'Sickening and cowardly': Canton mill owners pay dividends, sell stock before layoffs

Before announcing the layoff of more than 1,000 workers, the Canton paper mill's corporate owners declared they would pay a bonus to shareholders and sold more than $600,000 in stock before its price nosedived.

Town and union officials decried the profit-taking moves that were made days before Illinois-based Pactiv-Evergreen said it would shut down the Canton mill and one in Ohio as part of a corporate restructuring.

The March 6 closure announcement surprised local managers and residents who were in shock at the shuttering of a factory that has served as the economic and civic center of the town for more than a century.

Two days later, shock turned to anger for those such as Mayor Zeb Smathers.

"What we learned out of the blue on Monday evening led to shock and numbness and sadness and mourning. But what I have seen involving the dividends, the idea that top brass cashed in stocks just days before closing is absolutely sickening and cowardly," Smathers told the Citizen Times March 8.

"On a personal and political level this is another sickening example of rural Americans not being respected," he said.

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Pactiv spokesperson Beth Kelly did not return messages seeking comment. When asked about the profit-taking, Gov. Roy Cooper and Congressman Chuck Edwards did not address the issue directly.

"The people of Western North Carolina deserve better and we're going to stand with them to help navigate this devastating closure and bring good new jobs to the region," Cooper said.

In March 7 comments about the shutdown Edwards said his staff was working to "help bring economic stability and opportunity to the families in Haywood County who are affected by this loss."

In a corporate release geared toward investors, the company talked about the restructuring, closures and dividends.

"The Company continues to focus on strengthening its balance sheet," the release said. "The Company paid dividends to shareholders of $0.40 per share during the year ended December 31, 2022. The Company’s Board of Directors declared a fourth quarter 2022 dividend on March 2, 2023 of $0.10 per share of common stock, payable on March 24, 2023 to shareholders of record as of March 17, 2023."

The release did not give the cost of the upcoming payout. Dividends paid in 2022 at 40 cents a share cost $18 million, the company said.

Also on March 2, four top corporate officials sold off $664,000 in stock, according to Wall Street Zen and as also reported by Smoky Mountain News.

CEO Michael King sold 45,113 shares for $509,776. Chief Operating Officer Douglas Owenby sold 3,969 shares for $44,849. Beverage Merchandising President Byron Jason Racki sold 4,093 shares for $46,251 and chief legal officer Chandra Mitchell sold 5,613 shares for $63,427.

Pactiv's shares had climbed to $11.69 a share then after the announced changes tumbled, reaching a low of $9.64 March 8.

Troy Dills, local union president, said those actions to realize gains stung in the face of the layoffs.

"It's a hard pill to swallow," said Dills, whose union is part of the United Steel Workers.

As to whether the sales violated laws against insider trading used "material nonpublic information" to buy or sell stocks, said Andrew Verstein, co-director of UCLA's Lowell Milken Institute for Business Law and Policy.

There are elements of the trade, including the large sums by the CEO and the timing with the transactions happening days before the announced layoffs that Verstein said looks "concerning."

"Trading law says that if you are an insider, and you trade while in possession of material nonpublic information, you probably have broken the law," he said.

But there are exceptions, he said, "like if you have made a plan to sell stock at a time you did not have that information, then it is OK to finally get around to trading."

Western Carolina University economics professor Edward Lopez said aside from any ethical or legal questions, the moves were at the very least management missteps.

"It feels especially unjust when we see the company simultaneously paying investor dividends. Someone there should have found a way to make these moves separately. It's management 101, really."

The dividends are part of a larger corporate trend, he said. Outside of that, Pactive, which sells food packaging to restaurants, supermarkets and other North American buyers, appeared to be going to great lengths to make difficult decisions and stay competitive in a volatile market rocked by the pandemic and inflation, Lopez said.

And while the closure hurts families and disrupts livelihoods, he said Canton has potential to recover.

"Taking a long-term view helps put this painful closure in a somewhat hopeful perspective. If the regional economy remains competitive, Canton is sure to attract investment opportunities that bring new technologies to the physical capital and talented workforce there, and take advantage of its proximity to trade arteries in Interstate 40 and U.S. 74. We have seen local economies in our region transform and grow following other plant closures, and there's no reason not to expect that from Canton's long term economic potential."

Joel Burgess has lived in WNC for more than 20 years, covering politics, government and other news. He's written award-winning stories on topics ranging from gerrymandering to police use of force. Got a tip? Contact Burgess at jburgess@citizentimes.com, 828-713-1095 or on Twitter @AVLreporter. Please help support this type of journalism with a subscription to the Citizen Times. 

This article originally appeared on Asheville Citizen Times: Canton mill owners pay dividends, dump stock before layoffs