Hostess Blames Union For Bankruptcy After Tripling CEO’s Pay

By Annie-Rose Strasser/Think Progress

Today, Hostess Brands inc. — the company famed for its sickly sweet desert snacks like Twinkies and Sno Balls — announced they’d be shuttering after more than eighty years of production.

But while headlines have been quick to blame unions for the downfall of the company there’s actually more to the story: While the company was filing for bankruptcy, for the second time, earlier this year, it actually tripled its CEO’s pay, and increased other executives’ compensation by as much as 80 percent.

At the time, creditors warned that the decision signaled an attempt to “sidestep” bankruptcy rules, potentially as a means for trying to keep the executive at a failing company. The Confectionery, Tobacco Workers & Grain Millers International Union pointed this out in their written reaction to the news that the business is closing:

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.

Certainly, the company agreed to an out-sized pension debt, but the decision to pay executives more while scorning employee contracts during a bankruptcy reflects a lack of good managerial judgement.

It also follows a trend of rising CEO pay in times of economic difficulty. At the manufacturing company Caterpillar, for example, they froze workers’ pay while boosting their CEO’s pay to $17 million. And at Citigroup, CEO Vikram Pandit received $6.7 million for crashing his company, walking off with $260 million after the business lost 88 percent of its value.

CEOs Of Tax Dodging Corporations Push Congress To Cut Corporate Tax Rates

By Pat Garofalo/Think Progress

Several corporate CEOs representing the Business Roundtable, a lobbying group, were on Capitol Hill today to unveil a set of measures that they claim will boost the economy. Not surprisingly, some of the high-profile items are a cut in the corporate tax rate and shifting to what’s known as a territorial tax system:

Fresh out of a meeting with members of the Blue Dog Coalition, dozens of CEOs in town for a series of Business Roundtable policy and lobbying meetings today unveiled proposals to boost the economy.

The plan, billed as “Taking Action for America,” calls for a balanced federal budget, a reform of federal regulations and a lower corporate tax rate based on a territorial tax system, among others.

A territorial system, as well as cutting the corporate tax rate without raising more corporate tax revenue, are both misguided proposals. But the interesting thing about these particular CEOs pushing this particular policy prescription is that several of them already run corporations that pay little to nothing in taxes.

For instance, Boeing CEO Jim McNerny is part of the group calling for corporate tax cuts, despite the fact that his company has a negative federal tax rate for the last decade. Only twice in the last ten years has Boeing had federal tax liability in a given year, and between 2008 and 2010, the company made $9 billion in profits without paying any federal corporate income tax.

Andrew Liveris, president and CEO of the Dow Chemical, also joined the lobbying party, even though his company received nearly half a billion dollars in tax refunds in 2010. Proctor & Gamble’s CEO also participated, while heading a company very fond of exploiting loopholes to avoid taxes.

Corporate tax rates are already at a 40 year low. As billionaire investor Warren Buffett explained, “it is a myth that American corporations are paying 35 percent or anything like it…Corporate taxes are not strangling American competitiveness.” Yet corporate CEOs whose companies already pay literally nothing think driving rates down further is the answer to boosting the economy.

Boeing Paid No Corporate Taxes For Three Years, Still Wants A Tax Cut

By Pat Garofalo

Yesterday, Citizens for Tax Justice released a report showing that, over the last three years, 12 of the country’s biggest corporations made $171 bullion in pretax profits while paying a negative tax rate. So the U.S. taxpayer has been subsidizing these giant corporations, even as their profits soared.

One of the companies on the list was mega-manufacturer Boeing, whose vice president of tax, James Zrust, was on Capitol Hill today, testifying on corporate tax reform before the House Ways and Means Committee. Even though Boeing hasn’t paid a dime in federal taxes over the last three years, Zrust still asked for a cut in the corporate tax rate:

Everyone here today is well aware that the combined US statutory tax rate is almost 15 percentage points higher than the average combined rate of other OECD member countries. It is our view that significantly reducing the corporate tax rate will improve U.S. competitiveness. We believe lowering the corporate rate would dramatically reduce tax policy pressure and rhetoric by ensuring that U.S. companies are competitive, and importantly, would not tip the scale in favor of foreign production.

Boeing is far from alone in paying nothing into the federal coffers in recent years. General Electric, for example, made $7.7 billion in pretax profits over the last three years, and collected $4.7 billion in tax benefits. And even when corporations are paying something, it’s far below the statutory 35 percent tax rate. Last year, Google used tax havens to lower its tax rate all the way to 2.4 percent.

Zrust did say tax expenditures — the credits and deductions clogging up the tax code — would have to be “on the table” if the corporate tax rate were to be reduced. And corporate tax reform is something that both parties in Washington have expressed an interest in getting done. But they’re been focused on reform that is either revenue-neutral or even costs the government money (thus increasing the deficit).

CTJ’s numbers show, though, that revenue-positive corporate tax reform is possible and, given the deficits the country faces in the medium- to long-term, desirable to avoid pushing more of the burden of deficit reduction onto the middle class. “Our elected officials have a duty to the American public to make reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy,” said Bob McIntyre, director of Citizens for Tax Justice.

UPDATE

Watch video of Rep. Pete Stark (D-CA) reacting with surprise to Boeing wanting a lower tax rate:

REPORT: CEOs At Top 50 Companies That Laid Off Most Workers Raked In Millions In Compensation

By Ben Armbruster The Institute for Policy Studies (IPS) released its annual report on

executive compensation today — “CEO Pay and the Great Recession.” “I’m afraid that this year’s report will raise just about everybody’s blood pressure,” lead author Sarah Anderson said. Indeed, the report found that “CEOs of the 50 firms that have laid off the most workers since the onset of the economic crisis took home nearly $12 million on average in 2009.” Those CEOs’ combined compensation totaled $598 million, while at the same time, their companies eliminated 531,363 jobs despite reporting a 44 percent average profit increase for 2009.

More staggering is the level of executive pay, according to IPS:

[A]fter adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century.

American workers, by contrast, are taking home less in real weekly wages than they took home in the 1970s.

The Kansas City Star took a closer look at some of the CEOs and companies in IPS’s report:

Fred Hassan, former CEO of Schering-Plough, presided over announced layoffs affecting 16,000 workers after a 2009 merger with Merck. He resigned after the merger, receiving “golden parachute” compensation in 2009 of more than $49.6 million to rank as the highest-paid layoff leader.

The top five companies announcing the most layoffs for the study period were General Motors (75,733); Citigroup (52,175); Bank of America (35,000); Caterpillar (27,499) and Verizon (21,308). Among those top five, the biggest compensation package — nearly $17.5 million — went to Ivan Seidenberg, CEO of Verizon.

According to IPS, American CEOs make 263 times the average compensation for American workers, up from the 30 to 1 ratio in the 1970s. For comparison, the average compensation of a Japanese CEO is less than one-sixth that of their American counterpart and 16 times more than the average Japanese worker.

But on top of the lavish CEO pay at the expense of the American worker, many of these top-layoff firms received money from the taxpayer bailouts in 2008. Of these, IPS notes, “American Express CEO Kenneth Chenault took home the highest 2009 pay, $16.8 million, a sum that included a $5 million cash bonus. American Express has laid off 4,000 employees since receiving $3.39 billion in TARP funding.”

“These numbers all reflect a broader trend in Great Recession-era Corporate America,” the IPS report says, “the relentless squeezing of worker jobs, pay and benefits to boost corporate earnings and maintain corporate executive paychecks at their recent bloated levels.”

Corporate Front Group Funded By Coal Industry Scorns Widow Of Mine Disaster: ‘Everyone Wants Free Money’

By Lee Fang

Yesterday, the AP reported that Marlene Griffith, a widow of William Griffith, one of the 29 men killed in last week’s explosion at a coal mine in West Virginia, is suing Massey Energy, the owner of the mine. Griffith filed a wrongful death lawsuit in Raleigh County Circuit Court, arguing that Massey’s handling of work conditions at the mine plus its history of safety violations amounted to aggravated conduct that rises above the level of ordinary negligence. Marlene and here husband were to celebrate their 33rd wedding anniversary weeks after the deadly blast on April 5.

Indeed, as the Wonk Room’s Brad Johnson has reported, the mine where William Griffith worked had been cited for over 3,000 safety violations. Massey Energy CEO Don Blankenship, who has mocked safety regulators as being “as silly as global warming,” had gummed up the safety regulations process by filing endless appeals instead of paying fines and fixing safety problems.

Responding to the lawsuit, Nathan Coffey, the Public Affairs Coordinator of the American Legislative Exchange Council (ALEC), took to Twitter yesterday to mock Marlene Griffith. Coffey posted a link to the AP story about Marlene Griffith, sarcastically commenting that “Everyone wants free money!” View a screen shot of the comment below:

ALEC, founded in 1973 by conservative activist Paul Weyrich, is a DC-based front group which helps state lawmakers craft corporate-friendly legislation. State-based schemes aimed at deregulation are often conceived and coordinated out of ALEC. It is funded by some of the biggest corporations in America, including Koch Industries, Wal-Mart, and AT&T, as well as by the coal industry. Peabody Coal’s Kelly Mader, a Vice President for State Government Affairs at the company, sits on the board of directors of ALEC.