts while simultaneously using the savings to inflate executive pay and pensions.”
I don’t see any shared sacrifice. I see the workers sacrificing, or rather, sacrificing while unknowingly being robbed at the same time by the CEOs.
But the CEOs get theirs and then some. They got rewarded for bankruptcy. No one took their salaries away; in fact, their salaries were increased.
Mitt Romney was just the poster boy for what’s wrong with corporate America. The theft from the people continues unabated, this time from Twinkies, Ho-Hos and Wonder Bread.