Hostess asks judge to approve executive bonuses
NEW YORK (AP) - Hostess Brands Inc. is asking for a judge's approval to give its top executives bonuses totaling up to $1.8 million as part of its wind-down plans.
The maker of Twinkies, Ding Dongs and Ho Hos says the incentive pay is needed to retain the 19 corporate officers and "high-level managers" during the liquidation process, which could take about a year. Two of those executives would be eligible for additional rewards depending on how efficiently they carry out the liquidation. The bonuses would be in addition to their regular pay.
The bonuses do not include pay for CEO Gregory Rayburn, who was brought on as a restructuring expert earlier this year. Rayburn is being paid $125,000 a month.
Hostess is also seeking final approval for its wind-down, which was approved on an interim basis last week.
The process includes the quick sale of its brands, which also include CupCakes, Donettes and Wonder Bread. Hostess says it has received a flood of interest in the brands, including from national packaged food makers, international companies and its own customers, which include supermarkets and big-box retailers. Hostess sales have been declining over the years, but still come in at between $2.3 billion and $2.4 billion a year, a banker for the company said in court last week.
The company's shuttering means loss of about 18,000 jobs.
In court Thursday, an attorney for Hostess noted that the company is no longer able to pay retiree benefits, which come to about $1.1 million a month. Hostess stopped contributing to its union pension plans more than a year ago.
The company's demise came after years of management turmoil, with workers saying the company failed to invest in updating its products. In January, Hostess filed for its second Chapter 11 bankruptcy in less than a decade, citing steep costs associated with its unionized work force.
Although Hostess was able to reach a new contract agreement with its largest union, its second biggest union rejected the terms and went on strike Nov. 9. A week later, Hostess announced its plans to liquidate, saying the strike crippled its ability to maintain normal production.
The maker of Twinkies, Ding Dongs and Ho Hos says the incentive pay is needed to retain the 19 corporate officers and "high-level managers" during the liquidation process, which could take about a year. Two of those executives would be eligible for additional rewards depending on how efficiently they carry out the liquidation. The bonuses would be in addition to their regular pay.
The bonuses do not include pay for CEO Gregory Rayburn, who was brought on as a restructuring expert earlier this year. Rayburn is being paid $125,000 a month.
Hostess is also seeking final approval for its wind-down, which was approved on an interim basis last week.
The process includes the quick sale of its brands, which also include CupCakes, Donettes and Wonder Bread. Hostess says it has received a flood of interest in the brands, including from national packaged food makers, international companies and its own customers, which include supermarkets and big-box retailers. Hostess sales have been declining over the years, but still come in at between $2.3 billion and $2.4 billion a year, a banker for the company said in court last week.
The company's shuttering means loss of about 18,000 jobs.
In court Thursday, an attorney for Hostess noted that the company is no longer able to pay retiree benefits, which come to about $1.1 million a month. Hostess stopped contributing to its union pension plans more than a year ago.
The company's demise came after years of management turmoil, with workers saying the company failed to invest in updating its products. In January, Hostess filed for its second Chapter 11 bankruptcy in less than a decade, citing steep costs associated with its unionized work force.
Although Hostess was able to reach a new contract agreement with its largest union, its second biggest union rejected the terms and went on strike Nov. 9. A week later, Hostess announced its plans to liquidate, saying the strike crippled its ability to maintain normal production.
Let's talk Union money. Â Money taken from members.
Â
Do you think the "Union" is getting too much of your money when James Hoffa Jr makes $1-million dollars a year, flies in a private jet, lives in a mansion in Chicago?
Â
What about the other Union leaders - just the local ones that live well by living off you? Â Do they really need that much money? Â Do they need access to the Union owned five-star resort in West Palm Beach for free?
Â
Wake up. Â It is not 1930/1940 anymore. Â They served a purpose; there are laws now in place; over-sight boards.
Â
Paying someone part of your wage so you can work there, so you can get a job somewhere is blackmail that we no longer have to tolerate.
Â
 You earn it.  You keep it.
Reading the comments you can tell who has worked at a company going under and who hasnt. Companies DO need to retain tenured management for these type things, there is no time/energy/incentive to try and bring on 'new hires'. These people are needed until the end, and without incentive they will just go find another job.
Facts to keep in mind:
- Hostess stated they were paying 1 million per week in payroll, so this "huge" number is only about 2 weeks of payroll.
- The managers in question will deal with the negotiations of the sale of assets, 1.8 million on a 2.4 billion annual could easyly be lost if inexperienced negotiations were to take place
- If Hostess gets the most for the sale of the company then in turn all the employees have the best chance at getting things that were 'due' to them - so all of you who are complaining about big CEOs etc keep in mind that $ they are fighting for is not just for them!
 @big_m Bull crap. Employees have NO chance of getting things that were due to them. The execs won't let any money trickle down.Â
Its irrelevant if the execs want/dont want anything to trickle down, I'm talking about cash assests that could be divided to pay out things like lawsuits brought on by (now former) employees. My assumption, thouh, is that there will not be any assets left to divy up, and Im unclear on what the courts would decide (if the assets go to creditors or staff, etc.) - but one thing is certain - zero divided by any amount is still zero. (Or a cant divide by zero error for you geeks out there!)
 @jowsuf  @big_m Due to them? People have this weird concept that everyone is entitled to a job with a 6 figure salary and benefits. It's call hard work, creative thought, and furthering you education / hire-ability that makes an employee an ASSET work paying for. Just because you have worked in a job for a while doesn't give you the right to keep it for as long as you'd like. Your "right" is the pursuit of happiness...
 @bobthebuilder  @jowsuf  @big_m "Due to them?" What hypocrisy!
 @bobthebuilder  @big_m Funny that you talk about entitlement only from the lower employee angle. Isn't this whole bonus nonsense entitlement? If ANYONE has an unjustifiable sense of entitlement, it's the executives.Â
Still want to blame the Unions?
 @thebigteacher Yes. But not exclusively. Just mostly.
 @RN1 Boy, o boy are your right! It wasn't like the Union workers took a pay cut or a cut to their 401Ks while the CEOs and managers got a 300% raise...Oops, that did happen and their creditors chastised them for it. You need some actual facts, not those fed from one conservative editorialist.
 @thebigteacher I didn't remember the exact number, but that small percentage is compared to having to hire MANY more workers than is actually needed to do the job (i.e., the exact number is not particularly significant). I'm pro workers who WORK. I'm ALSO in favor of managers who manage well. I'm NOT in favor of unions that kill their host (you know the company that is CREATING the jobs?) with stupid work rules, while skimming dues to support pay & bennies higher than all but top management. And, if you read what I wrote above, I didn't hold management blameless. But hey, don't let the forest get in the way of your view of the trees.
 @RN1 How did you end up against workers and pro management? It wasn't a 5% it was ten but don't let facts get in the way of your typical rant.
 @thebigteacher Yah, it wasn't like the Teamsters union demanded work rules that required that many more teamsters be hired than were actually needed to do a job. I mean, who would'a thunk that a 5% pay cut wouldn't balance the demand for three times as many union "workers" because the rules said that different drivers had to deliver the bread vs the snacks, and that the drivers couldn't be required to load or unload the trucks. Gee, no efficiency in the distribution operation to be gained there, is there?
This is a typical problem for privately-held companies. Public companies that are accountable to shareholders and boards do not typically go this far into the pale. The owners are no doubt going to give these huge bonuses to all management who smoothly facilitate raping the last remnants of the company for all their worth.Â
 @NorthwestEconomist Apparently you have not been paying attention to Enron, JPM, C, Halliburton, etc...
 @RN1  @NorthwestEconomist I said "typical," and even in those cases you would not see such brazen abuse of bankruptcy as a means to loot a company for executive bonuses.Â
 @NorthwestEconomist On that topic, I think we can agree. We should not have laws structured in such a way that executives can make more looting and destroying a company than they can making it more efficient and functional in the long-term. (of course, there are some companies that NEED to be liquidated - failure is a *necessary* part of an efficient system) But we have to many perverse incentives built into our legal system that make it possible. The big banks and such, that are deemed "too big to fail" (and will therefore be bailed out) should not pay their execs more than a high-end civil servant, because they take no real risks. A corporation, pub or private, that can go under from bad management, should make compensation dependent not JUST on short-term share-holder value, but also long-term corporate viability.
Really! I did the history of this company for the past 15 years thru the Wall Street Journal. The unions did not bring this company down, it was the CEOs whom did not want to follow the food trends.
Â
Mothers don't want to feed their kids this junk food. McDonalds saw the trend and acted with healthier food. Not Hostess.
Â
Now the guys who did do right by the company want a bonus. What is wrong with this picture. I do wrong, I get fired.
 @snoopy84 so were you the one that wrote about how the distribution network was actually the problem? Which was a spot-on article in the journal a few days ago - and it was a Union issue...
Â
pure corporate greed
@Misty
Really? You think it's greedy of these people who are responsible for trying to get the highest value for all the assets that are being sold / liquidated (likely worth $billions)? Do you want to try to do it Misty? I'm sure you're highly qualified to do so give your grasp on free market economics. I'm guessing you wouldn't have the first idea of how to manage through a complicated Ch 7 bankruptcy process where you'd be working 15 hour days dealing with dozens of stakeholders all holding out their hands for a payout... unions included (unsecured creditors, i.e. suppliers, are likely also union affiliated). Do you not what them to get paid and lose their jobs too?Â
Â
I know people with little / no savings and low income levels don't like it when these "evil executives" are paid well, but these people work very hard and are very intelligent. That's why they're compensated at high levels (which happen to be a minimal fraction of the value of assets they're trying to maximize)
Â
Also, many of the corporations, investment funds, etc. that are buying these assets (such as the brands and manufacturing facilities) will likely re-open some of them and provide jobs to the folks that are unemployed right now due to the bankruptcy process. If you didn't have good executives and financial restructuring folks (who require "market" pay rates) employed to manage this process in a orderly manner, those facilities and brands may no longer exist / be able to support jobs. As a result, fewer jobs for employees and everyone is worse off.
Â
I'll get off my soap box now...
 @Misty Really? You think it's greedy of these people who are responsible for trying to get the highest value for all the assets that are being sold / liquidated (likely worth billions of $)? Do you want to try to do it Misty? I'm sure you highly qualified to do so give your grasp on free market economics. I'm guessing you wouldn't have the first idea of how to manage through a complicated Chapter 7 bankruptcy process where you'd be working 15 hour days dealing with dozens of stakeholders all holding out their hands for a payout... unions included (unsecured creditors, i.e. suppliers, are likely also union affiliated). Do you not what them to get paid and lose their jobs too?Â
Â
I know people with little / no savings and low income levels don't like it when these "evil executives" are paid well, but these people work very hard and are very intelligent. That's why they're compensated at high levels. Maybe you should have worked harder in school, college, etc and got a job with similar pay / benefits as these folks. It's called the American dream, and contrary to much of the general public's belief, it's still alive and well.
Â
I'll get off my soap box now...
 @Misty Maybe. But corporations are formed to make money. It's not like government is run by angles and don't have people at the top trying to amass power via regulation in stead of money... except you can opt not to buy corporate products.
Wow  1.8m in bonuses and they are going bankrupt but it is the unions fault.
Â
I really hope all the anti union people are reading this. Â It might make then think about who is really at fault.
 @FBrumfield $1.8 million dollars did not even pay two weeks of union wages.
Â
When Hostess said, "If you continue to strike, we will have to close" - what part of that do you not understand?
Â
Anyone? Â Oh - yeah, I guess the union members on strike didn't. Â Can someone explain the difference to them now of making their house payment, feeding their family or NOT?
Â
Anyone?
 @sentryone Well, 1.8 million would go a lot farther if used for the company then it did padding the pockets of 16 people.
Â
The people who couldn't manage the company get payoffs. Â Sounds just like what happened to the banks. Â
 @FBrumfield It's that damn Sasquatches fault.
So, since everyone is so up in arms about the "greedy CEO'S", what exactly are they supposed to do? They have to retain upper management to assist in the liquidation process, and with out compensation these 19 managers are not going to go down with the ship. They are going to go find new jobs which, like it or not, are a dime a dozen for executives. I guess they could divvy it up to the 18000 employees and send them a nice $80 check (after taxes).Â
Â
If I was working for the union that turned down the contract, I would have agreed to the terms, then found a new job while I was still earning a paycheck.Â
@JK15 If âjobs which, like it or not, are a dime a dozen for executivesâ is really true, most of them are obviously getting paid way too much.
 @flyskiwindsurf  @JK15 i never said they weren't.....I have been with two companies who closed down (HomeGrocer.com and a residential construction company when the bubble popped) In both cases the execs were working for other companies as high management within a few months. It's just how it works, it's not like this is anything new.Â
@JK15 That is what Alan Greenspan also used to believe. He discovered that he and Ayn were both wrong.
 @flyskiwindsurf It's not delusion, it's common sense speaking from experience.
 @JK15 If executive jobs are a dime a dozen, what incentive would an executive have to leave the company right away instead of waiting until the liquidation process is finished? It's all pampering for the privileged.Â
 @jowsuf Because if any of them accepted a $95000 bonus on the terms that they would stick it out through the liquidation, then walked away before it was done, would be shooting themselves in the foot. Their reputation would be ruined.
 @JK15 A lack of understanding isn't the problem. I think we're all on the same page as far as the facts go.
Â
You DON'T know my stance on unions just from my comments here, and how either of us feel about unions is irrelevant.Â
 @jowsufI know you are in the bag for unions, but this really isn't that hard to understand......And before you go on your "stop watching Fox News" rant, I am neutral on unions. I see the both the positives and negatives of them.
 @JK15 So they're protecting themselves from themselves?
@JK15 So even now you really do believe that these "executives" really do care about their âreputationsâ huh? Boy. You appear to be about as delusional as they appear to be.
You know what? I'm no expert, but it almost sounds like these types of bonuses were part of the reason why they shut down. Am I missing something here?
Both sides should have continued to negotiate while still working under current contracts. Now we have more unemployed people, CEO's clogging up the courts with thier greed, and NO TWINKIES!!!!!
 @Seahawk64 The plan was never to stay in business. The plan was to fleece as much money out of the corporation as they could and then sell it off. Truth be told, there's probably someone waiting to buy it up and run it as a non-union shop. We'll see, won't we?
 @Seahawk64 Unemployed union members, CEOs in court, and no twinkies. Sounds like a win-win-win to me.
Bonuses needed to retain current execs? How do you cry about not being able to take care of your employees while making sure to pamper those at the top? I honestly think business high ups have no real sense of reality. No concept of how the real world works outside of wealth. Totally oblivious, with a strong desire to not give a ____.
Let's see..The company can no longer afford to pay into their employees retirement funds, but let's continue to pay our CEO $125k a MONTH and our "high level management" huge bonuses. Hmmm, maybe if they had taken some of those bloated salaries and put it into their company and hard working employees, they wouldn't be closing. Perfect example of Corporate greed and their inability to understand that their "low level" workers are what their companies success or failure is built on. Corporate America is always rewarding the wrong employees.
I would like to get paid for running a company and storied brands into the ground too.
Â
Complete and total lack of innovation. Think that's a crock - think you want to blame the regular line workers.
Â
Oreo. Oh wait Oreo Double Stuff. Oh wait reduced fat Oreos. Oh wait Oreos mint creme. Oreos orange creme for halloween. Yellow filling Oreos for Easter. Buy Sunshine bakery. Stop production of Hydrox cookies. Vanilla Oreos. Half/vanilla, half chocolate Oreos. Double chocolate Oreos. Double-stuffed double-chocolate Oreos.
Â
You know -- INNOVATION while building a brand.
Â
But hey, where is my bonus.
 @Howard Beale What sort of innovations have the unions fought? Things that would reduce the number of employees required. The teamsters had agreed to a modest pay cut, but they still kept their extremely inefficient work rules, such as breads and snacks not being transportable on the same trucks (meaning twice as many drivers needed), and drivers not being allowed to load or unload the breads or snacks (in fact, they had to be loaded and unloaded by DIFFERENT union members, one for snacks, one for breads) meaning that deliveries and distribution were hideously inefficient. That sort of innovation were fought tooth and nail by the unions, just like it always is, to the detriment of all in the long run. What about a few AP news stories about THAT aspect of this whole mess?
 @RN1  @Howard Beale Because it's not exactly reality.
 @RN1  @Howard Beale At what point of the delivery process did this occur?  I know for a fact that the drivers of the Hostess trucks that restock the shelves in grocery and convenience stores rotate, and stock the shelves themselves.  And that they did all the Hostess items off one truck.  And I am pretty sure only one or two people at the distribution center loaded each truck.  If Union had this much control at the main center, I would imagine they would have just as much control at the distribution sites, which they DID NOT
 @jowsuf  @thebigteacher  @S4tran  @Howard Beale Wow. MAJOR case of undiscovered cognitive dissonance you've got there. Kind of a loose grip on reality, too.
Â
Capitalism is about maximizing profits (for the company OWNERS) from assets, not about supporting a jobs program; jobs are a *side effect* of providing a good or service at a fair price. Unions are about extracting the maximum pay and benefits for the minimum amount of work for the workers; their GOAL is inefficiency, to maximize the number of union workers and their extractable pay to support the union hierarchy, which is every bit as greedy as the corporate owners. Just like any parasite, though, if they drive the cost of their support too high, the host dies. In the shorter term, in exchange for higher pay and benefits to surviving workers, they drive non-labor solutions (automation) to reduce the number of needed laborers (see the coal industry, for example - FAR fewer employees, far more coal mined, because big expensive machines were much cheaper than lots of laborers).
 @RN1  @thebigteacher  @S4tran  @Howard Beale Yes to both questions. Nothing weird about it. Although I'm not sure what you mean by defying the agreement's spirit.Â
Â
It isn't the company's place to decide which rules a union fights to have implemented. It isn't the union's job to make sacrifices for executive profit.Â
 @RN1  @S4tran  @Howard Beale The data to the contrary is manifest -that is why your source wrote the article. Did you even read it? He states that he is tired of all the blame being focused on the poor, little CEO's :(
 @jowsuf  @thebigteacher  @S4tran  @Howard Beale So you are saying that a company that tries to work around the negotiated and agreed to rules the best they can, rather than avoiding the stupid rules in the first place, should be the winner? You WANT companies to do their best to defy the agreements spirit while complying with the letter? Yet you think the companies and their leaders are greedy when they try to make money by the letter of the bankruptcy rules. Weird. Seriously.
 @RN1  @thebigteacher  @S4tran  @Howard Beale I used to work for a company that had the motto "adapt, migrate, or fail." Those sort of work rules in themselves are hurting a company only if a company refuses to adapt around them. If a company cannot learn to structure their business model around additional unavoidable costs like this, they deserve to fail. This has nothing to do with damaging a company and everything to do with stubborn execs who refuse to adapt.
Â
Adapt, migrate, or fail. Those at the top aren't exempt from this rule.
 @jowsuf  @thebigteacher  @S4tran  @Howard Beale Have you considered that those sorts of work rules are hurting everyone, and Hostess is just the current headline leader, but more will follow?
 @RN1  @thebigteacher  @S4tran  @Howard Beale I've read the article, and I find it hard to believe that distribution costs they were forced into ruined the company. There are MANY companies that operate this way (I know from work experience). Why can everyone else hack it but Hostess? This was complaining about what they didn't want to pay for, but it's a poor excuse for the downfall of the company.
 @thebigteacher  @S4tran  @Howard Beale The question is not the source - the question is whether the facts are as he present them or not. If you have a rebuttal from a reasonable source, feel free to post it. Or, put another way, if Hitler said "two plus two is four," would the fact of who was saying it make it any less true?
 @RN1  @S4tran  @Howard Beale "Holman W. Jenkins, Jr. is a journalist, editorial writer and member of the Wall Street Journal Editorial Board. He writes the conservative-leaning weekly column"
Â
"Holman W. Jenkins Jr., a WSJ editor has an editorial making the same bogus free rider arguments yet again."
Â
Yep, a good, unbiased source.
 @S4tran  @Howard Beale Here is one of several stories on the topic. http://online.wsj.com/article/SB10001424127887324352004578130912150512612.html . if you don't think it is true, look up the contract they negotiated. Also be aware that different locations or districts may have different contracts, just like different school districts have different teacher contracts, even though they may all be members of the Washington Teachers Assn.