Corporate greed trumps the common good.

Robert Reich
7.6.2016

You remember the Hostess Cupcakes, Twinkies, Ding Dongs, and Snowballs? Those delicacies didn’t survive the age of nutritious deserts. But Hostess is now roaring back. It’s now valued at $2.3 billion, in a public offering announced today.

It's not because Hostess is now offering wonderfully terrific new products. It's because two private investment firms (Metropoulos & Co. and Apollo Global Management) bought it, and then used bankruptcy to get rid of all Hostess’s union contracts and slash wages and employee benefits.They also ended contracts with local bakeries around the nation and centralized the whole operation, automated production, and cut employment from 8,000 five years ago to 1,170 today.

Presto. The two investment firms make a bundle -- more than 10 times their original investment four years ago.

If the purpose of the corporation is to make fat profits for investors, this is a success story. If the purpose of the corporation is to improve the well being of all stakeholders – including employees, contractors (local bakeries), and the communities where it does business – this is an example of hyper-capitalism that works for a few and harms the many.

Next time you bite into a Twinkie (if you ever do), remember that the choice of investor or stakeholder capitalism is ours to make. Current laws – corporate, securities, bankruptcy, and labor – prescribe investor capitalism. But that’s not always been the case, and doesn’t have to be the case forever.

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