Thursday, February 14, 2013

Capitalism: Worst CEO's of 2012

Gosh, ain't capitalism grand?  You get to make multi=millions of dollars to drive companies into the ground, killing tens of thousand of jobs and get to walk away with your ill gotten gains, see Carly Fiorina at HP  or recent Hostess brands bankruptcy.

The latter hurts me personally; the Orlando Merita Bakery had a day old store with baked goods, condiments, cookies, and bread at substantial discounts.  Boy could get Twinkie fix fixed cheap.  Closing this will hurt thousands in neighborhoods, people in group homes, those who ran soup kitchens, many who depended on the savings at the stores.

Plus as for Orlando, there came on a bend on i-4 a wonderful wafting smell of baking bread from the Merita Bakery, and a sign with clock and brand name, an icon of my city.


Take a look at this story: The last sentence reads that Hostess had 900 million in debts, but the story fails to mention these debts came after 2 leveraged buyouts where everyone but the workers made boatloads of money and corporate officers and investors laughed their way to the banks.

[Yes, Hostess Brands was bankrupt before this strike happened. Indeed, it’s been bankrupt twice in the last 8 years, having only emerged from its last bankruptcy 3 years ago. Think about that a second. That means Hostess managed to go bankrupt, restructure, and run itself back into bankruptcy in 3 years. Perhaps this should get more play than “labor strike” when we discuss the demise of the company.

What prompted the company to run itself into the ground again? While the company has publicly placed all its business woes since 2009 on the difficult task of cutting labor costs, the reality is that the company remained behind the times. When America began to seek healthy alternatives to Wonder’s delicious but frightening 1950s deadly chemical feel,Hostess trudged onward losing market share to others. When childhood obesity became a national epidemic, Hostess kept churning out fat-filled cakes that sat uneaten on shelves. As the business faltered, Hostess turned blame on the workers.

But a losing business model with cheap labor can generate higher margins for only so long, and while this strike will provide the basis for closing the doors of the company, it will trigger the event that the company itself has planned for some time — liquidation. Hostess will now sell its famous brand names to other companies who can profit off them with smaller-scale production or by tweaking the product itself to better compete. For those at the top of Hostess, this — and not cutting labor costs while chasing diminishing markets — was the brass ring all along, with the owners of the company likely to become rich on these sales. By the way, who owns Hostess? If you guessed, “Private Equity firms seeking to slowly kill the company while milking its resources” you’d be right!]  emphasis added for scorn and derision

[2. Aubrey McClendon, the CEO of Chesapeake Energy (CHK) who apparently has trouble keeping his company’s finances and his own apart. According to Reuters, McClendon borrowed as much as $1.1 billion over three years in undisclosed loans against his stake in thousands of company wells and ran a $200 million oil-and-gas hedge fund on the side, an “obvious conflict of interest,” Finkelstein says. Use of the company jet (and company employees) for personal purposes and a corporate sponsorship deal for Oklahoma City Thunder while McClendon was an owner of the basketball team also didn’t help. Jim Gipson, a spokesman for Chesapeake Energy, declined to comment.]

No comments: