Perhaps the US Supreme Court was right, after all. Companies are people, too. They are not immortal, their promises can be broken, and like all fallible folks, they will probably -- wittingly or unwittingly -- let you down numerous times in the course of your life and theirs. Moreover, they may not honor contracts to customers, suppliers, investors, their local communities, or even employees.
Richard Diehl just found out how fickle both man and enterprises can be. Diehl, who lives in Greece, N.Y., worked 36 years for the Eastman Kodak Co. and wrongly assumed he had earned from a grateful company "retiree medical, dental, life insurance and survivor income benefits." On Monday, Diehl and 56,000 other Kodak retirees got a rude jolt when a bankruptcy judge agreed with the company's request for the termination of those benefits, effective December 31.
Kodak in a pre-ruling statement said it could not "support continued payment of retiree benefit" even after initiating several cost-reduction actions that included laying off "nearly 4,000 employees this year and exiting or winding down several businesses and the proposed sale of our Personalized Imaging and Document businesses."
Kodak is clearly a troubled company, and its many problems are spilling over to all employees -- current and retired -- suppliers, customers, and shareholders. The once-mighty photographic equipment, printing, and imaging company is fading slowly into oblivion with sales dropping sharply each of the last four years, and net losses piling up in the hundreds of millions. The company's market value has dwindled to less than $60 million, and its shares now trade as a penny stock on the PINK exchange. Sadly, the company that gave millions worldwide the photography equipment to record their memorable moments today is lacking even a smidgen of its own previous glory.
By the time Kodak emerges from bankruptcy -- if it perchance achieves even this moderate goal -- it would have a tiny footprint. The company's management is reorganizing Kodak as a "much smaller, leaner enterprise focused on commercial, packaging and functional printing and enterprise services." It will also have lighter debts and a much reduced retiree obligation, thanks to bankruptcy court judge Allan Gropper who agreed Kodak should terminate many of its obligations to retirees," according to a report in USA Today. "Individuals may see their life savings lost or lose their jobs," the judge said. "Bankruptcy can have a particularly painful effect on retirees."
Really? Tell that to Kodak's retirees who counted on the company to continue providing generous benefits long after they had left the company and who must now seek alternative medical and survivor obligations. Many of the ex-employees cited in news reports blamed Kodak's management for mismanaging the company's affairs and for failing to anticipate or foresee the major technological changes that ended its domination of the photography market.
The news that Kodak's current management wanted to ditch many employees and substantially cut retiree benefits hit me hard initially as I thought about all the naďve folks who based their lives on two wrong assumptions. The first was that the company would continue to be the undisputed leader in its market segment, and second, that it would unfailingly stick with the agreement to provide those benefits. They were wrong on both score.
Kodak and other troubled companies may not see anything wrong in terminating benefits to employees, but there's a larger lesson here for American enterprises and workers. While one part of me would like to side with the retirees and blame Kodak, the more enlightened part of me (thank you, Intel ex-CEO and ex-chairman Andrew Grove) remembered that employment and, unfortunately, promised benefits are "at will" in the United States. This means your employer only owes you wages for work already done and does not owe you guaranteed employment or lifelong benefits beyond what it is able to pay, even if it promised much more. Employees therefore have an obligation to ensure they secure their retirement by whatever means necessary and independent of past, current, or future employers.
Grove's observation may be coming too late for many Kodak employees, but I would like to restate the six points he emphasized in his book here for current workers. He said:
- Nobody owes you a career
- Your career is literally your business. You own it as a sole proprietor.
- You have one employee: yourself
- You are in competition with millions of similar businesses -- i.e., millions of other employees all over the world
- You need to accept ownership of your career, your skills, and the timing of your moves
- It is your responsibility to protect your personal business of yours from harm and to position it to benefit from the changes in the environment. Nobody else can do that for you.
There are implications for businesses, too. Executives must understand that as Grove noted in his book Only the Paranoid Survive: How to Exploit the Crisis Point That Challenge Every Company, employees will become more mercenary in their actions and will not always put company interest first. You may not like the implications, but that's what the Kodak bankruptcy ruling has reinforced.