Hostess supposedly decided to liquidate after bakers went on strike. Management warned the unions that Hostess would go out of business and everyone would lose their jobs if the strike continued -- and the unions stayed out anyway. Imagine: The unions deemed the risk of everyone losing their jobs to be preferable than continuing to work for current Hostess management.
Most recently it was proposed that the current Hostess management be showered with bonuses totaling $1.8 million. Bonuses! Now, it's one thing to ask -- all you need is brass -- but the request was granted.
Actually, Bankruptcy Judge Robert D. Drain's written order seems just a tad defensive about the decision to grant the request:
The Debtors' implementation of the Senior Management Incentive Plan is (1) not designed primarily for retentive effect and (2) is justified by the facts and circumstances in that it is narrowly tailored to incentivize remaining senior management employees who are vital to the successful implementation of the Winddown Plan and the maximization of value for the benefit of all parties in interest, including those with accrued administrative expense claims.... Without limiting the foregoing, (1) the Senior Management Incentive Plan was not developed by the managers but by independent consultants for the Debtors and by the Debtors’ DIP Lenders, whose collateral will be paying for it and who have no incentive to pay any more than makes sense as a business matter; (2) it is not a guaranteed bonus; as set forth in the unchallenged evidentiary record of the Final Hearing, (a) the participants in the Plan will receive their payments only if the metrics for such payments are 100% achieved, and (b) such metrics are difficult to achieve; (3) and it is fair and equitable in light of (a) the treatment of all employees who will remain working for the Debtors during the Winddown Plan, (b) the market for such services and the cost of replacing the managers (including the statutory fee and personnel costs of a chapter 7 trustee), (c) the fact that theLawyers, of course, are rotten businessmen, and I'm certainly no exception. Because I don't understand Big Business, I have trouble imagining why bonuses would be necessary.
managers will be performing tasks that, due to attrition, were previously performed not only as part of their original jobs but also by others, and (d) no one has, except in the most conclusory manner and without the introduction of any evidence offered at either of the Hearings, asserted that any of the managers who are eligible for the Plan will not perform their assigned jobs diligently and capably for the clear net benefit of the estate. The Court obviously cannot stop people from complaining, politicking or engaging in demagoguery about the grant of this relief (and, in fact, one of the factors to consider when presented with such a request for relief is the effect of such complaints, politicking and demagoguery on the Debtors’ estates), but the evidentiary record is clear, for anyone who actually wants to examine it, that the Debtors are entitled to be granted this aspect of their Motion under the strict standard established by 11 U.S.C. § 503(c), for the reasons stated by the Court in its bench ruling at the Final Hearing.
I mean, wouldn't people working for a bankrupt company be grateful that they still had jobs -- if only for awhile -- and not need bonuses in order to keep them showing up for work?
Sure, they might be making copies of their résumé on the company photocopier, but as many have noticed, jobs are kind of hard to come by in this economy.
And would Hostess's competitors really be sitting around licking their corporate chops to acquire executive talent from a company that's gone broke? I can imagine the conversation now. Sure, we're profitable now, but Smith here helped drive Hostess right into the ground. Imagine what she could do for us!
I rather wish Judge Drain had told the Hostess execs they should shut up and be grateful that they still have work -- after they've put all their employees on the street -- and hope that whoever buys the company doesn't blame the execs for the company's downfall and keeps them on. He wouldn't have had to sound the least bit defensive then. But, then, that's not how things are done in Big Business.
Which is why we had the Great Recession. And why we're going over the Fiscal Cliff in a couple of weeks. We deserve it.