Introductory Speech
In the spirit of thanksgiving, I would like to thank you for taking your time to listen to my case and arguments on why the Twinkie Hostess management did the right thing by closing down the factory. It is sad how the events at Twinkies unfolded and the employees had to lose their jobs. However, the management acted out of good faith in closing down the factory because an increase in salaries and wages would hurt the company financial and increased its debt. I am not defending the action that senior Hostess executives had their pay increase when the management new that the company was in debt and its operations were threatened. These actions were wrong but I still believe closure of the factory was the right action taken by the management given the current circumstances and situation.
Since 2004, the company has been operating in debt and it even filed for bankruptcy but this was later reinstated. Despite the company earning over $2 billion sales during that time, the misappropriations by a private-equity firm, hedge funds, and mismanagement have since left the company in serious debt (Feintzeig, Spector, & Jargon, 2012). Blame can be passed all around including increased cost of fuel and ingredients, the U.S. recession, mismanagement and the failure to adopt healthier foods. The company has over 18,500 employees in different factories (Geller, & Gillam, 2012). With this large number of employees, imagine what an increase in pay even by 5% would mean to the expense of the company. It would create a huge salaries burden on the company that would in the even see its closure due to lack of funds. This burden cannot even be compare by the 80% increase in senior executives pay because they are few.
I know employees feel that after the executives had their pay increased this should be reciprocated but the only reality that a pay cut was the only option that the company had to survive. Twinkies Hostess is not the only company to have requested for a decrease in salaries and wages of employees to enable its survival. The 8% cut negotiated by a bankruptcy judge was much to ask from the employees but given the company has more than $700 million debt, increasing the employees’ salaries would add to the debt. High debt level threatens the operations of a business and could eventually lead to failure unless various courses of actions are taken. The reduction in employee pay is one of the painful action that a company in debt such as Hostess could take to ensure that the expenses are minimal so that it could be able to meet its obligations. Another alternative was to have a massive retrenchment which was not the course taken by the management. At least all the employees would keep their jobs but their salaries reduced.
My points
An increase in employees’ pay would add to $700 million debt that the company owed. In 2011, investors had ploughed in $ 60 million in the bid to save the company and they expected returns (Feintzeig, Spector, & Jargon, 2012). Increasing costs would lead to losses that would lead to eventual failure of the business.
In the past, the company had restrictive work rules that saw employees enjoy large pensions and medical benefits (Carbaugh, 2015). This increased the labor cost reaching the climax in 2012. The lack of competitiveness in the company should be solely blamed on Bakers Union and Teamster Union aggressive bargaining. Management had to reduce labor costs to ensure survival.
History seemed to show the financial instability of the company. The company had filed for bankruptcy in 2004 and 2009. Some of the causes were debt and mismanagement. However, it should also be noted that American changes in tastes and preferences had changed leading to decline in sales by the company. Management has no control on such factors as changes in customer tastes.
Responses to the arguments from Opposition
Why should the workers have to suffer for the actions of poor management?
During economic strains in a company, solutions to save the company from failure have to be created (Gilbert, 2012). In this period, pointing accusing fingers at others would not solve the issue in question, which is to ensure the survival of a company. Through a pay cut, Hostess would be able to ensure that it stayed in operations. The employees could later ask for a pay increase when that company was stable or agreed to a deal that stated so. The influence unions have on workers sometimes may have positive or negative impact and consequences.
Why should the actions by the executives be overlooked in this case?
The increase in executives’ pay did not lead to bankruptcy of the company. Even if the executives did not take that action, the labor costs needed to be reduced to enable the company to run efficiently and this is what the management did. The company was already in debt and there is nothing that the management could do other than think of survival solutions (Gilbert, 2012).
If restrictive work plans increase the labor costs how comes the management, did not take action for years?
Based on management statement, the company seemed to be doing fine until 2012 when it felt it was financially overstretched. The employees work plan had been an issue that the management had tried to negotiate with the union but no agreement was reached (Carbaugh, 2015). The Unions having restrictive working conditions are not exclusively to blame for raised labor costs. The costs would not be an issue if the company had high sales and low debt. The prices that the goods were being offered could not cover the costs and actions to reduce costs need to be taken.
How comes the company could not fire the managers for misappropriation instead of laying off workers.
In this case, an immediate action needed to be taken to ensure the company survived. Evidently, management misappropriate fuds and used increase executives’ pay when the company was financial instable but this would only have to take a long process to recover the money paid to senior executives in form of remunerations.
References
Gilbert, J. (2012). Ethics for Managers: Philosophical Foundations and Business Realities. London: Routledge Publishers.
Carbaugh, R. (2015). Contemporary Economics: An Applications Approach. London: Routledge Publishers.
Feintzeig, R., Spector, M., & Jargon, J. (2012, November 16). Twinkie Maker Hostess to Close. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB10001424127887324556304578122632560842670
Geller, M., & Gillam, C. (2012, November 22). Twinkies bakers say they would rather lose jobs than take pay cuts. Reuters. Retrieved from http://www.reuters.com/article/us-hostess-labor-idUSBRE8AL06U20121122
