Newspaper article The Florida Times Union

FACT CHECK; Too Sweet a Deal for Hostess Honchos?

Newspaper article The Florida Times Union

FACT CHECK; Too Sweet a Deal for Hostess Honchos?

Article excerpt

Byline: Carole Fader

Times-Union readers want to know:

Is it true that while the Hostess company was filing for bankruptcy, it gave its executives huge raises? An email says that the bakers who were striking were faced with a 30 percent cut in benefits while the CEO got a 300 percent raise.

It's pretty much true, but needs more explanation.

In November, Hostess said it had to shut down because it couldn't withstand ongoing strikes by its workers. The union countered that problems were caused by mismanagement by executives who received huge bonuses as Hostess was descending into bankruptcy.

Hostess had been sold at least three times since the 1980s, according to an article in Forbes magazine, but continued to have problems with profitability. The company first filed for bankruptcy in 2004, then emerged from restructuring in 2009 before filing again in January.

The Wall Street Journal reported in April that Hostess' creditors claimed in court documents that the company might have converted its executives' pay from performance-based bonuses to salary in the months leading to its Chapter 11 filing, in part to sidestep bankruptcy code provisions. Hostess said that it didn't try to circumvent rules that ensure companies in bankruptcy aren't enticing employees to stay by offering more money. The July 2011 salary increases, Hostess said, were part of a routine compensation review to put officials more in line with industry standards. The company also said that the executives were taking on significant additional responsibilities to restructure the company.

The Wall Street Journal also reported what those raises were for 10 officials. They included then-CEO Brian Driscoll, who would get an increase from about $750,000 to $2,550,000; Executive Vice President Gary Wandschneider, from $500,000 to $900,000; EVP John Stewart, from $400,000 to $700,000; and EVPs Richard Seban, David Loeser and Kent Magill, from $375,000 to $656,256. …

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