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    Highlights for week ending November 17, 2001
  • Plan Sponsor (cover article): Mad as Hell. Excerpt: "Janet Krueger still spends part of every day thinking about how she can put right what she feels IBM set wrong back in 1999. That is the year the company converted its defined benefit plan to a cash balance formula. Krueger was part of a crusade that accomplished what many would have viewed as an impossibility; she helped lead a movement that convinced Big Blue to alter its pension strategy, broadening by 35,000 the number of individuals it would allow to opt out of the cash balance plan and stick with the old-style annuity plan. Ultimately, the traditional plan was offered to anyone who was older than 40 years of age and had more than 10 years of service at the time the plan was switched. However, three years after quitting a 23-year career as an IBM software consultant, Krueger is not satisfied." The Plan Sponsor article includes these sections:
    • Seeds of Discontent
    • Graying of America
    • "Blue" in the Face
    • Pension Surplus
    • Boeing Retiree Takes to the Web
    • Activists' Targets
    • What Sponsors Can Do About It
    • Activists Remain Skeptical

    Sidebar: Cash Balance Conundrum Continues
    Sidebar: Rabble Rousers


  • WCAX-TV (Burlington, VT) News: Big Blue's Bad News. Excerpt: "Sources within IBM, the business community, and state government say big blue is planning for big cuts—around one thousand jobs at one of the highest paying industries in Vermont."
  • "har_philby" warns of possible upcoming layoffs in RTP. Excerpt: "Hunker down and dig a foxhole. RTP will have never seen a series of resource actions like what's coming down."

  • Wall Street Journal: Declining Pension-Fund Values May Trim Companies' Earnings. Excerpt: "Another company whose fortunes could be harmed by a lengthy bear market is International Business Machines, which got $1.24 billion, or 11%, of operating income from its pension plan last year, according to Bear Stearns. That figure could fall to $417 million by 2003, Bear Stearns estimates." "That worries some investors who fear that IBM's shares, which trade at 25 times trailing 12 months' earnings, are priced for steady operating-income growth. 'If you were looking for this as a recovery play, and this drag is going to flow through the income statement, you could probably do better elsewhere,' says T. Rowe Price's Mr. Smith, who doesn't own IBM shares. An IBM representative says the company doesn't comment on analysts' reports."

  • IBM just issued its "10-Q" statement showing its most recent financial results. According to an analysis by Janet Krueger, "vapor profits" from the IBM pension plan accounted for 21.8% of IBM's net income, compared to only 14.8% in 2000.

  • Plan Sponsor: Discrimination Settlement Nears at Ford. Excerpt: "The lawsuits in question involve the company's performance evaluation system, which allegedly favored younger, so-called diversity candidates (see Statistics Show Older Ford Managers Get Bad Grades). Last July, Ford said it would discontinue the 18-month-old Performance Management Process, which assigned managers grades of A, B or C – and handed out bonuses/raises accordingly (see Ford Shifts Gears On Employee Grading System)."
    • Plan Sponsor: Statistics Show Older Ford Managers Get Bad Grades. Excerpt: "A disproportionate number of Ford Motor Company's fifty-something midlevel managers were given the lowest grade in the company's performance evaluation system in 2000, according to lawyers representing a group of Ford employees in a suit against the auto maker."

  • Washington Post: Meet Patriotic Pork. Excerpts: "In normal times, pork-barrel spending is offensive. When the nation is at war, it's considerably worse. But the patriotism felt by most citizens since the terrorist attacks has done nothing to restrain lobbyists' habit of putting special interests ahead of national interests. Indeed, some apparently can't tell the difference. Kenneth Kies of PricewaterhouseCoopers, who has been pushing tax breaks that would profit clients such as GE and IBM Corp, told The Post it would have been "irresponsible" and even unpatriotic for him to behave otherwise." ... "It's hard to see how this measure, which would encourage firms to keep money outside the country, would do anything to stimulate the American economy." ... "The senators who larded the bill in committee ought to feel ashamed of themselves, but they're not the only ones. It seems to us that lobbyists such as Mr. Kies and clients such as General Electric and IBM also bear some responsibility. Normally in Washington we assume that such corporations will grasp for whatever they can get; it's up to those in Congress to resist their more egregious graspings. But do the chairmen of GE and IBM really want to pursue their narrow self-interest at a time when everyone else is being asked to think of the common good -- at a time of war? Imagine the stir it would cause, and the impact it could have, if just one of them said, "Better spend the money on the troops. We'll be back when the war is over." It's not too late for them to show what patriotism might really mean." If link is broken, view Adobe Acrobat version [PDF--62.5 KB].
  • New York Times: So, Friend, It's Time for That Tax Cut. Excerpts: "In recent weeks, a steady parade of executives from industries like airlines and insurance companies, hotels and pharmaceutical companies, has trooped to Washington for handouts. Some have walked away with billions in aid. But those pleas pale when compared with the all-out lobbying push now under way — a fight for broad and deep corporate tax cuts that are being measured in the hundreds of billions of dollars." ... "Robert McIntyre, director of Citizens for Tax Justice, an advocacy group that is critical of tax breaks, said he had not seen anything like it since 1981, when Ronald Reagan became president. "Basically they want to take us back to the 1980's, when half of the companies in the country were not paying any taxes," he said." ... "One proposal could provide instant tax-rebate checks to some of the biggest companies: $1.4 billion to I.B.M. (news/quote), $1 billion to Ford Motor (news/quote), $833 million to General Motors and $671 million to General Electric (news/quote). Another proposal would immediately cut by $1 billion the taxes of Wall Street firms with foreign operations." If link is broken, view Adobe Acrobat version [PDF--27 KB].

  • The Oregonian: 401(k) plans sink with Enron. Excerpt: "Enron stock is a staple of many of its 21,000 employees' 401(k) accounts. Because of a decision the company made months ago, employees and retirees could only watch in horror as the stock price plunged more than 70 percent after Oct. 16, when Enron announced a $618 million third-quarter loss." ... "On Oct. 17, Houston-based Enron "locked down" the 401(k) accounts. The lockdown made it impossible for employees, including about 2,700 at Portland General Electric, to roll their Enron stock into a different investment or make any other changes in their accounts. The freeze, which lasted until Wednesday, coincided with Enron's sudden downfall." ... "We couldn't get out, we just sat there and watched our nest eggs go down to nothing," said Roy Rinard, a longtime PGE lineman from Boring with all of his 401(k) plan in Enron stock. Rinard, 54, said his account has dropped in value from more than $472,000 a year ago to $238,000 at the time of the freeze to about $70,000 now." ... "Some employees are furious, noting that Enron executives and directors sold off more than $100 million worth of company stock in recent months."

  • Janet Krueger provides advice to IBM retirees concerned about whether IBM is meeting their obligations on retiree health care...
"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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