why else would they want to liquidate the company instantly? So they can run away with as much cash as possible and go rinse and repeat at another company.

key officials of a dying business have little upside in staying. they have big financial incentives to get a new job with a new company with a bright future.

and creditors have a big incentive to keep these people there, even paying them silly bonuses, because the key people often know best how to liquidate the operations for the most money -- usually the difference is more than enough to cover the silly bonuses.

it's one of those situations, like price gouging, where if everyone acts in their own self-interest, just like they're "supposed to" in a free market, sometimes you get some pretty distasteful results.

I have no problem with the concept that ownership reaps the rewards of a business enterprise, but the idea that the sole purpose is to enrich -- sometimes grotesquely -- a few people at the top, with zero regard to all the others actually necessary to conduct the enterprise, is ridiculous.

Worse in this case, where the company was bought out by venture capital that leveraged it to the rafters in the first place, then let it die a slow death while squeezing labor but preserving -- even at the very end -- big paydays for execs.

I wonder how big the proposed insider bonuses are?

people will recognize the connection between corporate buy-outs by hedge funds and wage/benefits cuts, followed by corporate insolvency.

What you have in this case is two evergreen brands with very stale product lines - when was the last time Hostess created anything new? - a good distribution system and a string of worn-out bakeries thanks to a string of private equity transactions. Maybe this is the deal that finally proves to America there's no upside to the LBO business.(How close did we come to putting one of those assholes in the White House?)

Whoever buys Hostess has one initial task: develop - not buy and put your brand on, but invent from scratch - a totally new baked good that no one has ever seen before and everyone will love. New ownership, and products you can only buy from them, will reinvigorate Hostess.

say, grupo bimbo making them in mexico with much cheaper labor.

they may or may not keep the "hostess" brand name -- it's the products and their names, like "twinkies" and "ding dongs" that have the real commercial value.

Making the stuff in Mexico would introduce transportation costs that would eliminate any advantage gained by using cheaper labor. Hostess has 33 bakeries spread all over the US. Hostess also makes bread, which has to be delivered almost as soon as it's made...who would want to buy four-day-old bread?

aside from the recent possibility of renegotiating with the unions and keeping hostess alive, of course.

they could sell off the various brands to a number of different companies. the brands don't all have to go together. they could sell the twinkies and other preservative-laden foods to a company further away and sell the fresher stuff to someone close by, or who would continue to operate the existing plants.

can't say i know exactly how much extra transportation costs compare to savings from cheaper labor, so i don't know if mexico is economical or not. most likely it *is* economical at least for distribution in the southwest.

Key officials are on contracts. Lucrative ones that pay them good money, even if they choose to leave for no apparent reason or get fired. Or so most reports I have seen would seem to indicate.

Especially in the modern era of commonplace bankruptcy and failure, why wouldnt these contracts have a clause regarding bankruptcy/buyout of the company, basically they agree to stay on for the orderly transition of the company as long as their normal salary is paid?

creditors are willing to pay to retain key people in an unwind, and key people are willing to take it.

so who is there to insist on them being required to continue working for only their normal salary?

Why contract to pay out extra for failure?

Why not have it the other way, that failure costs them something, particularly if they jump ship as its going down.

Honestly, I think that we need to look at the way corporate compensation works. I dont know a lot about it, but i feel fairly certain that stockholders dont get all that much of a say. Might change the order a bit if anything over, say 300k/year per company employee had to be specifically approved by the stockholders(and any specific benefits that are not applied companywide), Or not, I don't know.

but mostly this relates to options or restricted stock that presumably has little if any value in a failure scenario.


in terms of compensation, most companies have a compensation committee that overseas, at least at a high level, labor costs, particularly for upper management. members of the compensation committee are often some of the board directors and possibly some outside people as well. but the reality is that this is often an insular world in which the first guy is on the compensation committee determining the compensation of the second guy, who in turn is on the compensation committee for the first guy's company. or maybe the first guy's brother, or whatever.


really it comes down to sometimes the players all have incentives to do something that just plain stinks. this continues to happen unless someone somehow sets a standard that such things ought not happen and a company is shamed or fined if it does. this is the role of government or outside groups that shine a spotlight on such things.

sadly, we as a culture seem highly ineffective at this.

Workers get laid off. Retirees lose their pensions. Stockholders get nothing. Creditors get pennies on the dollar. But a handful of executives get fat bonuses.

Oh, and very Romney-like, the holding company that owns Hostess "extracted the value" of the company over the past several years by loading it up with debt while transferring wealth to the holding company. (Now that they've sucked out all the creamy filling, they're throwing the rest away.)

I STILL work at Lehman Brothers over 4 years later, helping to wind up the company. These bankruptcies are incredibly complex and usually the best people to see them through are the people that were there. And for the record, I was in a unit that had nothing to do with the crisis, but I've stuck around because the compensation makes it worthwhile, and frankly, I have far more personal time.

When it is far more profitable to liquidate rather than continue in business, where does the fiduciary duty lie?

in a co-op. Bring Democracy to the work space.

They'd probably do a much better job.

and suddenly, all the fraud is removed from the system. Let the fraudsters inherit the debt.

Except that the demise of Hostess probably will make America healthier overall.

For bankrupting the company?

the best talent

It would be a good idea to learn more about him:

It sounds like this Collins guy might be halfway decent, but he's swimming with sharks. The ending pretty much writes itself.

that they failed to report that those raises didn't happen:

A Trustee is automatically assigned in every bankruptcy.

Yes, they have requested bonuses. The only truly credible amount I have seen claimed is $1.75M spread around 19 executives, at least some of whom have been working for $1 this year. I don't think that's too terribly outrageous, frankly. The company is a billion dollars in debt; a mil and a quarter is not going to save the company.

No trustee is automatically assigned in a Ch. 11.

In Ch. 11, you start out with the premise of the "Debtor in Possession" ('DIP' - haha). While the overall case falls under the jursidiction of the U.S. Trustee's Office under DOJ, you do NOT get an individual trustee in a Ch. 11 case unless one is specially appointed.

That's what big corps love about Ch. 11. They have broad discretion to present a "plan -- which can include a liquidation plan, but they generally keep control of the assets and day-to-day operations. This can work fine, as the idea is "reorganization." The company is allowed to operate under its normal ordinary course of business, under supervision of the bankruptcy court and creditor's committee. They can propose almost anything, if they can get it approved.

A Ch. 7 liquidation under a Ch. 7 trustee is not the same thing at all. Ch. 7 trustees take control over all "property of the estate" immediately. All business operations cease, all execs and the board are done. The trustee looks out for ONLY the creditors, and sets about liquidating in their best interests.

Edit:
All of which is to say, getting the case converted to Ch. 7 is a gigantic slap to the current management, and would be done on the basis that THEY CANNOT BE TRUSTED to wind up the corp. appropriately.

Read your own articles.

"returned" "roll back"

They got the increased salaries from July 2011 until April 2012. Most of a year. They DID happen. They just reduced them when it became public knowledge and things started getting a little sticky.

So.. triple salary for most of a year, then working for a dollar a month for half a year. They still walked away with about 200% of what they would have normally had. While the company was going bankrupt.

And then they are trying to send out bonuses. On top of normal compensation. While the company goes bankrupt.

This certainly gives a different perspective to the issue.

"when it comes to money other things such alliances, ideology and certainly politics are always, always, secondary."

The bottom line is that the company's pension fund was raided, and the PE/hedge fund side of negotiations has chosen to pay giant bonuses to management instead of keeping the company afloat.


http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-curious-cast-characters-twinkie-tumbles

Where is the proof of any pension fund being raided or any giant pay bonuses in lieu of keeping the company afloat?

to support your claim of raided pensions.

HOSTESS suffered in it's dealings with Unions because right now EVERY Rethug Governor has been trying to DESTROY collective bargaining and it's obvious that these unions made an effort to negotiate in good faith if they gave $110 million in concessions and couldn't protect all union jobs.

SO OK the ship is going down, but it still makes no sense at all to give $1.75 Million to 19 Senior Managers. THAT is bags of money split among a short list.

It's a bankruptcy. Investors and employees get the shaft and no fricken reward for managers who failed along with everyone else involved to find a way to really work together on solutions. If they'd kept talking the Unions wouldn't have had to walk out.






12. Hostess said it wants to pay as much as $1.75 million in incentive bonuses to 19 senior managers

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http://www.bloomberg.com/news/2012-11-19/hostess-to-seek-court-approval-to-liquidate.html

filings, just as it is with individual bankruptcy, in which there is a time period prior to the filing (something like 6 months) that if you make charges against accounts you are filing against, you may not include those charges.

But of course, since that would be closer to how our democracy was set up by the Founding Fathers, it won't even be on the radar.

Borders, in bankruptcy, plans to pay $8.3 million in bonuses
Source: Bloomberg

Last Updated: March 25. 2011 2:02PM
Borders, in bankruptcy, plans to pay $8.3 million in bonuses
Linda Sandler and Tiffany Kary / Bloomberg News


Borders Group Inc., after filing for bankruptcy in February with plans to close about a third of its stores, said it plans to pay key employees as much as $8.3 million in incentives and retention bonuses.

The second-biggest U.S. bookstore chain asked a judge to approve its plan in a filing yesterday in U.S. Bankruptcy Court in New York, saying it historically compensated employees through incentives.

The main awards would be part of a program budgeted for as much as $7.1 million. The size would be calculated after the company files a reorganization plan or gets approval for a sale of the company, Borders said. The rest of the money is budgeted for retention bonuses, it said.

Under the incentive program, Borders President Michael Edwards, chief executive officer of the chain's parent company, Borders Inc., would get as much as $1.7 million in bonuses, according to the filing. "Award opportunities" under the plan would be 150 percent of historical levels for the company's incentives, it said.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4787325

those fucking greedmeisters.

They win if the company makes stuff, they win if it doesn't.

It is the new corporate model.

Kodak, Hostess, other.

Energizer is going the same way. laying off 10% of its workforce, closing factories and discontinuing R&D.

language; happened w/ United, Delta, Northwest, and will probably occur again with American....

There is a lot of sausage making here.

Workers come first. Pension fully paid.

Executives DEAD last. They should not be getting bonuses for running a long-time company to the ground.

Now, restart the factories, and executive compesantion will be linked to workers performance.

Yes, that means you have to deal with the union.

We must somehow learn how to say NO to these elite jackasses, the working class has suffered long enough paying for their excesses

"Vultue capitalism" as it's called would be considered a class A federal felony as grand larceny and those that are caught practicing this nonsense would be punished by forfeiting their assets and would have to do minimum 20 years in jail with no parole. The only way we can fight back against these greedy scumbags is to take drastic measures to do so. I'm tired of this shit.

these folks write nice checks every couple of years.

Don't forget theft. Embezzlement works too.

Surprisingly, much less union bashing than I had expected. They just had a baker's union member on and asked him if he'd rather take less pay but still have a job. He explained that the company had been withholding a bit over $4.00 an hour from their pay checks and the money was supposed to go into their pension plans. Instead the company was keeping the money, "they've been stealing from us. You can't negotiate with people you can't trust and you can't trust people who steal from you." He is hoping another company will buy up Hostess and he said he might be willing to work there without a union.... The interviewers were Bill Griffeth and Michelle Caruso-Cabrera and I swear this is the first time I have ever seen her not sneering at the working class. She even chimed in at one point that the company had been loaded down with debt by the investors.

I just can't get over the sheer nerve that it takes to steal from your employees. I had read that money hadn't been paid into the pension fund for almost 2 years...

... and United Vulture Capitalists

Who needs a union hall when you have country clubs?

"Union friendly"? I'm skeptical.

Seriously, they'd be more motivated, willing to work their asses off for less and show a real love for the job while saving a lot of money for the creditors.

These older executives are just moochers, always wanting their "free stuff", without having to earn it.

I say, give it to the students fresh out of school.

Or better yet, import some new grads from India. They speak English, don't they?

It's back breaking hard work.

trying to save the company from all those greedy, incompetent workers.

Pensions first. 75 years worth of pensions just like the USPS.

There should be a federal rider that says that executives who run their companies into the ground get NOTHING.

uh NOPE!