Chapter 11: Fact and Fiction

By October 23, 2005General

There’s a fairly extraordinary op-ed in today’s Washington Post, entitled, “Workplace Tremors“, that shows a fundamental ignorance of business. It is by Mark Ruetter, a professor at the U of Illinois Urbana-Champaign. We only know about him what we found in Google. He appears to have written favorably on topics such as ” Social Security Not in Peril, as Bush Suggests“, that corporate speech doesn’t deserve First Amendment protection and that Sarbanes -Oxley — widely viewed by most today as wildly over-reaching — doesn’t go quite far enough. The Baltimore Sun called him, “one of our great angry voices.” They forgot, “misguided.”

In any event, he gets this part right: “Chapter 11 protects a company from creditors as management develops a reorganization plan and restructures its liabilities in the hope of becoming profitable again.” However, almost everything else in the article is wrong, including this whopper: “Once shunned by respectable companies and ignored by Wall Street, federal bankruptcy court has become the venue of choice for sophisticated financiers and corporate managers seeking to pull apart labor contracts and roll back health and welfare programs at troubled companies.”

The “venue of choice”?!? Does he really think this is something that companies jump into, screaming, “Yippee!!!!” ? As any business person will tell you, Chapter 11 is a place of last resort. That’s reality. Reutter cites 150 companies currently in bankruptcy. When you think about the fact that there are 5 million corporations in the US, that 150 is a pretty paltry number, and a small sample on which to base any national lurches in policy. As we’ve noted here before, there are some 31,000 defined benefit pension plans in this country, virtually all of which are in pretty good shape. Let’s not lose sight of that as we move forward in this national debate. The idea, as we said in our letter to the Post on this topic a week ago, is “to keep reform legislation from doing more harm than good.”