Friday, April 17, 2009

Abitibi severance scams

I really feel for the laid-off Abitibi mill workers, though I know none of them. Don't forget the woods workers contract didn't include severance either. It seems AbitibiBowater doesn't recognize much of its responsibility, including to the province and the environment.

Something similar happened to me when I was laid off in late 2002, but not as bad. I collected severance required by provincial law, but my contract specified additional severance which the company refused to pay. They used delay tactics to avoid the courts until their bankruptcy months later, and never paid the additional severance. But at least I got something, more than the Abitibi workers.

I thought employees were considered first-in-line among creditors, but I guess I was wrong. I think perhaps they should be. Pay the severance before the bondholders get anything. I know the bondholders would scream, and in general future bond yields would have to go up to put the finances back into equilibrium, but so be it. They aren't fairly priced now to reflect the risk (of loss by paying severance ahead). Or place the required severance money in escrow somewhere, as employees are hired and as obligations grow.

Employees are different from businesses (e.g. suppliers and contractors), and don't enjoy the same tax benefits (not necessarily tax rates but more deductions, e.g. home office, vehicle, travel, insurance, loan interest, etc.). B
usinesses enjoy those benefits because they assume more risk than employees - at least I thought so.

Contractors often charge more than the equivalent salary or wages of an employee to compensate; employees accept lower pay in return for lower exposure to risk - at least I thought so.

I think the trade-off between risk and reward needs to be re-examined. Businesses have become much better at "delegating risk" to others - isn't that what a "Credit Default Swap" is all about? It seems the share of risk assumed by employees has risen, and it's time to push that back to those who claim the reward.

Those who claim the most reward must bear the most risk. It's only rational.


  1. And never mind the nice subsidy the pulp mills are getting in the U.S.

    I don't blame Williams one bit for hanging on to the cutting and energy rights. He at least cares about his province and country unlike other politicians.

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