Boycotting Bankruptcy
Posted on May 25, 2006 by Her and tagged spending
Last night I made the decision to boycott bankruptcy. Specifically, I intend to boycott corporations which have undergone bankruptcy. I watched the PBS Frontline documentary, "Can I Afford to Retire" and learned that many corporations are now choosing bankruptcy not as a last resort, but as part of their overall financial plan. Undergoing bankruptcy allows them to back out of promises made to their employees. Through bankruptcy, they are allowed to slash salaries, cancel pension plans, and bill employees for their own benefit plans. At the same time, the corporation’s management and lawyers fill their pockets with bonuses and fees for their "loyalty" during bankruptcy. This is morally disgusting.
In my opinion, bankruptcy needs to exist as a safety net for people who have made honest mistakes, not as a way for CEO's to get rich while their union employees struggle. Therefore, I am going to show these corporations how I feel the only way I can: with my wallet. I am going to boycott United Airlines and Kmart. Are there any other post-bankruptcy corporations I should be aware of?
Bankruptcy may be an inevitable corporate right in a capitalist country, but so is my right to freedom of expression. I'll be expressing myself with my wallet.
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The Travelin' Man | May 25, 2006
It's not just United. You may not be able to fly soon! :) Delta, USAirways (which now also includes America West), and Northwest Airlines have all filed bankruptcy. It also depends on how far you want to go -- I am pretty sure that Worldcom, which became MCI, was subsequently swallowed up by Verizon. I like the idea, though -- there is no need to support corporate welfare.
A list of the largest corporate bankruptcies since 1980 can be found here: http://www.infoplease.com/ipa/A0904494.html (side note: I actually owned stock in Conseco when they went bankrupt -- and their CEO cashed out for MILLIONS! -- he is another crook who should be in jail!).
I don't think firms choose to go into Chapter 11 who wouldn't be about to go bankrupt anyway. You need court approval to do it.... but it is a neat trick.... investors get screwed too - all the value of stock is usually wiped out and lenders get their debt converted to shares.... Chapter 11 is probably the most lenient and flexible bankruptcy program in the world. In most countries a firm that declares bankruptcy is liquidated - the assets are sold off to pay off the debts. Downside is that all the employees lose their jobs... I think Chapter 11 results in too many firms returning from the dead which should never have done so... the US generally has a very forgiving attitude to bankruptcy... Anyway, I don't see what boycotting them will do. Why not find whether there are groups already working on changing legislation etc. you can work with?
As the The Travelin' Man said, you probably won't be able to fly all that much. The only major airlines that haven't declared bankruptcy in order to get out of paying their unions is Southwest (non-union I think), JetBlue and Continental.
Moom, you make me laugh. I think that's the first time I've heard an economist encourage regulation.
Major | Jun 1, 2006
You'll quickly run out of companies to shop with. Don't forget that KMart and Sears are now one. Delta Airlines is in bankruptcy. Continental has declared bankruptcy in the past.
Until these companies actually improve how they are doing business, they shouldn't still be in business. Build a better product (bye bye GM), have a better plan (bye bye United, hello Southwest), etc... And unions aren't helping things either as they have artificially priced the US out of competition in most areas. While I agree that there was a time when they were needed, that time has passed. With all the regulations that we have now, most corporate misdeeds are settled via litigation now.
What I don't understand is the strike threats. If a company is coming to you saying we need to cut your pay by xx% to stay in business. And you respond, no we'll strike. So company goes out of business, you have now cut your pay by 100% and have lots of competition getting what few jobs there are in your chosen field. h yeah, and lost your pension, health benefits, and everything else.... ala Enron.
I do however strongly disagree with the execs voting themselves big raises and bonuses. At some level I think that should be regulated within the codes for filing bankruptcy, and even have a 2-5 year tail on raises and bonuses once successfully emerging from bankruptcy protections.
Steven | May 25, 2006
That is fascinating that companies would choose to do that. But then, I guess that that is a kind of commentary on how our culture chooses to use money, isn't it?
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