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 naïve 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.
You have raised good points. I agree. It is unrealistic to expect everyone to have an entrepreneural attitude. If that was the case, everyone would be a boss with no workers!
None of us know how to steer the career boat when we first start working except a few exceptional individuals maybe. However, one has to self-monitor while working to find out where he/she wants to head. If a person does not know how to steer the boat, that person has got to learn it either from more experienced colleagues, life coaches, friends or literature etc. There is tons of reliable information sources on such things.
The trouble is when a person gets into a comfort zone while working and forgets to raise the head to look around and to look into himself/herself to see where the career is heading and where it should be heading.
Employment requires constant personal growth and awareness to take a person further. Simply keeping your head down and doing your job properly is not enough. You always have to have the bigger picture in perspective to be successful and to avoid disappointments in the future.
Furthermore, you should not be afraid to change direction and location - even if your current job looks safe - if you believe that manouvre will be to your benefit.
The universal rule of "survival of the fittest" applies when it comes to a successful career. The worst thing one can do is to keep on running in the "rat race" simply because everyone else is doing it without questioning why and without keeping an eye for opportunities and better alternatives.
Cryptoman, First, I agree with most of what you've written. However, I have to ask: How many of us can captain the career boat successfully? Many workers who agree with Grove try to steer their own career but many don't know exactly where they are headed and the realities of what it would take to get there even when they know.
Our educational system encourages the "Get-a-job" syndrome. We send kids to school for donkey years -- all the way to a Phd, in cases -- so that they can finish and then start hunting for a job created by a smarter fella or woman who doesn't have a Phd but knows he/she needs to be a job creator first to be in control of his/her destiny. As you noted, many of us (including this writer) spend 5 or more days a week sweating for a salary but owns no stakes in the enterprise -- except for a promised set of benefits that may anytime go poof with the job!
I think the worst part of working for someone on a salary is the false sense of security and longevity the worker gets. This false sense is also the key reason why millions of people go through the trouble of polishing up their CVs purely to be employed by someone else.
The reality is very different though. Businesses can go down and employees can be left jobless on the street. People currently employed read about such things in the paper and feel sorry for the unemployed never realising that the same can happen to them one day. I realised this when I first lost my job. I was sent an SMS saying that the company filed for insolvency and therefore the employees were not required to show up for work the next day. It was shocking at the time but probably was one of the best wake up calls I ever received in my life. It transformed my vision about careers, jobs, employers and security. Unless you experience unemployment at some stage in your life, you keep on living in a bubble and keep on chasing a carrot called 'a successful career' as the very valuable years pass by. You keep on giving 5 days of your valuable week for some money so that you can spend it in the remaining 2 days. That means you are giving 71.43% of your working time to realise the dreams of someone else under a highly insecure employment environment! (I suggest you read the last sentence again but this time a bit slower).
Therefore, although I sympathise with the retired personnel of Kodak, I think they are just an unlucky bunch who have found out too late that the bubble can burst one day. Trusting an employer to keep you employed for many years to come is naive enough but expecting a former employee to keep on paying you after retirement is unrealistic. This is simply the reality of the world we live in and whether we like it or not we have to accept the facts as they are and move on.
Fortunately, human beings have one fantastic attribute that has helped them evolve and stay alive over thousands of years. It is called "adaptability". No matter how bad the situation looks, people (thankfully) always find a way to survive.
I agree with Grove's remarks and have one more bullet to add to that list:
7 - Never put your eggs in one basket. Always have a plan B in your profession and safeguard yourself while you have a job and a stable income. Always remember that you are the captain of your own ship.
The obligations were promised by the company and they should have "funded" these entitlements. I think it's morally reprehensible that a company should be able to do this. In fact, I think a management should be criminally liable for not putting the funds for such an entitlement in a lock box that cannot be touched. By the way, such a lock box does exist. Pension funds for senior executives are typically excluded from this kind of discussions and cannot be touched because they are always well funded and exist outside of the control of even the company's management.
Daryl, Exactly. Why should it be possible for Kodak to ask for the cancellation of its obligations to its former employees? Any of these obligations should have a lock-box that cannot be touched when a company is seeking bankruptcy protection.
T.alex, The tough choice the company made was to eliminate its obligations and leave the workers with a nasty hangover. I don't call that much of a "tough choice". There wasn't anything tough in here for Kodak itself, after all it isn't a flesh and blood organization. The management that took the decision would never take the same medicine. If they choose to do this, that would be a tough choice. They could decide to cut off their own entitlements or eliminate their own pension payments. That would be a tough choice.
T.alex, The tough choice the company made was to eliminate its obligations and leave the workers with a nasty hangover. I don't call that much of a "tough choice". There wasn't anything tough in here for Kodak itself, after all it isn't a flesh and blood organization. The management that took the decision would never take the same medicine. If they choose to do this, that would be a tough choice. They could decide to cut off their own entitlements or eliminate their own pension payments. That would be a tough choice.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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