Hostess Inc. – Company Bankruptcy and Executive Mismanagement

Hostess Inc., the sweet treat manufacturing company moved to chapter 7 bankruptcy after being under the public spotlight as one of the biggest chapter 11 cases of 2011. The drama that ensued as the company fell from grace included a back and forth between the executive staff at Hostess and the labor union representatives of the Hostess work force. The executive staff attributed the company’s bankruptcy to inflexible agreements controlled by the labor unions. However, recently uncovered were the records of extreme salary and bonus increases for Hostess’s executive staff.

During the financial crisis at Hostess, instead of distributing monetary resources evenly amongst workers and executives, the executive staff decided to allow significant pay increases to the CEO and 8 other executives at Hostess. According to the article Hostess Blames Union for Bankruptcy After Tripling CEO’s Pay,

BCTGM members are well aware that as the company was preparing to file for bankruptcy earlier this year, the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. One such executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256.

As the case continued to develop after initial declaration of bankruptcy, workers were arguably exploited further. According to the Daily Kios,

Hostess took Union members self-funded pensions without their authorization to pay their debts. The pensions will not be paid back under bankruptcy.

Hostess Inc. could be viewed as an example of executive mismanagement at an egregious level with the outcome severely effecting the workers not the executive staff.

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