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for week ending April 19, 2003
- Forbes: Pension Wars: The
Fallout After IBM. Excerpt: "It's not often you see protestors outside a Treasury-Internal
Revenue Service hearing on proposed tax code regulations. But ever since disgruntled IBM employees
brought the issue to public attention, the movement by major corporations to convert traditional
defined-benefit plans to so-called cash-balance pension plans has been a lightning rod for workers'--and
particularly baby boomers'--growing anxiety over their retirement incomes. And so, last week,
there were picketers outside and raw emotions inside at hearings on rules that would end a moratorium
the U.S. Department of the Treasury imposed in 1999 on giving its blessings to cash-balance
conversions." If link is broken, view Adobe Acrobat
version [PDF--18 KB].
- Washington Post: Pension
Proposal Is Under Fire. Employers Seek Flexibility; Employees Fear Losing Benefits. Excerpt:
"Critics say companies implement cash-balance plans to cut costs, and often rely on the
complexity of pension calculations to hide that fact from workers. 'A lot of workers do not
know what is happening to them,' said Rep. Bernard Sanders (I-Vt.). Sanders and other members
of Congress proposed legislation that would require employers that convert to cash-balance plans
to give workers the option to remain in old plans. Workers from companies such as International
Business Machines Corp. and AT&T Corp. testified that when their employers implemented cash-balance
plans, their retirement benefits were reduced by as much as half."
- TheStreet.com: Pension
Plan Draws Mixed Response. Excerpt: "While mounting pension obligations have become
a thorn in corporate America's side, a new bill proposed by Congress could offer some relief.
But not everyone is celebrating: Some say the bill ultimately could end up hurting employees."
- National Retiree Legislative Network (NRLN): NRLN
Urges Rejection of Portman-Cardin Bill Provision Altering Funding Assumptions So That Companies
Can Reduce Their Contributions to Their Pension Plans.
Excerpt: "In a letter to Congress, NRLN president A.J. Norby cautioned that the new funding
rate proposed by the bill would 'artificially wipe out billions of dollars in projected pension
liabilities.' This would lead to 'the false appearance of corporate profitability that resulted
from the reduction in pension funding obligations,' said Norby. 'We are deeply concerned that
enactment of Section 705 will further undermine the already shaky funding of existing defined
benefit plans and provide another pretext for high-ranking corporate insiders to enrich themselves
at the expense of pension plan participants and beneficiaries. NRLN’s membership regards
Section 705 as another phase in an Enron-like charade by corporate America to cover up its incompetent
and ethically obtuse management of employee pensions,' said Norby."
- Washington Post: More
Employees On Their Own. Excerpts: "While compensation and retirement benefits of top
corporate executives have soared in recent years, retirement for rank-and-file working Americans
is increasingly a do-it-yourself kind of thing. Either do it yourself or rely on the government's
increasingly wobbly system of retirement benefits. And the government is trying to edge away
from the responsibility of funding even that. The current battle over companies' efforts to
convert traditional pensions to 'cash-balance' plans obscures the fact that only a minority
of workers in this country have a true pension at all. The rest have either a retirement savings
and investment account, such as a 401(k) plan, or nothing beyond Social Security. But wait,
there's more. At the same time -- and while health care costs are soaring -- employer-sponsored
health insurance for retirees is also fading rapidly, leaving a growing number of retirees with
only Medicare and whatever private insurance they can afford."
- New York Times: Workweek
Woes. Excerpts: "According to the International Labor Organization, Americans now work
1,978 hours annually, a full 350 hours — nine weeks — more than Western Europeans.
The average American actually worked 199 hours more in 2000 than he or she did in 1973, a period
during which worker productivity per hour nearly doubled." ... "The harmful effects
of working more hours are being felt in many areas of society. Stress is a leading cause of
heart disease and weakened immune systems. Consumption of fast foods and lack of time for exercise
has led to an epidemic of obesity and diabetes. Many parents complain that they do not have
enough time to spend with their children, much less become involved in their community. Worker
productivity declines during the latter part of long work shifts." ... "By contrast,
over the past 30 years, Europeans have made a different choice — to live simpler, more
balanced lives and work fewer hours. The average Norwegian, for instance, works 29 percent less
than the average American — 14 weeks per year — yet his average income is only 16
percent less. Western Europeans average five to six weeks of paid vacation a year; we average
two." If link is broken, view Adobe Acrobat version
- San Francisco Chronicle: Left
behind. Psychologists say increased workloads and insecurity put stress on job-cut survivors.
Excerpt: "Matt Bjork's company has gone through six rounds of job cuts. So far, his job
at a Bay Area robotics manufacturing firm has been spared. Even though Bjork, 36, is thankful
to still have a job, he must cope with more work, dwindling morale and worry that his number
could be up next. 'Morale is just rock bottom,' said Bjork, a mechanical engineer. 'The only
way you deal with it is by not dealing with it. You keep your head down and do your work."
- Los Angeles Times: More
Work, Less Pay -- They Call It Family Time Flexibility. Excerpt: "While you were watching
the war, Congress and the White House blindsided you with a couple of moves that could end up
meaning you'll work longer hours and get paid even less. I missed the news, but Joe Robinson,
a Santa Monica agitator who runs a workers' rights campaign at worktolive.info,
screamed for me to wake up. I met Robinson three years ago, when he was on a crusade to get
more vacation time for American workers. We're lucky to get two weeks a year while Europeans
are sunning themselves on the Riviera for five weeks at a time. Robinson's new book, Work
To Live, lances employers for giving modestly paid employees 'management' titles to squeeze
free overtime out of them. Now, he said, President George W. Bush and allies in Congress are
waging 'a full-scale assault on the 40-hour work week and the workers of America'."
- Washington Post: The
Pension Chasm. Disparity Between CEOs, Workers Under Scrutiny. Excerpt: "As workers'
pensions are eroding, employees, shareholders, unions and legislators are focusing new attention
on the many ways top executives' retirement packages outshine those of their employees."
... "'The workers of America deserve better pension-law oversight and protection from their
government,' Janet Krueger, a 23-year International Business Machines Corp. employee from Rochester,
Minn., testified at a pension hearing. She said her prospective pension eroded sharply after
IBM converted it to a 'cash balance' plan in 1999. In a later interview, she complained about
the generous pension IBM had constructed for chief executive Louis V. Gerstner Jr. during the
same period." ... "The pension gap is 'the utmost in hypocrisy,' said Karen Friedman,
director of policy strategies at the Pension Rights Center, a nonprofit pension-advocacy center
that counsels workers who have seen their plans cut back or terminated. 'Companies that are
cutting back on pension benefits are giving huge benefit packages to CEOs at these companies.
There's a basic element of unfairness.'" If link is broken, view
Adobe Acrobat version [PDF--58 KB].
- Fortune: Have
They No Shame? Their performance stank last year, yet most CEOs got paid more than ever. Here's
how they're getting away with it. Excerpt: "Who says CEOs don't suffer along with the
rest of us? As his company's stock slid 71% last year, one corporate chief saw his compensation
fall 12%. Sure, he still earned $82 million, making him the second-highest-paid executive at
an S&P 500 company in 2002, according to the 360 proxy statements that had rolled in as
of April 9. And yeah, he's under indictment for the wholesale looting of his company, Tyco.
But at least Dennis Kozlowski set a better example than the top-paid executive, who pulled in
a whopping $136 million. That was Mark Swartz, his former CFO." If link is broken, view
Adobe Acrobat version [PDF--54 KB].
- Fortune: CEO Pensions:
The Latest Way to Hide Millions. Think CEO pay is out of control? Wait till you see what these
guys get when they retire. Excerpts: "Witness the latest--and quite possibly the greatest--double
standard in the world of compensation. At the same time big companies are taking an ax to the
traditional pension plans of the rank and file, they are funneling millions of dollars into
what's fast becoming the ultimate pay-for-nonperformance vehicle: the executive pension plan.
In this magical land, years are transformed into decades, and the term 'shareholder value' doesn't
apply. And don't think pensions are bit players in the grand scheme of executive pay: Using
the most conservative actuarial assumptions, the $4.5-million-a-year pension that former Tyco
CEO Dennis Kozlowski is now attempting to collect is worth some $50 million in today's dollars.
That's $50 million belonging to current Tyco shareholders." ... "The ever-growing
disparity between the retirement nest eggs being built up by executives and by rank-and-file
employees is perhaps best personified by John Snow. He stepped down as CEO of CSX in January
to become the Bush administration's new Treasury Secretary. Now he is set to rule on a set of
pension regulations proposed by the Bushies that would let companies convert their traditional
pension plans to the 'cash balance' version--the kind that can cut the pensions of older workers
by 50%. Meanwhile, he received an extra 19 years of service that he never performed, then cashed
out his pension as a lump sum of $33 million." If link is broken, view
Adobe Acrobat version [PDF--58 KB].
- New York Newsday: The
High Cost of a Corporate Low-Ball Tactic, by Marie Cocco.
Excerpts: "Theirs is yesterday's story. They are ordinary, middle-aged, middle-class people
whose complaints were once considered extraordinary enough to make it into the news and congressional
hearing rooms. For a while, it seemed, everyone thought they deserved better. Now war has erased
their images. Nothing has changed their circumstances. The workers who were caught up in the latest
corporate craze - converting old-style, defined-benefit pensions to less costly 'cash-balance'
plans that give older workers smaller pension checks than they were promised - are still caught.
They still hope to convince the Treasury Department to change a proposed regulation that would
make it easier for companies to make this switch. They still hope the regulation does not halt
the age-discrimination lawsuits they've already brought - about 800 so far. They hope to convince
Congress to let workers over 40 have a choice between the pensions they were promised and the
new system that benefits their younger colleagues."
- Motley Fool: Big Blue's Little
White Lies. Excerpts: "It bears noting that International Business Machines shares
the same acronym as the International Brotherhood of Magicians. I mention this in passing only
to alert you to the fact that both IBMs have been masters of the illusion. IBM has used smoke
and mirrors to blur financial results in the past, and it's at it again. Of course, last night's
feat of using currency exchange gains to boost results is petty parlor magic compared to some
of the company's past tricks of burying asset sale gains as operating cost savings. Actually,
IBM was kind enough to roll up its sleeves this time and reveal the secret to its $20 billion
- Wall Street Journal: Why
the Get-Rich-Quick Days For Executives May Be Over. Corporate boards are taking a fresh look
at virtually every aspect of CEO pay. CEOs may not like the result. Excerpt: "Stunned
by a tsunami of accounting scandals, bankruptcies and investor outrage over option abuses, many
boards are taking a fresh look at almost every aspect of their leader's pay package. The result
is a dramatic overhaul emerging in the form of smaller servings of options, wider use of restricted
stock plus stricter stock-ownership and retention requirements. All across America, being the
top boss looks less like a get-rich-quick scheme these days."
- Wall Street Journal: Mad
About Money. The outrage over CEO pay isn't only a U.S. phenomenon. Just ask shareholders in
Europe. Excerpt: "The controversy surrounding Mr. Barnevik's pension highlights how
one of the worst economic downturns in years, the bear market and a post-Enron fixation with
financial scandals have focused shareholders' attention on the corporate goodies and pay packages
being awarded to CEOs. Corporate excess came to a head in the U.S. with the revelations of what
numerous troubled companies had lavished on their executives. Now, like their counterparts in
the U.S., a growing number of investors in Europe are asking why corporate chiefs are receiving
generous rewards, even after presiding over lackluster performances. 'Shareholders have lost
a lot of money during the last few years, and more than ever they are pointing the finger at
CEOs and saying: "We are hurting, why aren't you?"' says David Somerlinck, a senior
manager at Pensions & Investment Research Consultants, a London-based pension consultant."
- The Center for Public Integrity: The
Clinton Top 100: Where Are They Now? Excerpt: "Two years after they left the federal
government and one year after a ban that limited their lobbying activities expired, more than
half of the top one hundred Clinton White House officials went on to represent, work for or
advise businesses and entities in areas they regulated while they were in office, a Center for
Public Integrity survey has found." ... "The current survey offers a glimpse into
how entrenched the phenomenon of the revolving door—in which industries, corporations
and special interests hire ex-government officials hoping to gain access to their former office
and colleagues—has become in Washington. No one knows precisely what percentage of officials,
historically, take up private sector jobs where questions of potential conflicts of interest
could arise, but those who have followed presidential appointments for decades say the number
of Clinton officials who made such switches is about average."
- Wall Street Journal: Pension
Bill Helps Employees, But May Also Boost Employers. Excerpts: "However, the 207 pages
of largely inscrutable technical language includes an array of provisions that benefit employers,
financial companies, and executives. If passed, employers could pay departing workers smaller
lump-sum pensions, contribute billions of dollars less to ailing pension plans, have greater
latitude to establish separate but unequal retirement plans for favored and less-favored workers,
and continue to protect executive pensions in bankruptcies, among other things." ... "'This
is an industry wish-list,' says Norman Stein, a University of Alabama professor who specializes
in pension law. 'The problem with these proposals is they're using an incredible amount of tax
revenue to address the wrong problems.'"
- Reuters: Lazard hires former
IBM, RJR executive as advisor. Excerpt: "Investment bank Lazard LLC said Wednesday
it hired Lawrence Ricciardi as a senior advisor, gaining access to the former IBM executive's
corporate ties. Lazard Chief Executive Bruce Wasserstein and Ricciardi, who recently retired
as senior vice president and advisor to the chairman at International Business Machines, have
a long-standing relationship."
- Daily Telegraphy (United Kingdom): Will
pensions be Labour's poll tax? Excerpt: "The first signs of a pensions crisis of huge
proportions are now apparent. Someone retiring today with a personal pension will gain a retirement
income roughly half that of a pensioner who retired three years ago with the same contributory
record. Worse still, the country is about to witness the winding-up of company pension schemes
for existing members."
- CNBC: American Airlines deal in jeopardy.
Unions outraged by executive pension arrangements. Excerpts: "The union that represents
35,000 American Airlines ground staff said Thursday it would not sign a deal to help save the
ailing air carrier after finding out about a special arrangement that would preserve some top
executives’ pensions even if the airline went bankrupt. The decision could force the airline
to file for bankruptcy, which it had threatened to do earlier in the week if its unions did
not agree to deep wage concessions."
- New York Times: American
Air Pulls Back Bonus Plans for Executives. Excerpt: "American Airlines dropped plans
yesterday to pay large bonuses to seven top executives if they stayed with the company until
January 2005. But the carrier said it would keep money in a much-criticized trust fund set up
to protect the pensions of 45 executives in case it files for bankruptcy protection. Despite
the attempt by American to appease its irate workers, the flight attendants' union said last
night that it would vote again soon on $340 million in critical concessions its members narrowly
agreed to give the company on Wednesday. American's announcement came after union leaders denounced
Donald J. Carty, the chief executive, and other officials of the AMR Corporation, the parent
of American, for agreeing to take the compensation packages while they were seeking annual labor
concessions worth $1.8 billion and for not disclosing them during negotiations. American, the
world's largest carrier, had told the unions that big concessions were needed to keep the airline
from having to seek legal protection from its creditors."
- Are you an IBM stockholder? Consider attending the Annual Meeting of Stockholders on Tuesday,
April 29, at 10 a.m., at the Kansas City Convention Center, in Kansas City, Missouri. IBM's
information concerning the meeting is available here.
IBM Stockholder meetings offer you the rare opportunity to ask questions of top IBM executives
and board members. See for yourself how they answer the tough questions from employee and other
IBM stockholders. For the past few years, the question and answer sessions of the stockholder
meetings have been held after the meetings have been declared officially closed. This
ensures that Q&A comments are not included in the public records of the meeting. Therefore,
the only way to know what was said is to attend the meeting yourself!
- Paul Krugman of the New York Times: Behind
Our Backs. Excerpt: "As the war began, members of the House of Representatives
gave speech after speech praising our soldiers, and passed a resolution declaring their
support for the troops. Then they voted to slash veterans' benefits. Some of us have long
predicted that the drive to cut taxes on corporations and the wealthy would lead to a
fiscal dance of the seven veils. One at a time, the pretenses would be dropped —
the pretense that big tax cuts wouldn't preclude new programs like prescription-drug insurance,
the pretense that the budget would remain in surplus, the pretense that spending could
be cut painlessly by eliminating waste and fraud, the pretense that spending cuts wouldn't
hurt the middle class. There are still several veils to remove before the true face of
'compassionate conservatism' is revealed, but we're getting there. I've always assumed
that at some point the American people would realize what was happening and demand an
end to the process. Now, though, I'm not so sure, and that wartime vote illustrates why."
- Hartford Courant Opinion by Vivian B. Martin: Who
Really Gains From Labor Law Changes? Excerpt: "Give credit where it's due. Bill
Clinton and his Democrats slapped dull, straightforward names like Family and Medical
Leave Act and Welfare Reform Act on their initiatives. With titles like USA Patriot Act
and No Child Left Behind Act, George W. Bush and the Republicans show much more creativity.
One of their latest campaigns, the Family Time Flexibility Act, really does require a
stretch of the imagination if one is to buy the idea that changes to laws requiring that
workers get overtime pay for extra work will help many families." ... "A friend
who does consulting for corporations undergoing layoffs and other tensions once observed
that employees these days not only work in the iron cage, they're expected to build it,
too. That piece of gallows humor came to mind when I read the bill proposing to revise
the 65-year-old Fair Labor Standards Act, the much-vaunted legislation that set 40 hours
as the maximum for a regular work week. Even people who have difficulty counting change
at the cash register can probably figure out that working 10 to 20 extra hours to get
time off in the future isn't much of a benefit."