Hostess Blames Bankruptcy on Unions, Company Executives Pocket Huge Bonuses

Hostess Brands announced last week that it would go out of business and blamed the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, who recently threatened a strike.

This storyline was parroted by conservative anti-union media outlets. The Wall Street Journal wrote: “The union that brought the 85-year-old baker of Twinkies and Wonder Bread to its knees.” RedState.com used the headline: “The Demise of Twinkies? Yes, It’s True. Parasitic Unions Kill Their Hosts (or, in this case, Hostess).”

However, Hostess [and the conservative media] failed to mention that the 85-year-old company gave its executives pay raises earlier this year when it declared bankruptcy for the second time.

ThinkProgress.org reports that the salary of the company’s former chief executive tripled from $750,000 to about $2.5 million, and at least nine other executives received pay raises ranging from $90,000 to $400,000.

On Monday, a bankruptcy judge “asked whether he should preside over mediation” between the two parties. Hostess and the union have agreed to mediation, which would avoid the bankruptcy.

Bargaining talks will begin today, but if they fail, then the liquidation of the company will go forward on Wednesday.

Hostess had planned to request that the judge approve a plan to shut down the company and pay $1.75 million in bonuses [$7,400 to $130,500 each] to the executives who already received pay raises earlier this year.  The union opposes those bonuses.

Hostess previously declared bankruptcy back in 2004 and was taken over by the venture capitalist company Ripplewood Holdings in 2009 for $130 million, reports Salon.com

Eileen Appelbaum, a senior economist at the Center for Economic and Policy Research, told Salon.com: “It’s been a disaster. Ripplewood did not know what it was doing. They did not introduce any successful new products. Sure, they had high sales revenue but it had been declining since 2004.”


Lance Igon, Communications Counsel to Hostess Brands, told Opposing Views via email today:

"The salary increase you referred to did not apply to current CEO Greg Rayburn.  The increases were awarded to the executive team, including a former CEO, in July 2011 --- seven months before Mr. Rayburn joined the company and six months before the company filed for Chapter  11."

"Upon learning of the salary increases a few weeks after he replaced the former CEO, [current CEO] Mr. Rayburn asked four remaining senior executives to work for $1 until the end of 2012 or until the Company exited Chapter 11, whichever came first.  The salaries of four junior executives were reset to their pre-increase levels."


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