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Hostess Falls Victim To Worship of The Almighty Dollar

For roughly five years or so, I worked as a distance learning facilitator at a small college in Georgia. The work was easy. What was not easy is turning off my brain. I learned a lot sitting in those classes, and the most important thing I learned in the business classes is that we, as a nation, do not teach good business practices. Instead, we teach good profit maximization. These are not the same thing. The collapse of Hostess is one such example, but there are hundreds of thousands of examples everywhere lately about how business is no longer in the business to produce goods, but rather to maximize profits.

Let us start with Hostess. They have some $2 million in revenue a year. Last January, the company filed for bankruptcy protection for the second time in a decade. In April, Rayburn and others at the top agreed to substantial wage cuts, and then demanded that their workers take an 8% wage decrease and a substantial cut in their benefits. The Baker’s Union refused.

The prior year, the top executives were given raises of about 80%, and in April, while the company was in bankruptcy, the former CEO Brian Driscoll was suppose to receive a compensation package of over $3 million for running the company into the ground.

Greg Rayburn, the final CEO of Hostess, blamed the unions for not accepting the contracts that they were offered and for going on strike, but did acknowledge that “management was poor.” The reality is that, if the management hadn’t been poor, it would never have gotten to this point. What is more, Rayburn had been warning since he took over as CEO that the company was headed towards liquidation and mass layoffs.

Too often, management is more to blame for what happens than the workers. Oh, certainly, they can blame the pensions, which is what Rayburn wanted to get Hostess out of, but they did not slash their own salaries until the bankruptcy court had already found out that the salaries had been inflated. In fact, there are unconfirmed information regarding Rayburn’s salary that it was clocking in at about $1.5 million a year. Why not cut that down to, say, a third of that? In fact, why are CEO salaries so exorbitant while salaries of the people who actually do the work are stagnant?

One thing that the MBA classes taught me is that the whole focus of the MBA is to funnel the money in a business to the top and the risk to the bottom. This is why the CEO of Papa John’s Pizza is so willing to slash worker hours and threaten to raise prices a whopping $0.14 per pizza. What is more, he is willing to do this on the excuse of ‘Obamacare’, but rather than taking pride in his company, he just worries about his own money. Why not shut down Papa John’s and be done with it. He could probably make enough money off of the sale to fund a lavish lifestyle if he wanted to.

John Schnatter, Papa John’s CEO, earns about $2.5 million a year and has about $250 million in stock in the company. Why not slash his salary down to, oh, about $1.75 million a year. That saves his company money, right? Of course not.

What is more, Schnatter is threatening to cut worker hours in order to avoid a law that has always been in place. Part time workers are not required to have healthcare benefits according to the laws in the various states. The healthcare reform act simply enforces this particular structure across the nation. So, Schnatter is simply trying to force people to hate Obama and use this as an excuse to change how his store operates in the country.

Another example of the same issue is the fact that banks refused to help home owners. Rather than helping those in trouble, they just kept piling on the fees and pressure in order to try and get blood out of a stone. Instead, they could have done something like help those in need and prevent them from going under. It would have hurt their profits a little in the short term, but they would have kept their revenue flow going.

There is a lot more to this, but this is a start. The problem is not that the workers need more money or deserve benefits. What this comes down to is that the mentality in business is not pride in the business itself, but a push to get whatever the rich can and then to run away without taking any of the risks. We should start by demanding that CEO’s and executives lose their golden parachutes. If the company is in the red when you leave, you get nothing.

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3 Responses to Hostess Falls Victim To Worship of The Almighty Dollar

  1. Glynda

    November 16, 2012 at 10:49 pm

    Many thanks for this article!

  2. Lou Cannon

    November 16, 2012 at 7:42 pm

    How much money is enough. I weep seeing America disintegrating right before my very eyes.

    • Bridgette P. LaVictoire

      November 16, 2012 at 7:44 pm

      Well, that’s what I always wonder. It seems like some people are more worried about making money than they are about doing a good job.