Real world vs. Union fantasy

There’s been a reprieve, perhaps a short one, in the liquidation of Hostess Brands. The bankruptcy judge is giving the union one more chance to come to an agreement. I don’t think it will happen.

The Bakers & Confectionery union has created a picture of Hostess being a wastrel and bad manager of the company. Hostess opened their books to the unions and invited them to audit them. The Teamsters looked and agreed to a new contract. The B&C union looked, said, “Ah, ha!” Hostess is giving executive bonuses! They used that as an excuse to go on strike.

While it makes good press for the MSM, bonuses are a normal method of executive compensation.  Have you ever noticed when unions criticize management pay they include those bonuses ignoring the fact that bonuses are not guaranteed income?

Here’s the reality of executive compensation. Executives are paid in two forms—straight salary and bonuses. While that salary component is higher than the entry level trainee, it’s not the multi-million dollar figure in most corporations that the press passes around. That bonus, a performance bonus, is what really makes up the large part of an executive’s salary. Often the structure of those bonuses are documented in employment contracts.

You see, contrary to union claims and Hollywood fantasies, executives don’t sit around in executive offices conniving, chasing secretaries, and playing mind-games.  No, they work and work hard. They’re given goals to meet from higher executives or the Board. If they don’t make those goals, they’ll shortly be shown the door.

Usually those goals fall into three categories: Market Share, Revenue, and Expense Control. The Board determines the overall goal for the corporation. The chief executives refine those goals and determine methods to achieve those goals. Then it’s all passed down to each level of the company down to managers, down to the individual employees.  The consequences of failure to meet those goals differs from level to level. Making or failing to make the goals will determine whether pay raises and/or individual bonuses will be forthcoming. During last years with Sprint, some of the company didn’t make their goals. My division did but no one in the company received any merit raises.

The bottom line is that to acquire those bonuses or pay raises, each level of the company must produce. The results of bottom levels feed upward to the top.

If I remember correctly, Sprint, my former employer, went through four or five CEOs in the last decade. Why the turnover? They didn’t make their goals. That failure to meet goals fed downward from the CEO throughout the corporation. Mid-level executives were fired and layoffs of salaried employees occurred every year.

The unanswered question in the Hostess example was twofold: did bonuses actually get paid and what were the goals that needed to be met to win those bonuses. For example, it could have been that the goal segment was Market Share; to maintain  the existing market share. If the executive in question lead a division of the company, perhaps his goal was expense control: to keep expenses level or reduce them by a given percentage. He might have met his division goal while other divisions of the company did not. If so, then the company may have been obligated to may him and those in his division the bonuses they earned while other divisions who did not meet their goals received no bonuses.

But that doesn’t matter to the union. It was an excuse to strike and strike they did. Approximately 1/3 of the employees of Hostess were union. That third was divided into two unions, the Bakers and Confectionery workers and the Teamsters. The Teamsters agreed to a new contract. The B&C did not. One-fourth or one-fifth or one-sixth of the company, whichever percentage that actually belonged to the B&C union, controlled the fate of all the rest.

Who is the reckless and wastrel party? It isn’t Hostess. The union had to create a fantasy to feed their members to justify their actions.

The unions claim someone will buy Hostess and they’ll all keep their jobs. That, too, is a fantasy. Why would some future buyer want a union intent on killing it’s host? No, if there is a buyer (and Hostess has been looking for one for several years) they would likely retain only those facilities in Right to Work states, or in the case of the Mexican company, buy the brand and move the bakery jobs to Mexico. A new buyer would not want to acquire the same troublemakers that brought Hostess down. The union fantasy has no relationship to the real world but it sells well with Hollywood and the MSM.