Last week people were filling their toilets with powerful projectile rage vomit over Judge Drain’s decision to allow Hostess executives to collect their bonuses despite the fact that the company is going bankrupt. After running the company into the ground from gross mismanagement and obscenely high CEO pay raises, the people on top of the Hostess food chain get rewarded for their incompetence while workers struggle to fend for themselves.
When the company was looking into declaring bankruptcy in July 2011 board members voted to increase the salary for Hostess’ chief executives and other higher-ups. Five months later the company filed for Chapter 11 (their second bankruptcy in 10 years), and when union members and creditors found out they were outraged. They claimed that Hostess CEOs deliberately ransacked company funds when they knew that they were going under to avoid a federal law that restricts retention bonuses for company insiders after a bankruptcy case is filed.
Retention bonuses are supposed to serve as motivation for employees to stick with companies during troubled times, so some people believe that they’re crucial for preventing mass employee walk-outs and trying to keep struggling companies afloat. When they’re used properly they could help businesses during dire times. But there is a major difference between rewarding hard working employees and snatching up corporate funds before it’s too late to do it.
It seems absurd that Hostess CEOs will be getting bonuses while their company attempts to find a way to pay the $860 million the company owes its creditors, and the $1 billion hostess owes its employees for unfunded pension liabilities. The bonus situation at Hostess is infuriating, but it isn’t uncommon. The Wall Street Journal did an in-depth story on the phenomena of corporate plundering and their findings have the potential to induce another rage vomit. When Blockbuster finally kicked the bucket after spending years trying to compete with Netflix and Redbox, the company approved around $775,000 in bonuses for a dozen top executives just one week before they filed for bankruptcy. Blockbuster isn’t alone, the WSJ found more than 1,600 executives and company insiders have received over $1.3 billion in bonuses and salary increases.
It’s isn’t really surprising to learn that some businessmen have exploited laws and taken more than their fair share of company funds, but it doesn’t make it less disgusting or infuriating. It’s time to find a way to cut the strings on the golden parachutes of CEOs. Henry Mintzberg, another WSJ writer, wrote an excellent opinion piece on why executive bonuses need to disappear. Letting CEOs take as much money as they want doesn’t help job growth or keep “job makers” happy. Undeserved pay raises and bonuses just manage to rub more salt in the wounds of the people affected by CEO greed.