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    Highlights for week ending March 1, 2003


Important Call to Action:
  • Alliance@IBM: URGENT ACTION! Stop the outrageous Treasury Proposal! Save your pension! March 13 is the deadline. (A simple 3-step process is offered).


  • AARP Action Alert: Cash Balance Pension Plans. Protect your pension! Excerpt: "Express your views. Contact your members of Congress and the IRS to weigh in on the Treasury Department’s proposed regulations for cash balance pensions. Under the proposed regulations, older and long-term employees caught in a conversion from a traditional defined benefit pension plan to a cash balance plan are likely to be harmed in two ways: first, they’re likely to receive lower benefits from the new cash balance plan and second there is a potential 'wear away' period – a period of time that may extend for years without the employee earning any new benefits under the cash balance plan." Editor's note: The AARP makes it very easy to contact your representative and senators. All you need to supply is your ZIP code.. If you don't have time to contact your representatives and senators directly, please at least take one minute to use the AARP site to let them know you object to the Treasury Department's proposed regulations to legalize cash balance pensions.


  • From "CPR #6", a "last minute call to action". Excerpt: "It has come to our attention from some very experienced and senior Republicans that there is considerable angst among local Republican party officials about the upcoming Treasury Regulation changes. In the words of a senior Pennsylvania republican 'It wouldn't take much for Bush to get a lot of calls against the pension fiasco from state and local party officials.'" ... "We strongly suggest that everyone of you call every Republican local and state party official and tell them that THEY are going to pay the price for this pension fiasco. Tell them that this is a serious error on the part of the Republican party. Tell them that will be negatively impacted next election."


  • Molly Ivins, Creators Syndicate: Pension de-form. Got any gray hair? You're Bush's next target. Excerpt: "You ain't no John Snow when it comes to pensions. Snow, our new treasury secretary, was CEO of the railroad company CSX Corp. and got a platinum parachute when he bailed. He gets $2.47 million a year for life in retirement benefits. This package was based on the premise that he'd worked for the company for 44 years, even though he'd been there only 25. Now that's creative accounting. Plus, CSX decided to let him factor in the stock benefits he had received as regular income, instead of just salary, as is normally done. At the same time CSX was giving Snow this lovely deal, it was cutting the health benefits in its retirement plan for lesser workers. Since Secretary Snow is now in charge of pension policy at the Treasury, can we look forward to similar deals for ourselves? Yep -- but we're in the class that gets the cuts, not the parachute." ... "The cash-balance plan is particularly harmful to older workers, so if you've got any gray hair, you might want to take a look at what they're about to do to you. Under fixed-benefit plans, retirement is based on the employee's salary and years of work at the company. This gives older workers a chance to rack up benefits. When companies started switching to cash-balance plans, the AARP, the Pension Rights Center, the AFL-CIO and other groups set up a mighty holler. The Equal Employment Opportunity Commission received over 800 age-discrimination complaints. As a result, the IRS stopped approving these conversions in 1999." ... "But the Bush administration, operating on its cardinal principle -- Whatever Bill Clinton Did Was Wrong -- has naturally decided to reverse course. If Clinton did it, it can't be good (and what splendid results they've gotten so far), so the new rules will give companies that convert to cash-balance plans a tax advantage, as well as giving them protection from age-discrimination suits. Don't you love it? The perfect Bush plan: They get to screw workers and get a tax break, and nobody is allowed to sue." ... "More than 200 members of Congress have written Bush asking him not to let the proposed rules become law. The General Accounting Office did a study showing that annual pension benefits of older workers can drop by as much as 50 percent under the new plan." Editor's note: This is a must read editorial.


  • Dow Jones Business News: IBM Lays Off Employees in Software, Services Units.


  • St. Paul Pioneer Press: ON THE RECORD: Bill George: Too many business people have been 'worshiping the wrong idols'. Excerpts: "Even before the corporate scandals of the last several years, Bill George was voicing concerns about excessive CEO compensation, weak corporate governance and the mantra of 'maximizing shareholder value' at the expense of longer-term goals." ... "In the past five years, stock options went from modest grants to mega-grants for top executives. Because they had no cash impact and were not charged against profits, many executives and boards viewed these grants as free. The effect was to shift the CEO's focus almost entirely to getting the stock price up — by whatever means necessary. The lessons from this crisis are evident: If we select people principally for their charisma and their ability to drive up their short-term stock price instead of their character, and shower them with inordinate rewards, why should we be surprised when they turn out to lack integrity? We do not need executives running corporations into the ground in search of personal gain. We do not need celebrities to lead our companies. We do not need more laws."


  • Fortune (February 17, 2001): Hocus-Pocus: How IBM Grew 27% A Year. Do you want to believe in the IBM miracle? Then don't look too closely at the numbers. Excerpt: "Even Wall Street, which has applauded Gerstner's performance so far, understands that rapid earnings growth, flat revenues, and shriveling profit margins aren't a lasting combination. As you'll see below, IBM owed much of its 25% growth in EPS last year to share buybacks, a boom in its pension funds, and the sale of assets--items that say more about the ingenuity of IBM's accounting department than the strength of its operating businesses. The company's bag of accounting tricks may be all but bottomless, but it won't satisfy the crowd forever. Eventually investors will get tired of the illusion of growth and demand the real thing."


  • Memphis Commercial Appeal: Others will trek FedEx pension trail. Get to know cash balance basics. Excerpt: "Over the next six months, about 137,000 FedEx employees will receive some intensive lessons in the complex world of pensions. And you should be paying attention even if your paycheck doesn't read 'FedEx.' Your firm could be next." ... "And while FedEx is following its counterparts in doing so, the company is confident it will avoid their missteps because employees will have a choice, said Sandra Munoz, a FedEx spokesman. 'It helps to have a choice,' adds Janet Krueger, director of the IBM Employee Benefit Action Coalition, (www.cashpensions.com), an advocacy group created after IBM converted to a cash balance plan in 1999." ... "At the time, IBM didn't give its employees a choice, and its older employees revolted. FedEx said no benefits accrued by its workers will be lost, regardless of whether eligible employees decide to stay with the current defined benefit pension plan or take the new option. The new option also allows them to retain the previous plan."


  • New York Times: Revolt of the Shareholders. Excerpt: "The annual-meeting season is here, and one thing seems certain from a glance at the resolutions shareholders have filed: the persistent bear market and recent corporate scandals have taken as great a toll on trust in management as they have on investors' wallets. State pension funds, unions and other investors, big and small, are clamoring for their say on executive compensation packages, board elections, even choosing where companies are incorporated."


  • Recommendations on Executive Compensation From the Joint Committee Enron Report [PDF]. Excerpts: "The report describes a number of Enron practices that the Joint Committee perceives as having given management excessive control over their deferred compensation funds. The report suggests that the precedents are unclear and that the following Enron practices could cause immediate taxation of executives under current law."


  • New York Times: Unbridled Greed. Excerpts: "The time-honored practice of tax avoidance is also an invitation to abuse. Two particularly egregious cases of tax avoidance involved our old friend Enron and executives at the telecom giant Sprint. Both provide regulators and Congress with powerful incentives to crack down on tax shelters that deprive the Treasury of an estimated $50 billion a year. The Sprint case should be enshrined in the Executive Compensation Outrage Hall of Fame. First, the company's two top executives — William Esrey and Ronald LeMay — awarded themselves stock options worth up to $311 million in return for thinking up a merger that they couldn't pull off. Next they tried to protect this undeserved windfall from Uncle Sam, using a complex tax shelter devised by Ernst & Young, Sprint's auditor."


  • Pittsburgh Post-Gazette: US Airways gave $35 million in pension payments to top 3 former executives. Excerpt: "As it was careening into financial ruin and ultimately Chapter 11 bankruptcy, US Airways paid $35 million in lump-sum retirement benefits to its former top three executives." ... "The payments are yet another example of "outsized compensation to management that borders on looting," said William Lauer, chairman of the Tarentum-based Allegheny Capital Management, a former investor in the airline. The issue of the retirement benefits was raised this week during a hearing before U.S. Bankruptcy Judge Stephen Mitchell on the airline's request to terminate the pension plan for its unionized pilots and replace it with another plan."


  • From Linda Guyer: The AFL-CIO leadership is meeting this week and discussing the fact that union membership in the US is now at its lowest in 20 years, even though recent surveys say at least half of all US workers would like to be in a union. Union busting (a highly paid consulting practice) is a major reason that unions are not growing. This article sheds some light on employer practices that are used to threaten and intimidate workers who are trying to organize. The Progressive: Brazen Bosses.


  • From Janet Krueger: "How often have you heard IBM managers talk about how 'unusual' IBM is because they don't waste resources with lobbying in Washington? One of the benefits of the Internet is that you can check out such claims. Read more...


  • Tom Paine.common sense: Individualism equals overwork: Without unions to broker benefits, Americans work 15 weeks more each year than European counterparts. Audio commentary, requires free RealOne Player. (A link to download the RealOne Player is provided on the Tom Paine site.


  • Vault's IBM Business Consulting Services message board is a great place to go for the inside scoop on IBM Global Services, including the PriceWaterhouse Cooper acquisition. Most of the board's messages are from former PwC employees, commenting on their new employer. A sample message: "PWCCers are now discovering what we old IBM consultants have known all along. The front line troops are like top racing horses in their prime left confused and neglected in the barn while management bickers away coming up with 'The Strategy' du jour. This is the real 'new' IBM. Relax and enjoy it. Even when you get assigned to do something of value, they'll be always be some IBM bureaucrat somewhere with an ego to feed ready to impede your progress by introducing the process, practice, rule or procedure from hell. IBM = I've Been Misled."
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