As part of its liquidation filing, Hostess is requesting approval to pay $1.75 million in bonuses to executives—the same executives who ran the company so poorly it is closing its doors and liquidating its assets. The pattern of paying executives large sums of money while firing workers is nothing new for Hostess.  The CEO at the time of the most recent bankruptcy filing, Brian Driscoll, is guaranteed as much as $2 million even as the company liquidates.

Many are suggesting that it was necessary for Hostess to be liquidated once the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) workers refused the latest offer from Hostess. The company itself isn't exactly in control of the negotiations, as the two hedge funds that control about 60% of the company's debt, Silver Point and Monarch, are really in charge. The two companies effectively gave the workers an ultimatum—accept cuts or we shut the company down.  The argument is that worker-related costs are driving the company's losses and that Silver Point and Monarch are in danger of losing money on their Hostess investment.

It isn't clear, though, that either of the key premises behind the ultimatum are true. After emerging from its previous bankruptcy filing, there isn't much evidence that much was done to improve the company's bottom line. Declining market share and failure to innovate with changing consumer demands made it difficult for the company to keep up. Deep debt, concessions from unions, the laying off of workers, the closing of factories and switching CEOs six times in 10 years— none of whom were experienced in the baking field—none of these things made the company more profitable. Neither did giving large pay raises to the very executives that were running the company into the ground.

It also isn't clear that Silver Point and Monarch are losing any money on their investment. They, along with other investors, bought about $450 million of Hostess debt. But such debts are often purchased at well below their face value and the actual purchase price for the debt is not public record. Depending on how much the companies get for the proposed liquidation of Hostess, they could easily make a profit on the deal, particularly through avoiding paying pensions promised to Hostess workers.

What is certain is that the company is going to hurt workers, regardless of what happens. One worker told the story on Daily Kos:

In July of 2011 we received a letter from the company. It said that the $3+ per hour that we as a Union contribute to the pension was going to be "borrowed" by the company until they could be profitable again. Then they would pay it all back.

....
This money will never be paid back. The company filed for bankruptcy and the judge ruled that the $3+ per hour was a debt the company couldn't repay. The Union continued to work despite this theft of our self-funded pension contributions for over a year.
....
What was this last/best/final offer? You'd never know by watching the main stream media tell the story. So here you go....
1) 8% hourly pay cut in year 1 with additional cuts totaling 27% over 5 years. Currently, I make $16.12 an hour at TOP rate of pay in the bakery. I would drop to $11.26 in 5 years.
2) They get to keep our $3+ an hour forever.
3) Doubling of weekly insurance premium.
4) Lowering of overall quality of insurance plan.
5) TOTAL withdrawal from ALL pensions. If you don't have it now then you never will.

Remember how I said I made $48,000 in 2005 and $34,000 last year? I would make $25,000 in 5 years if I took their offer.
It will be hard to replace the job I had, but it will be easy to replace the job they were trying to give me.

While the BCTGM workers who stood up to Hostess may not personally benefit from their action, others might. Michael Hilliard, a University of Southern Maine economist and labor relations expert, argues that the situation could force the hand of other companies:

"You’ve seen ownership practices for any kind of large scale manufacturing operation replaced by this short term financial mentality, that’s come largely from Wall Street, and looking at companies less as enterprises than as bundles of assets that can be moved around a chessboard,” Hillard said. “They’re operating with the idea that you can always squeeze more—squeeze more out of operations, squeeze more out of labor, squeeze more out of distribution, just find any way to get more profit.

“The idea that this is how you run a healthy economy is a question, and so who’s standing up to this? Labor unions are one of the ways people have to make their concerns known about the economic conditions in our world,” he continued.

Hilliard said that corporate investors across the economic spectrum may have to take into account the power of the working class, realizing that such obviously greedy moves will be protested like they haven't been in the past.