Friday, March 18, 2016

Peabody Coal and the Evils of Late Capitalism

Peabody Coal is the world's largest private coal company. It is also in bad financial trouble; since 2011 the price of its stock has fallen from more than $1000 a share to $2.19. It is likely to declare bankruptcy soon. And the company has already signaled what it plans to do in bankruptcy, which is shed its obligations to retirees. The deal coal companies offered their workers was always that while the work was dirty and dangerous, eventually miners would be able to retire on generous pensions, with good health care.

Not any more. Peabody has been dreaming up ways to shed those obligations for years:
In 2007, Peabody created a new entity called Patriot Coal, and transferred to it 13 percent of its coal reserves. It also transferred to it about 40 percent of its health care liabilities—the obligations for 8,400 former Peabody employees. A year later, Patriot Coal was loaded up with even more liabilities when it acquired Magnum Coal, an offshoot of the country’s second-largest mining company, Arch Coal. This left Patriot with responsibility for another 2,300 retirees, and, by last year, total liabilities of $1.37 billion. Patriot Coal is now [2013] seeking Chapter 11 bankruptcy, through which it will seek to limit or discharge its pension and health obligations to 22,000 retired miners and their spouses, 90 percent of whom never worked for Patriot Coal.
Nice trick, no?

But, ok, the coal industry is in trouble, and the whole country is moving away from generous pensions. So some people would be sympathetic toward these companies, if their executives weren't so nakedly enriching themselves at everyone else's expense. During the period when the stock price fell 99.8%, what happened to the salary of Peabody's CEO? You guessed it, it rose from $10 million a year to $11 million.

When Patriot Coal applied to the bankruptcy judge to shed its pension obligations (which she approved), it also applied to pay its executives $7 million in "retention bonuses." The judge approved that, too.

I honestly don't understand how these men can look at themselves in the mirror every morning. For the fact that they obviously can, I blame Reagan, Thatcher, and the rest of the Randian crew of modern conservatism. They faced real economic problems in the 1970s and carried out some important reforms, but they also spread the gospel that businessmen are heroes deserving of as much money as they can pocket, and workers who strike or otherwise fight for what they have been promised are nothing but whining losers. The most important thing we could do for America would be simply to insist that their behavior is unacceptable. But the rise of Donald Trump shows how hard that is going to be.

2 comments:

Shadow Flutter said...

"[B]ut they also spread the gospel that businessmen are heroes deserving of as much money as they can pocket, and workers who strike or otherwise fight for what they have been promised are nothing but whining losers."

I rather had thought this began in the 90's, during Clinton's administration, when the stock market exploded and everyone wanted to become a millionaire and thought they could. It was then that I heard people proudly proclaiming the wonders of greed, its inherent goodness, and it was then when laying off employees became fashionable because it improved the bottom line and raised stock prices. That was the era of excess. Perhaps Reagan and Thatcher seeded the landscape though.

David said...

It seems to me there's a real opportunity here for the Democrats. I'd like to see what would happen if there were a Democratic candidate who could forthrightly push BOTH Black Lives Matter and forcing coal to pay the pensions, simultaneously and with muscular rhetoric on both counts. If working class whites would vote for such a candidate, I would say there is hope for American democracy that goes beyond mere muddling through.