Labor & Management
HE EARNED IT, THEY TOOK IT AWAY: PART 2
By Gary S. Howell
Nov 23, 2003, 19:20

My brother isn't the only person to see his pension benefits dwindle. In the late seventies, hundreds of local A&P workers saw their pension benefits shrink. Both my father-in-law and my mother-in-law worked for A&P. My father-in-law started working for the supermarket chain before WWII. He had well over thirty years invested in the company and was slated to receive a generous pension.

Due to mismanagement, A&P teetered on the brink of collapse. They shut down all their operations in Western New York. A&P was in such bad shape that they could not pay their employees the benefits the employees earned.

A&P did not go out of business. They restructured. But they never compensated former employees for pension benefits that were frittered away by corporate mismanagement.


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What do Employers and Employees Owe Each Other?

It's simple.

If an employer contractually binds themselves to pay a certain salary and benefits, the employer is obligated to provide the salary and benefits.

Employees owe employers their best effort to fulfill the duties of the job they are being paid to do.

Yet there are times when one party or the other cannot fulfill their obligations.

If, in good faith, an employer invests his employee's pension fund in a program that fails, they may not be able to fulfill their obligations. How can you fault an employer who, in all good conscious, invested employee funds in a program that he thought was sound? Especially if the program fails through the fund managers mismanagement!

But that's not what happened with A&P or Tyco.


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Privately Held Companies

A privately held company is one that does not sell stocks to the public. The operations belong to the owner or owners. They take the risks and reap the benefits.

Privately held companies owe their employees whatever benefits they offered them. Their employees owe them the best job possible.

All the profits of a privately held company belong to the owner or owners. If there is any money left over after all their contracted expenses are paid off, that money belongs to the owners. They have the right to do whatever they want with their earnings. It's theirs. They took the risk, they deserve to reap the benefits.

Tyco and A&P are not privately held.

By in large, privately held companies have a better track record of meeting employee obligations than publicly held companies do.


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Publicly Held Companies

A publicly held company is one that sells stocks to the public. Tyco and A&P are publicly held companies.

Stockholders own publicly held companies. They risk their money by investing in stocks and they deserve to reap the benefits.

Boards of directors manage publicly held companies. Sometimes the directors are stockholders and sometimes they are not. Many times the directors are considered majority stockholders. It's not that they own the majority of stock, but they own a larger portion of the stock than other individual stockholders.

Boards of directors may or may not be stockholders or majority stockholders. But they are obligated to the stockholders to manage the company in a prudent manner. Good board members earn their benefits and stockholders reap the profits.

Dennis Kozlowski and Mark Swartz did not exercise good management.

Amongst their misdeeds are the accusations that they used company money for their personal benefit. They had no right to use this money for personal perks. The money they used was not part of their salary or benefit package. It was money that belonged to the company. Some of the money belonged to stockholders and some of it was designated to meet corporate obligations to vendors and employees.

Kozlowski and Swartz are now "former Tyco Executives." They were terminated. How do you terminate an owner? How can you terminate a person for using their personal income any way they want? You can't.

Kozlowski and Swartz may have been owners because they held stock, but they did not hold enough stock to control their fate.

More importantly, the money they squandered wasn't theirs.

Some of the money they squandered should have gone towards employee benefit packages. Benefits the company obligated themselves to when they hired employees. In effect, when Tyco bought Scott Aviation they hired the existing employees.

Rather than insure that obligations to employees were met, Kozlowski and Swartz took the money and indulged their personal fantasies. Descriptions of their indiscretions are sickening. Especially when one sees the devastating effects their peculations have on the future of their workforce.


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My brother worked to support his family and provide for their future. At one time, he had a decent pension. After Tyco purchased Scott Aviation, his pension shrunk. Rather than support the benefit programs they agreed to pay employees, Kozlowski and Swartz blew the money.

In effect, my brother earned a pension, and they took it away.


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