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Sunday, October 28, 2012

Skimmers in the Dairy Business

Today's NYT has a long article about the consolidation of the dairy industry, including how Glenn Engles, Yale Law graduate, former Supreme Court clerk, and CEO of Dean Foods continued to make hundreds of millions of dollars while Dean Foods was going down the toilet.

It's another story about how a CEO can develop a completely undeserved reputation for being some kind of a genius just because everything happens to be going well for his company.  In the good old days, Engles was described as the “cream of the crop,” “head of the herd” and “milkman to the nation,” but by 2011, Wall Street had "soured on the Nation's milkman," and Forbes ranked him among its Worst Bosses for the Buck in 2011 (he averaged $20.4 million a year during a six-year stretch while Dean Foods' stock was declining by 11% a year).

According to the NYT, the consolidation:

". . . all resulted in a small group of men making enormous sums of money . . . . One business partner of Mr. Hanman [head of the Dairy Farmers of America, a collaborator of Engles's in the consolidation] was paid $100 million by Dean’s predecessor and the D.F.A. for his stake in milk plants; the partner had paid $6.9 million for it two years earlier. A business partner of Mr. Engles was paid more than $80 million for his investment in milk plants; that partner had paid little more than $5 million.

"Mr. Hanman was paid $31.6 million during his seven-year tenure as chief executive, including bonuses for increasing the cooperative’s market share, according to court records.

"As for Mr. Engles, his compensation over the last decade comes to $156 million, according to Equilar, a firm that tracks executive pay."

So we've been paying more for dairy products -- and cows have probably been mistreated all the more -- to subsidize these skimmers' lifestyles.  And the "consolidation" doubtless resulted in lost jobs as well.

And Mitt Romney and Paul Ryan want to cut their taxes?

Again, this cut-taxes-for-the-rich proposal makes zero sense when you consider who the rich actually are, and how they got rich (and how they are getting richer).  Yes, some of them created some jobs along the way, but that's a very small minority.  Nowadays, most of them do it by skimming, at everyone else's expense.

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