Bankruptsy = Savy Corporate Management, The Bastards...

[Minor Axis]

Do you all remember a time when Bankruptcy was a badge of shame? Now in Corporate America it's a badge of honor, a savy management tool using Chapter 11 to shed costs and to renig on promises to its workers, while lavising wealth on it's top management. My understanding is that Chapter 11 was created in 1980, Ronald Reagan years. See this link.

The Bankruptcy Reform Act of 1978 was passed in 1978 and took effect on October 1, 1979. This act, which continues to serve as the uniform federal law that governs all bankruptcy cases today, substantially revamped bankruptcy practices. A strong business reorganization Chapter was created: Chapter 11. (This replaced the old Chapters X, XI and XII that had been created by the 1898 Act and amended by the Chandler Act.) Similarly, a more powerful personal bankruptcy, Chapter 13, replaced the old Chapter XIII. In general, the Reform Act of 1978 made it easier for both businesses and individuals to file a bankruptcy and to reorganize.

USA ran a tremendous article today Bankruptcy a Reprieve For Some Companies. What it does not say is that despite the original intent, it's been converted into a heinous, immoral management tool. It is absolutely clear to me that morality in Corporate America no longer exists, not when you write off your labor force as expendable while rewarding yourself with piles of gold, screwing the workers that make your company go and reducing the manufacturing % of GDP from 25% down to the 10% it is today so management can enrich themselves regardless of the expense to the overall National economy.

Juicy quotes:

The USA's unique bankruptcy law makes it possible for insolvent companies to do what's not possible in most other countries: survive by shedding legal debts and obligations that they can't or don't want to pay.

"Chapter 11 in the United States is the darling of the international business world," says University of Michigan law professor John Pottow. "If you are a company or even a rich person, you can go into the bankruptcy system and confront your failures, and you will not be punished."

In England, management is fired when a company declares bankruptcy. Other countries liquidate bankrupt firms or require that payments continue for years until debts are paid.

Every major airline has used bankruptcy to slash costs, most shedding some or all pensions and revising labor contracts since then-Continental Airlines chief Frank Lorenzo invented the strategy in 1983. American Airlines was the last holdout.

"They need a new labor agreement, a fleet realignment and a more economical cost structure," says airline analyst Ray Neidl of Maxim Group. "This is how it's been done since the days of Frank Lorenzo."

The use of Chapter 11 as a business tool is popular in some industries such as real estate and airlines, while unpopular in others. Some companies use it multiple times.

Hostess has filed for bankruptcy twice. Donald Trump's casinos went bankrupt three times — and he still owns 10% of the company. "It's not personal. It's business," Trump told ABC News last year when he was considering a presidential bid.

 

[Accountable]

Oh yeh. Washington insulates corporations from risk far too much. It encourages recklessness. I mean hell, if we were each given an invincibility suit at no cost, many of us would be jumping off the Empire State Building or Niagara Falls just because we could. ... and most of us probably wouldn't care that every bounce costs somebody else millions of dollars.

 

[Alien Allen]

It also insulates individuals too easily

Accountability on all levels has gone down the crapper

And unless I missed something why do you blame this on Reagan?

It was passed before he ever came close to taking office

 

[Accountable]

Hey, we're in agreement for a change. Let's see if we can keep partisan hackery out of it.

Death to easy Bankruptcy!!

 

[Minor Axis]

Obviously bankruptcy today is being used to enrich "self", because the laws as written allow this. Making company management suffer for failing, would make them more accountable and less likely to take the easy way out. There are cases of strategic bankruptcy where it was not needed, just used as a tool to be beat down employees and void previous agreements.