David Shemano wrote:
Let's assume that the bankruptcy laws did not permit a corporation to
"reject" (i.e. refuse to perform under) a collective bargaining agreement
and/or pension agreement. (BTW, it is not easy to reject such agreements
in bankruptcy. The corporation is first required to make a good faith
proposal that is rejected by the union/retirees, and then demonstrate that
the balance of equities favors modification.) If the corporation is
required to perform under the agreements, but the agreements render the
corporation unprofitable, the corporation can simply choose to liquidate.
The assets will be sold off (either together or piecemeal) to other
corporations who will be under no obligation to assume any of the
obligations of the liquidated corporation. Even if the rules are changed
to require the acquiring corporation to assume the union/pension
obligations, it is possible that no buyer will
appear. In other words, if the union/retirement benefits are not
economical for whatever reason, at the end of day, the benefits are only
worth what they are really worth.
Corporations fail for a lot of different reasons. Only ideological
blindness will prevent you from acknowledging that a contributing cause of
corporate failure can be a union that is too successful. It happened to
the steel industry, and it is happening to the airline and auto
industries. The union/retiree benefits were negotiated in a different
economic environment and those agreements are coming back to haunt the
corporations, which means they are now necessarily haunting the unions.
-----------------------
No one is disputing that unionized workers in shaky companies and industries
are under the gun, and are often faced with trading pay and benefits off for
jobs. That is not at issue, and you will find few inside or outside the
labour movement wearing ideological blinders preventing them from seeing
that. The issue is whether the tradeoff is to be a negotiated one between
the company and the union, or an imposed one by a bankruptcy court - to all
intents and purposes acting on behalf of the company and its creditors. You
would have to be wearing ideological blinders to see otherwise.
To be sure, the petitioning company has to go through the appropriate
motions - that is, make a "good faith" proposal that is rejected by the
employee side - but, unless the situation is very different in the US, which
I doubt, the "good faith" test is easily met and often requires no more than
that the company table a proposal which it would consider, in the normal
course of bargaining, to be little more than an extreme opening position
which it knows it will have to modify to reach either a voluntary agreement,
or, failing that, to impose as a result of a lockout. The same
considerations weigh on a union considering strike action. That is in the
nature of any negotiation.
But where no such constraint exists, and there is easy recourse instead to a
bankruptcy court or a pension bailout authority to impose a settlement,
these mechanisms serve as powerful disincentives to employers to make
precisely the kind of affordable good faith offers you suggest they
encourage. The outcome is foreordained, and there can no opportunity for the
parties to reach negotiated settlements containing a range of measures which
can cushion the impact on employees of job and compensation cuts while
permitting weak companies to continue operating and attract new investment.
In any event, as you note, "companies can fail for a lot of different
reasons", apart from their labour costs. In boom times, they take on too
much debt, make unsuccessful acquisitions and build too much capacity,
speculate too freely in the markets (the source of a lot of underfunding in
employee pension plans following the 2001 Nasdaq crash) and miss or make a
host of other strategic decisions which send them into Chapter 11 when
conditions change. You acknowledge this, but the whole thrust of your
remarks points to a haircut for employees and retirees rather than the
creditors and shareholders who are the responsible parties. It strikes me as
the same approach taken on the international level by the IMF and other
agencies who place the burden of restoring bankrupt economies on the host
populations, targetting their living standards, rather than the lenders and
speculators and governments who precipitated the crisis.
MG
