The real reason for almost all big business failures

[swag]

http://observationalepidemiology.blogspot.com/2012/11/the-real-reason-for-almost-all-big.html

The commonly voiced view of business, red in tooth and claw, a Darwinian landscape where only the fit survive may hold for small to mid-sized operations, but with big business, survival is surprisingly easy. As a rule it is only the remarkably unfit that die. When you see a big company go under you can generally find a history of incompetent management and stupid or shortsighted decisions.

Though as narrative-obsessed as their political brethren, business journalists tend to be notably averse to stories built around the question "what happens when you give the keys to an idiot?" That's a shame because some of the most entertaining accounts start with that premise. It's understandable though. Business journalists, once again like their political brethren, tend to have overly cozy relationships with their subjects and, (compared to reporters thirty or forty) tend to sympathize more with management than labor.

The decline of professional standards also plays a part. A surprising number of "news" stories are actually press releases in only slightly rewritten form and PR department go to great lengths to avoid statements that make their bosses look like morons.

. . . follows with links and a good narrative on the demise of Hostess

[Iggy]

1. "Stupid, Shortsighted Decisions"

yep. and looks like this applies to Hostess.

"Who Killed the Twinkie?"

Hostess, then known as Interstate Bakeries, spent more than four years consolidating (it closed 54 bakeries and hundreds of stores), selling assets, negotiating with its unions and battling takeover attempts. But instead of emerging cleaned up in 2009, it emerged smaller and burdened. Private equity and hedge funds owned half. Unions took an ownership stake in exchange for concessions.

The biggest problem was a $700 million loan that couldn’t be repaid. Hostess was back in bankruptcy court earlier this year, seeking to reorganize again. But it was a bad situation made worse. The unions, including the Teamsters and bakery workers, felt they had been lied to and misled by new management. Is it the end of the line for Twinkies? (Slideshow)

It got nasty. A court ordered 8% wage cuts and a 17% increase in health-care costs for workers. The unions point to huge management contracts . The CEO is paid $100,000 a month. It’s considered an improvement. The former CEO, Brian Driscoll, was making $1.5 million annually.

New management is led by restructuring whiz Gregory Rayburn. His record outside of Hostess is mixed. He’s worked with companies including WorldCom (sold to Verizon Communications, Muzak (eventually went bankrupt), and Sunterra Corp. which became Diamond Resorts Holdings.

Rayburn thinks the unions are sabotaging Hostess. The unions think Rayburn and his team are looting the company. There’s been disinformation on both sides,

Hellooooo? a $700 million dollar loan that can't be repaid? is this the fault of Hostess workers?

FAIL.

http://www.marketwatch.com/Story/story/print?guid=3F512DCC-3269-11E2-A56A-002128040CF6

[sulphurdunn]

6. It seems that

reorganization means only the employees and the suppliers get screwed, and the suits make off with the swag and one gets to run for President.

[Iggy]

9. Exactly. I've not read the related article yet, but I see

"Chainsaw" Jack Welch, one of the originators/adherents of this branch of dog-eat-dog capitalism, is on the cover of the recent Bloomberg Business Week.

[DCKit]

2. Did "greed" even make the list?

With the astronomical salaries and bonuses (whether it's a good year, or bad, they still pay themselves those damn bonuses), it's a wonder there aren't far more large business failures.

[onethatcares]

3. it's that gauddammm debt they load the company with

using the assets of the same company while taking bonuses and obscene wage ratios that kill it all.

Our economic model is a scam, just like bernie madoff, but congress allows it to go on and on.

[AlbertCat]

5. taking bonuses and obscene wage ratios

I had a Repug "explain" to me that many people get golden parachutes not because the make the company money, but because they SAVE the company millions. That is all well and good... but JUST saving and making money is not all there is to it. There's also HOW they make and save money. The ends do not justify the means. If one has to cheat, then, is that a good business model?

[Major Nikon]

4. Another common misconception is that the private sector always does it better than government

The inevitable example is DMV, which is obviously provided to provoke an emotional response of the worst experience people tend to have with the government instead of using reason to support their case, when they can't.

Some states I've lived in have an amazing DMV. Very little waiting. Great service. No problems. In other states, legislators slice the budget of things like DMV to the point which guarantees poor service, then use the DMV as an example of why government doesn't work.

[AlbertCat]

7. The inevitable example is DMV,

And then there's the Post Office.

As if it sux.

95.5% of your mail gets to you. I can't remember the last time something was lost in the mail. I mean considering what it is they actually do.... they are amazing!

[Patiod]

8. PA's DMV is really good

Many of the employees are severely handicapped and also provide good service.

[onethatcares]

10. Floridas' DMV is really good too.

and you can pay your property taxes, buy your car/boat/trailer tag/mobile home tag, and get your drivers licence in the same spot.

Now pricksnot wants to privatize it.

Go figure.