I was a Reader’s Digest writer for 48 years. Except for DeWitt and Lila Wallace, the founders, my name was on the magazine’s masthead longer than anyone in its history. No one contributed more articles. But when the Digest went into Chapter 11 bankruptcy last summer, the supplemental pension I had been granted “in recognition of your editorial contribution and dedication” was summarily discontinued. Some 300 others, including writers, editors, ad salesmen and widows were similarly stripped of a retirement bedrock.
In this fragile economy, others in our profession will continue to be hard hit. The difference here is that Reader’s Digest has been hurt less by bad business than by a business strategy gone off the rails. In 2006, when Ripplewood Holdings, a private equity firm, took over the Digest, they put up in cold cash only a fraction of the buying price. The rest, $2.2 billion in debt, they loaded onto the company’s back. This is a well-trod path to riches for the top ranks, yielding swollen bonuses, salaries, management fees. Court records show that $23 million was distributed to top executives just before the Chapter 11 filing. But as can also happen, the huge debt will drive a company into the ground.
It left the Reader’s Digest’s balance sheet in shambles.
Digest retirees, many now in their 80s, have banded together to make their plight known; some have told their stories in the press. All are full of fear for a future suddenly darkened by the loss of between 30 and 80% of income which they had been promised would be theirs for life. What we are currrently offered is less than four cents on the dollar, in my case, $44 a month in place of $1259.
Peter J. Clark is terminally ill and has a sick wife and a handicapped daughter who requires 24-hour care. His supplementary pension, he writes, just covers his monthly medical insurance premiums and uncovered medical expenses. “I fear facing financial hardship through my remaining days,” he writes. Stan Englebardt sees his savings disappearing. John G. Hubbell, an award-winning writer, wonders about the Digest’s claim that it does not have the money to pay his full pension. How, then, can it pay its current executives multi-million dollar salaries (Mary Berner, the Digest’s CEO, earns $125,000 a month in base salary alone, plus handsome bonuses).
I spent most of my Digest time, 37 years, overseas as a European correspondent. It was fun while it lasted, but far from the expatriate life of luxury dreamed up in the red states. Until this year my wife and I drove a 1994 Volvo; we’d be driving it still if I’d known in June that I was going to lose a critical part of my pension in August.
Since retirement, we have lived solely on the pension and Social Security benefits. The decline of the dollar has made things difficult for us and our savings are meager. But I am 86 years old, too late for us to pull up our roots now and start a new life in America. The permanent loss of a third of my pension would be a severe blow.
I know that others on whom this hurt has fallen have sorrier stories. But what everyone of us who helped make Reader’s Digest a byword around the world now share is the hit-in-the heart realization that we are being asked to pay for the damage done to our company by the very people who brought it to ruin.