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Workplace Tremors
The man and the message: After seeking Chapter 11 bankruptcy protection, Delphi's Robert "Steve" Miller warned his workers of drastic cuts, saying "It may not be fair, but it is reality."
(By Bryan Mitchell -- Getty Images)
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Logic would suggest that a dynamic corporate doctor would want to amputate, not remunerate, the people who helped get the company in trouble in the first place. Bonuses and equity, however, "incentivize" managers, to use Wall Street lingo, to remain at the company and meet the downsizing targets set by Miller.
It's one of those disembodied tactics of modern business life in which there is no apparent crime -- only victims, such as retirees who lose their benefits, and Middle American towns that lose a part of their tax base when the local Delphi plant is padlocked.
Aside from the question of social equity, is Chapter 11 an effective cure for a sick company? There is little evidence that court-supervised reorganization produces a superior company. In fact, quite a few companies that come out of bankruptcy make a return trip, and there is growing evidence that the process diverts capital away from needed investments into the pockets of the restructurers.
"Moral hazard" warns us against letting poorly run companies undercut the practices of strong companies. It would be a pity, says Shaiken, to encourage responsible companies to follow in the Chapter 11 footsteps of weak ones, rending the social and economic fabric of years of comparative labor peace.
You don't have to be UAW's Ron Gettelfinger to be bothered by the contrast between the winners and losers of recent Chapter 11 reorganizations. The enrichment of managers and financiers who parachute into troubled industries is unacceptable if taken from the benefits promised to workers who served their employers loyally in return for a measure of security in their golden years.
Author's e-mail :
Mark Reutter is an Illinois-based journalist and the author of "Making Steel: Sparrows Point and the Rise and Ruin of American Industrial Might" (University of Illinois Press). He writes about business issues at his Web site, Makingsteel.com.
