Throw Granny to the wolves. Or the Vultures.

January 19th, 2012 by Rick Drain

Today another classic old company, Kodak, has filed for bankruptcy.テつ Among its first statements, “the company cited the burden of retiree benefits”.

There’s no doubt that Kodak’s management made big mistakes, completely botching the transition to digital photography.

Why, though, should retirees who worked for the company during its good times get robbed “relieved” of their pensions?

Retirees, and current workers with long service to the company, are in a terribly vulnerable position.テつ They have no bargaining power.テつ They can’t take back the work they did, for which they were promised payment that included a pension.テつ They can’t go back in time and work for someone more trustworthy.テつ Many of the older retirees physically can’t go back to work at all.テつ Their only protection is the law, and the law isn’t helping.

There’s no other supplier to Kodak in a position to get screwed out of decades of payments.テつ The companies that sold Kodak plastic or silver or chemicals got paid long ago.テつ If they hadn’t, they’d have had the opportunity to drop Kodak, long ago.テつ Only the employees, suppliers of labor, were paid partially in a long-term promise.テつ That promise is now being violated.

During all those years of work, Kodak was NOT setting aside enough money to fund the promises they were making to their employees.テつ The pensions were called “unfunded liabilities” by the accountants, meaning that the money was owed, but there was nothing set aside to pay.テつ Implicitly, Kodak was saying that they would pay for the pensions out of future earnings.

And this is key:テつ in the meanwhile, Kodak was able to claim higher profits, raising their share price and bringing bonuses to management.テつ The accumulated debt to employees was not counted as a cost.

Kodak was not breaking the law, or accounting standards.テつ For other types of expenses, companies are required to treat money that’s owed as an expense, reducing profit, whether it is paid or not.テつ Pensions are treated differently.

Those laws and accounting standards need to be changed.テつ Companies must be forced to set aside– really aside, in a trust where they can’t touch it– the pension money that they’re promising they’ll pay.テつ They need to be forced to recognize the expense as it is incurred.テつ That’s more honest accounting, but most important:テつ that protects the workers from getting robbed.

The managers long ago got their bonuses, the shareholders of long ago saw the share price rise, champagne was popped and toasts were raised… long ago.テつ The workers from long ago paid for that illusory “success”, but did not taste the champagne.

Those workers are now faced with the remainder of their lives tasting lower living standards, possibly even bitter poverty.

That stinks.テつテつ S-T-I-N-K-S.テつ

We need to change the law to protect those workers, and all the others like them, from being robbed.