Hostess employees get 8% pay cut, management gets $1.8m bonuses

You remember Hostess.  Home of the Twinkie.  Gone bankrupt and closing down after the previous CEO tripled his salary, knowing full well they were on their way to the poor house.

Well here we go again, Lucy.

While it’s worth noting that current Hostess acting CEO Gregory Rayburn, to his credit, is not accepting a bonus, you have to ask yourself why anyone would be getting a bonus in the first place, with the company in bankruptcy.

Well.  It seems that at the same time the company went into bankruptcy, and now is cutting employees’ pay by 8%, just in time for Christmas, the management team finagled itself a whopping $1.8m bonus.  “The money is intended as an incentive for 19 top-level managers to remain with the Twinkies and Ding Dongs maker to oversee its liquidation,” the LA Times reports. Right, because you wouldn’t want to lose any of the winners that oversaw a company going into bankruptcy.


Pigs via Shutterstock

Nothing says shared sacrifice like the blue collar guy getting his pay cut while the white collar guy gets a bonus.  (Who negotiated this deal anyway, John Boener?)

Merry Christmas!

And it’s not like Hostess could have found any other good use for that $1.8m in bonuses:

Hostess, which stopped contributing to its pension plans last year, also told the court that it needed to stop paying $1.1 million a month in retiree benefits.

As for acting CEO Rayburn, the reason given for not cutting his pay too – he earns $1.5m a year – is that he’s not on the Hostess payroll.

A lot of Americans have been through similar situations where they’ve been asked to accept temporary pay cuts, but it’s less typical to see the acting CEO – whether he works directly for the company or not – continue at the same pay rate. It’s not what most would consider “working as a team.”

It’s hard to see much future success from a business with a CEO who fails to join the financial pain that others are forced to accept.  Then again, it looks like Hostess is being liquidated.  But if that’s the case, then why give bonuses to keep the management team there if the entire thing is being shut down anyway?

What is also curious is how much big money has been thrown around at Hostess. The unions were forced to take cut after cut but that was never enough.  And now, when the employees keep being told there just is any more money to go around, they found some more money to go around.  (Kind of the way Republicans always find the cash, our cash, to go to war or cut taxes.)

All animals are equal, but some animals are more equal than others.

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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46 Responses to “Hostess employees get 8% pay cut, management gets $1.8m bonuses”

  1. Ryan says:

    There is no team anymore. Now the team is the stockholders who own the company. Management in the past did fail the brand by increasing their pay, but in comparison the the money they saved by the cuts the company as a whole was in a better position. I still don’ think it was right for the increase in pay or bonuses, but unless change was made the company was going to fail and innovation was not the problem it was high cost of operation due to insanely high labor. The 1.8mil bonus comes into play if the liquidation is done fast and meets goals set. These goals are put in place to save money. In the end the incentives bring about more savings for the owners of the company. Furthermore, the company stopped paying 1.1mil/month to the pensions a year ago. Meaning, 1.8 million in incentives over a year would have only covered 1 month. It doesn’t matter now, but what should have happened is they should have laid off a great deal of their workforce years ago so that they had the funds to contribute to the pension fund and innovate their product lines. The unions in this case can be comparable to a Mafia organizations and Hostess isn’t much better.

  2. Snaggletooth says:

    “a janitor can be replaced really easy”

    Actually no they can’t, why do you think we have such a problem with food-borne illnesses in our industrialized food chain? Getting qualified, careful, and detail oriented people who have enough of a chemistry background to adequately address food safety issues in minimal paying job is a real problem and that why you see news stories about elderly and babies dying after eating tainted whatever…

  3. lynchie says:

    Until our Congress gives a shit about this kind of thing nothing will change. We constantly reward CEO’s with golden parachutes, bonuses, etc. for doing a shitty job. Then they lay off workers, ask 1 to do the work of 3, cut pay, cut benefits, pay Congress to cut SS and Medicare to save on their portion of the payroll tax, pillage or underpay their pension plans and Wall Street applauds the gutsy decisions being made. We bailed out bankrupt Wall Street and banks who knew what they were doing was wrong and illegal but they paid bonuses for shitty work. In fact if you remember Wall Street said we have to keep salaries and bonuses high to keep the best talent. What best talent when they tanked the World Economy and we the taxpayer (who never shares the pain) got salaries reduced, are threatened with having to work to 67 or 70 with the expectation that our SS will be less and Medicare won’t cover a fucking thing. Yeah, this is equitable treatment of the middle class and poor because we seem to love a good shit sandwich with a side order tender vittles. When we elect a Congress which runs on bullshit promises and then votes in the best interests of big business we can expect no better. The only person in congress who i respect is Bernie Sanders, the Dem party got rid of Kucinich, not one other Congressman represents the wishes of his constituents, NOT ONE.

  4. samizdat says:

    Yeah, unions bad. LOL! Nearly every industry in Germany has unions representing the workers. Guess what? The Germans are still kicking ass when it comes to the high-technology products they manufacture. With the highest productivity on the planet. And four months of mandatory vacation every year. And a highly regulated health insurance/healthcare sector which allows Germans to buy insurance for themselves, and pay for bills without going bankrupt. None of this “62% of Americans file for bankruptcy because of medical hardship” BS.

    You’re a sad, ignorant tool. I pity you.

  5. samizdat says:

    Your neoliberal economics textbook is still wrong, chief. That, and the fact that you seem to have neither conscience or scruples. Having worked in industry, I’ve come to the conclusion that this “low-skilled v enhanced-skill” worker meme is just a load of BS, as is the “Americans don’t want these jobs anymore” crock the Nation has been sold.

  6. samizdat says:

    Low-skilled workers. You’re funny, and you’ve also obviously never worked a truck or a factory job in your life. Unless it was a summer internship at daddy’s factory, which he took over after his father died–who first started it, and worked his ass off and rewarded his employees for their valuable labor. Which you probably sold to an LLC full of financial idiots, who borrowed a shit-load of money based on the assets of the company they technically didn’t own yet (yeah, try to buy a house by borrowing on its value, lol, you’d be laughed out of the bank; apparently, though, it’s all hunky-dunky for the 1%). So, load up the company with debt, sell off the good and the highly profitable stuff (over 15%), kill the stuff that’s only got a few percentage points of margin, then lay off all of the workers. Who were the ones who actually performed the labor which kept the company alive and profitable. In short, you’ve no idea what actual value contributes to society, and you cannot grasp the concept of the value of labor.

    Thanks for playing. We now return you to your regularly scheduled brainwashing.

  7. LisaSpamier says:

    We got sold out, the rich got bailed out, what else can you say, welcome to the REPUBLICON America.

  8. Bob says:

    And I have a simple suggestion – learn to spell – it’s “brakes” not “breaks.”

  9. arcadesproject says:

    low skill workers don’t to have to be abused. sorry if morality doesn’t agree with you.

  10. arcadesproject says:

    I used to like the cup cakes. But I ain’t gonna eat ’em no more, no more.

  11. El Bruce says:

    “Good CEO’s are actually valuable…”

    Except most of the people being paid mountains of cash aren’t good CEO’s. And paying them more and more doesn’t make them any better. In fact, it seems to have the opposite effect.

  12. Kelvin Mace says:

    Let’s keep a civil tongue in our head, shall we?

    1) Good CEO’s who earn their wages are an exception rather than a rule. When the last Exxon CEO retired he walked with $400 million. I can see nothing he did to earn than money, unlike a Bill Gates or a Steve Jobs who actually created entire new sectors of the economy.

    2) The union’s didn’t cause Hostess to go bankrupt, incompetent, profiteering management did. While unions took pay and benefit cuts, management kept giving themselves bonuses while running the company into the ground.

    Your comments demonstrate you know nothing of the actual problems at Hostess. Perhaps you should spend less time watching Fox News or CNBC and read more reality-based publications/programs.

  13. WriterGuy says:

    Actually, NullGod, most corporate CEOs — including American CEOs up until the time of Ronald Reagan — used to have salaries that averaged about 10x to 15x the average workers pay (not the lowest paid worker). The average American CEO now makes 400x to 500x the pay of the average worker, more than a full order of magnitude more than most foreign CEOs still make.

  14. WriterGuy says:

    Brilliant. I’d vote for that law in a second!

  15. This is exactly the kind of predatory capitalism that Mitt Romney continues to commit with Bain. What they do is they move into a company with the sole purpose in mind of liquidating a company’s assets, give themselves huge raises (which they put in off shore bank accounts), and move on to the next victim once the company has burned to the ground. You cannot base 100% of the economy on 1% of the population. TAKE AMERICA BACK VOTE DEMOCRAT! Giving all the money to the 1% DOES NOT WORK. Business will not employ people they don’t need, or pay their employees more, just because they have more money. I made a video about unemployment, and how we can fix it. It’s at my YouTube channel Zarrakan, and here’s the name:

    2012 6 5 ZOC Job Pyramid

    Watch it, share it, and join the fight against those who want to kill all of us with destructive social policies.

  16. Kelly says:

    The rich get richer, and the poor are left to starve to death, that’s the Republicon way.

  17. Naja pallida says:

    Except that in most cases, including this one, unions have given extensive concessions to management – to the detriment of all the workers – and the management has still been inept, and then decided that their ineptitude deserves them millions of dollars in bonuses, instead of paying the companies debts or honoring its promises to workers.

    It isn’t unions that are bankrupting these companies, sorry. That delusion just doesn’t pan out, or companies in every other industrialized nation, most of which have much stronger unions than we have, would be facing the same problems. Yet, most are not. Corporate greed and managerial incompetence are the primary reasons, coupled with generalized malfeasance, and a lack of any real company loyalty because the management of many companies never had to work their way up through the company they were brought in from outside. Union demands are pretty far down on the list of things that are hurting companies.

    In the end, if your company goes bankrupt, no matter how you want to twist it, management does not deserve millions of dollars in bonuses. They failed. Failure should not be rewarded.

  18. karmanot says:

    “no floor sweeper is worth 100k. Idiot.” I bet yo mamma was—idiot.

  19. Thanks.for.Playing says:

    It is impossible in some circumstances for mgmt. to truly manage a company under certain union covenants. Unions should go away. period. There are other people willing and CAPABLE of replacing them in their low skilled jobs and probably at or less than their current rates; this would’ve been the case I’m sure if such covenants of job ENTITLEMENT were not in place. This should hold true for executives as well as it pertains to willing and capable employees. In the case of a publicly traded company, it is the shareholders’ responsibilities to ensure the right people are in place. In the case of a privately owned company, it is the right of the owner to commence bankruptcy/liquidation of assets by whatever means necessary if the business is not profitable. Its unfortunate for the employees in every circumstance. That is business however. Cheers.

  20. JIMHO says:

    Well if the owners of the company is motivated to give them this $1.8M bonus, unfortunately nobody can do anything about it. The equity holders are probably deciding in their best interest to sell out the brand with the best possible price. However, I am pretty sure these managers have been overpaid and they don’t deserve any bonus either for running a company to the ground. They should’ve been contractually obligated to stay with the company until its full liquidation completes. Sometimes, the stupidity prevails, well this is exactly why the owners, or the equity holders, will have to loose their investment on a company…

  21. Fifi says:

    Because Congress has yet to impeach one of those judges and turn the DoJ on his ass for aiding and abetting corporate fraud.

    The US bankruptcy code is an horror show but the judges are the largest part of the problem,

  22. BeccaM says:

    Sadly, the people who pass laws and sign them into being, and who are charged with enforcing them, are wholly owned lackeys of the parasite capitalists.

    Hence we have laws that make it easy for corporate plundering to continue even as a company is swirling down the toilet drain, but meanwhile make it all the harder for a regular 99%’er person on a run of bad financial luck to have their debts forgiven.

  23. BeccaM says:

    Bankruptcy courts and associated laws have been written by the 1%, for the 1%. Over the last two decades, they’ve been specifically set to allow the plundering to continue, even as bankruptcy proceeds. The state of being in bankruptcy itself has become a condition that facilitates the plunder of assets, such as pensions and contracted liabilities, which are otherwise legally off the table until then.

  24. Naja pallida says:

    How much of #3 is cause and effect? We’ve accepted douche-baggery as a simply a cost of living in our society for so long, that nobody even bats an eye anymore. Selfish doesn’t even begin to describe American culture. It is no wonder it pervades everything, from the lowest to highest facets of society.

  25. I wish I could upvote this a thousand times….

    Something ole’ ‘Nullgood’ here could learn is that instead of shilling for his corporate masters, he ought to take the blinders off and see what mistakes they’ve made.

    1) Employees do not cause the corporation to go into the hole. Their jobs are to produce the product the company sells. Management’s job is to ensure that that company continues to make a profit. When a company’s at the bankruptcy court, it’s because management has failed to do ITS job and is now trying to get out of the obligations the company owes, either in part (Chapter 11) or in full (Chapter 7). Blaming the production workers for this is serving management, who is the real culprit (not that ‘Nullgood’ here will ever accept that, because he’s either a member of management (unlikely, they’re too busy running their company into the ground or wouldn’t have reason to be here in the first place) or (much more likely) a tool being used by his masters to cover their rears.

    2) Strategic Bankruptcies SHOULD come with a stiff cost to management, but they never will because corporations are designed to maximize profit while minimizing risk. I doubt this will ever change, and I’m not too sure it should change because we do have responsible corps who couldn’t get funding or management if the management team was ever exposed to the risk…maybe tweak the system so that gross mismanagement (in the eyes of the courts) means corporate protections are stripped and the responsible parties have to answer, but then you get into the problems of judges not, you know, actually _judging_ and just following some inflexible set of rules?

    3) Our real problem is our society. How can you expect corps to not do douchey things when _we_ do douchey things. Yaknow, cutting each other off on the roads while texting and calling on our phones, bowling people over to get that last TV on sale, not showing common decency, etc, etc? Corps’ douchebaggery is just a reflection of our own douchebaggery. And before you dismiss this as someone else’s problem, let me just talk about the time I almost got run over by a car in which the driver was yacking on her phone and impatiently pulling up to the road, and on which were plastered Obama and Democratic Party slogans. Asshattery is bipartisan. :)

  26. Naja pallida says:

    A CEO that intentionally runs his company into the ground instead of trying to operate it effectively isn’t worth anything. A CEO that treats his employees like trash isn’t worth anything. A CEO that treats his customers like they don’t matter isn’t worth anything. We’re the only country in the world that seems to think it is okay to reward repeated failure, just because someone like this has managed to weasel his way into a high paying executive job.

  27. OtterQueen says:

    The “low skill” workers are not the ones who screwed up the company and made it fail. Upper management is responsible for this one.

  28. Nigel says:

    Why does a bankruptcy judge allow this to happen? How is it legal for contracts with workers to be broken due to lack of funds, when top management is getting a raise and bonus?

  29. And watch the CEOs (and their shills like the troll here) go screaming ‘OH NOES WE TAKE OUR BALL GO HOME!!!!!’ over it.

    Strangely, places like Japan seem to get by just fine with CEO salaries being < 50x the average of non-management crew. Yet our CEOs insist they are worth more than scientists, engineers, and doctors. Yeah. Right.

  30. Naja pallida says:

    They have quite effectively turned bankruptcy law from a safety net and a protection from being raided into oblivion by creditors, into a scam to ensure the initial investors, and the management that drove the company into the dirt in the first place, get out with a pile of cash, and everyone else is left to fight over the scraps.


    (Really, that’s all you’re worth.)

  32. Trrroroooooooooooooooooooololololol.

    (Don’t feed the trolls. It just encourages them.)

  33. NullGod says:

    Low skill workers are low skill workers. Sorry if reality doesn’t agree with you.

  34. NullGod says:

    1. You’re an idiot. You’re going to anchor a CEO to the janitor’s pay scale? Good CEO’s are actually valuable, a janitor can be replaced really easy so yeah, that’s a dumb idea.

    2. You can’t go after wages fairly earned, retroactively, because they go out of business, especially if the union costs contributed to it going out of business. You know that hostess couldn’t save money by having bread and cakes go on the same truck, because the union wanted an extra worker, so cakes HAS to go on one truck, and bread HAS to go on another truck. That doesn’t HELP the company because they have to employ extra workers to satisfy the Union Monster.

    Do your homework and you wont look so dumb.

  35. NullGod says:

    Because there is a difference between a high skill worker and a low skill worker. You’re clearly a low skill worker so you don’t understand certain jobs are only worth so much. While it might make you feel good to pay the floor sweeper 100k, it’s wasted money because no floor sweeper is worth 100k. Idiot.

  36. I think it’s time to haul out the guillotines. It worked for France.

  37. MyrddinWilt says:

    The US bankruptcy code allows the management of a company to avoid their creditors by filing under chapter 11.

    In theory a company under bankruptcy is owned by the creditors. The idea of chapter 11 was that it would enable the company to continue as a going concern.

    There should really be a better control to enable the creditors to dismiss the senior management in this situation and take control. Especially when the creditors are the employees.

    They should do something about Bain Bankruptcies as well. Romney made his $0.50 billions by borrowing money without intending to pay it back. They bought a company on credit then borrowed against the assets to fund dividends that they paid to themselves. And Mittens wet is beak on every deal.

    There should be a better mechanism for ensuring a claw back in that situation.

    Oh and yes, folk like Mittens should be rewarded with jail rather than the White House.

  38. Ed says:

    Why don’t the execs work for the amount of pay they thought was reasonable to ask the union workers to work for?

  39. nicho says:

    I’m sure they could get people to “oversee the liquidation” for far less than that. This is fraud, pure and simple.

  40. Gerard Hasselbach says:

    What can we do about this.

  41. mononucleosis says:

    “…And the pigs are the most equal of all.” At least I believe that is how Chris’ quote from “Animal Farm” ends.
    It certainly is appropriate for the sleazy management crew at Hostess.

  42. Kelvin Mace says:

    I have a simple law to put the breaks on this crap:

    1) ALL compensation for upper management that exceeds 100 times the lowest paid company employee is not tax deductible. The tax payer should not be called upon to subsidize the rivers of cash corporations douse these people with.

    2) If a company files bankruptcy, the court may claw back any bonus paid in the past five years before the filing if, in the court’s view, the company was mismanaged or the bonus was paid while the company continued to lose money.

  43. Jim Olson says:

    How is this even legal?

  44. OtterQueen says:

    Typical. The guys working the production line are doing their jobs and are asked to take pay cuts. The guys at the top, the one who are mismanaging the company into the ground, vote themselves pay raises.

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