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Pension Dumping: The Reasons, the Wreckage, the Stakes for Wall Street
Fran Hawthorne, author of Pension Dumping, is a recipient of the New York State Society of Certified Public Accountants award for Excellence in Financial Journalism for 2009--the first year books have been honored.
Pension plans in America no longer represent commitments that financially troubled companies will honor. Neither bankruptcy courts, nor Washington, nor unions have the clout to make them do so. The disposition of these plans is instead left to serve the needs of big investors. Often these investors are a failing company's best hope of restructuring after bankruptcy. Investors want a lean investment unburdened with financial promises to employees no longer on the payroll. Despite laws passed to discourage the termination of plans, the courts allow it, caving in to the forces garnered to reinvigorate a failing company. Unions are often compelled to choose between the financial welfare of retirees and jobs for active workers.
Pension Dumping explains in shocking detail how terminating the pension plan became a knee-jerk strategy for bankrupt companies that hope to attract big investors to help them reorganize.
Hawthorne traces the dynamics and the players involved as a pension is targeted for termination:
thebankruptcy court and the hierarchy of power that dictates whose interests will prevail the choices forced on unions the burden placed on the Pension Benefit Guaranty Corporation the risks investors take and the returns they look for the companies' efforts to salvage what they can as they restructure, as well as the backlash they risk by breaking pension promises In 2008, Pension Dumping was cited in testimony before a Congressional committee investigating bankruptcies in relation to pensions.
Pension plans in America no longer represent commitments that financially troubled companies will honor. Neither bankruptcy courts, nor Washington, nor unions have the clout to make them do so. The disposition of these plans is instead left to serve the needs of big investors. Often these investors are a failing company's best hope of restructuring after bankruptcy. Investors want a lean investment unburdened with financial promises to employees no longer on the payroll. Despite laws passed to discourage the termination of plans, the courts allow it, caving in to the forces garnered to reinvigorate a failing company. Unions are often compelled to choose between the financial welfare of retirees and jobs for active workers.
Pension Dumping explains in shocking detail how terminating the pension plan became a knee-jerk strategy for bankrupt companies that hope to attract big investors to help them reorganize.
Hawthorne traces the dynamics and the players involved as a pension is targeted for termination:
thebankruptcy court and the hierarchy of power that dictates whose interests will prevail the choices forced on unions the burden placed on the Pension Benefit Guaranty Corporation the risks investors take and the returns they look for the companies' efforts to salvage what they can as they restructure, as well as the backlash they risk by breaking pension promises In 2008, Pension Dumping was cited in testimony before a Congressional committee investigating bankruptcies in relation to pensions.
- GenresEconomics
288 pages, Hardcover
First published March 1, 2008
15 people want to read
About the author
Fran Hawthorne
19 books291 followersFran Hawthorne got sidetracked for three decades writing award-winning nonfiction, including eight books, mainly about consumer activism and business social responsibility. But she's been actually been writing novels since she was in elementary school.
Her newest--HER DAUGHTER--has just been published by Black Rose Writing. Kirkus Review said of it: "A deep dive into the pain of separation and hope for reconciliation conveyed with grace, realism, and empathy."
Fran has also published two other novels, including I MEANT TO TELL YOU (Stephen F. Austin State University Press, November 2022), a finalist for the SARTON AWARD, the ERIC HOFFER BOOK AWARD, the NATIONAL INDIE EXCELLENCE AWARDS (in both contemporary novel and women's fiction), and other honors.
Her newest--HER DAUGHTER--has just been published by Black Rose Writing. Kirkus Review said of it: "A deep dive into the pain of separation and hope for reconciliation conveyed with grace, realism, and empathy."
Fran has also published two other novels, including I MEANT TO TELL YOU (Stephen F. Austin State University Press, November 2022), a finalist for the SARTON AWARD, the ERIC HOFFER BOOK AWARD, the NATIONAL INDIE EXCELLENCE AWARDS (in both contemporary novel and women's fiction), and other honors.
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Displaying 1 - 2 of 2 reviews
July 12, 2021
Corporate executives have incentives to promise benefits to workers today that will be delivered by future generations of executives. This temporal mismatch of promises and associated underlying costs is responsible for considerable suffering on the part of those who believed the promises.
How can the pain be avoided or at least mitigated? The critical step is for recipients of ostensibly generous promises to recognize in advance the warped incentives of promise makers to delay -- and ultimately minimize -- corporate outlays that would convert the promises into truly safe and reliable commitments.
This well-written and carefully researched book provides essential information for those in need of such clarity about the problems with defined-benefit pension plans. It convincingly details the game playing that has inflicted pain on many workers who failed to understand the warped incentives of executives who promised them generous pension benefits many years into the future.
Perhaps most importantly, the lessons of the book need to be absorbed by those who have responsibility for negotiating on behalf of workers who are offered compensation terms that inherently put much of their wealth at risk because of the warped incentives of corporate executives.
The only realistic way to mitigate the problems detailed in this book is to avoid accepting compensation promises that are not backed up by credible and enforceable pay-as-you-go funding requirements. Anything short of that leaves workers exposed to opportunistic failure to deliver on promised pension benefits using the tactics detailed in this book.
How can the pain be avoided or at least mitigated? The critical step is for recipients of ostensibly generous promises to recognize in advance the warped incentives of promise makers to delay -- and ultimately minimize -- corporate outlays that would convert the promises into truly safe and reliable commitments.
This well-written and carefully researched book provides essential information for those in need of such clarity about the problems with defined-benefit pension plans. It convincingly details the game playing that has inflicted pain on many workers who failed to understand the warped incentives of executives who promised them generous pension benefits many years into the future.
Perhaps most importantly, the lessons of the book need to be absorbed by those who have responsibility for negotiating on behalf of workers who are offered compensation terms that inherently put much of their wealth at risk because of the warped incentives of corporate executives.
The only realistic way to mitigate the problems detailed in this book is to avoid accepting compensation promises that are not backed up by credible and enforceable pay-as-you-go funding requirements. Anything short of that leaves workers exposed to opportunistic failure to deliver on promised pension benefits using the tactics detailed in this book.
May 12, 2009
Solid overview of the U.S.’s pension problems
Fran Hawthorne began writing about pension dumping in the 1980s and her expertise is evident. In this excellent book, she provides clear explanations about why pension dumping exists, why the practice will continue, and how the laws and organizations created to protect workers against pension dumping often abet it instead. You work all your life to put some retirement money together and should be able to count on the promises made to you. However, too many people are finding that those promises were written in disappearing ink. getAbstract recommends reading this book to understand what you are up against, to know what distinguishes defined-benefit plans from defined-contribution plans, and to see why those differences matter. Hawthorne also teaches you why business executives, investors in distressed firms, bankruptcy judges and even union leaders are willing to throw retirees under the proverbial bus to keep companies running. Even if the book is a bit too technical in spots for the average employee who needs to grasp these matters, the subject’s importance should inspire you to embrace and understand the daunting technical terminology of pension legislation and regulation.
Fran Hawthorne began writing about pension dumping in the 1980s and her expertise is evident. In this excellent book, she provides clear explanations about why pension dumping exists, why the practice will continue, and how the laws and organizations created to protect workers against pension dumping often abet it instead. You work all your life to put some retirement money together and should be able to count on the promises made to you. However, too many people are finding that those promises were written in disappearing ink. getAbstract recommends reading this book to understand what you are up against, to know what distinguishes defined-benefit plans from defined-contribution plans, and to see why those differences matter. Hawthorne also teaches you why business executives, investors in distressed firms, bankruptcy judges and even union leaders are willing to throw retirees under the proverbial bus to keep companies running. Even if the book is a bit too technical in spots for the average employee who needs to grasp these matters, the subject’s importance should inspire you to embrace and understand the daunting technical terminology of pension legislation and regulation.
Displaying 1 - 2 of 2 reviews