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    Highlights for week ending April 26, 2003
  • The Association of BellTel Retirees press release: Verizon Retirees Defeat Company at Annual Meeting Winning on Two of Three Proxy Proposals. 59% Shareholders Vote to Put Brakes on Costly Executive Golden Parachutes. Excerpt: "The agreement to Exclude Pension Credits from Executive Compensation Packages reached by Verizon management with retiree proposers, C. William Jones, Joseph A. Ristuccia and his wife Ann, immediately amended the company’s policy that allowed executive compensation to be based partially on pension plan earnings. Retirees argued that if 'pension credits' were excluded from performance-based pay formulas, executive bonuses could be lower and more in line with their true value to the corporation. Further, retirees say, executives would be less likely to hoard pension surpluses rather than using them for their intended purpose, such as paying benefits, including much needed and long overdue cost-of-living adjustments to retirees."


  • Quote.com: Xerox to Post 1st-Quarter Legal Charge. Excerpt: "Xerox Corp. said Monday it plans to record a first-quarter charge of $183 million, or 25 cents a share, for litigation involving its pension plan." ... "The litigation charge refers to Berger v. Retirement Income Guarantee Plan, which is a case brought against Xerox's primary U.S. pension plan for salaried employees. The pension plan is appealing a ruling made in September 2002 by the U.S. District Court for the Southern District of Illinois. A Xerox spokeswoman said the plaintiffs are challenging the method used to calculate lump-sum retirement benefits since 1990. The charge reflects the amount of the damages, the spokeswoman said."


  • Wall Street Journal: Executives Get Pension Security While Plans for Workers Falter. By Ellen E. Schultz and Theo Francis. Excerpts: "A number of large companies are setting aside millions of dollars to protect pensions of top executives, even as they forgo contributions to financially strained pension plans for other workers." ... "The practice illustrates the growing gap in retirement security between most employees and those at the very top. As senior executives rely more on their special pensions, they have less incentive to ensure that the regular pension plan offers adequate benefits -- or is adequately funded. Executives' special pensions also are increasingly being sheltered from their companies' financial troubles, including bankruptcy."


  • Dow Jones News Service: Study Blames Pension Fund Managers For Big Losses. Excerpt: "A new study blames huge losses at U.S. pension funds on bad investment strategy and a host of other missteps by fund managers. Public and private pension funds have bled over $1 trillion since 1997 as the result of mishandling by managers who failed to pull out of inflated equities market or recognize stock fraud, according to the study. Managers also 'completely failed in their responsibility to restrain the salary demands of top management' of the companies they invested in."


  • Business Week: Exec Pay: More Pain for CEOs. The top 15 chief executive earners netted an average of $35.8 million in 2002. That's down from the $135 million average in 2001. Editor's note: According to this article, former IBM CEO Louis Gerstner earned total pay of $22.7 million in 2002, down from his 2001 earnings of $127.4 million. (Must be tough adjusting)!


  • CNN/Money: Anger rising over CEO pay. Shareholder proposals on curbing management pay hit record, tracking group says.
  • Excerpt: "Carol Bowie, director of governance research services at the Washington, D.C.-based Investor Responsibility Research Center, said that this year's proposals frequently ask that stock options be treated as an expense, a development that would likely cut these grants. Investors are also asking that CEO pay be tied to performance standards."

  • MSN Money: You're fired. Here's your $16 million. Multimillion-dollar severance packages for lousy executives are more than just outrageous. They also provide critical clues about a company's board, its stock and its future. Excerpt: "While many Americans are cashing their final unemployment checks and wondering how they’ll pay next month’s bills, the top brass at our nation’s biggest companies could hardly pick a better time to be laid off. Chief executives leaving S&P 500 companies pocketed a cool $16.5 million on average in the past two years on the way out the door. And there's little sign yet that the going rate for executive departure has come down. That $16.5 million doesn’t even count juicy perks like gold-plated pension plans, rich stock option grants, health benefits, or use of corporate jets and company secretaries. These goodies can bump up the value of the typical executive severance package by an additional 50%."


  • Center on Budget and Policy Priorities: Examining the New Portman-Cardin Legislation. Are Further Pension Tax Subsidies for High-Income Households Affordable or Sound as Pension Policy? Excerpt: "On April 11, Representatives Rob Portman and Ben Cardin introduced legislation to make changes in the tax laws governing pensions and Individual Retirement Accounts (IRAs). As with earlier Portman-Cardin proposals, this legislation includes a mix of promising and problematic provisions. Most of the provisions that involve the largest revenue losses, however, represent problematic policy. At a time when substantial budget deficits loom as far as the eye can see, these provisions would provide additional tax subsidies to high-income individuals who would likely save without these new tax breaks and who already tend to be much better prepared for retirement than other Americans with less income and wealth."


  • Groom Law Group: House Committee Approves Enron-Related Pension Legislation. Excerpt: In March, the House Education and the Workforce Committee approved an Enron-related pension reform bill (H.R. 1000) by a vote of 29-19. Two Democrats joined all Republicans in voting for the bill. During the mark-up of the bill, the Committee rejected a substitute amendment offered by the Ranking Democrat, Rep. George Miller (D-CA), and several other proposed amendments offered by Democrats, including amendments to:
    • give participants a choice between a traditional defined benefit plan formula and conversion to a cash balance formula;
    • require employee representation on boards of trustees for individual account plans;
    • provide for (1) vesting of employer contributions, and (2) diversification of employer contributions of employer securities, after 1 year of service;
    • limit employer relief for the provision of investment advice to "independent" advice; and,
    • limit executive deferred compensation plans.


  • USA Today: IBM founder's Depression gamble pays off. Excerpt: "In the 1930s, companies faced an extreme version of many of the challenges facing CEOs today. Sales fell, stock prices slumped, employees' retirement accounts went through the floor, and the public lost faith in business. Thomas Watson Sr., then IBM's chief executive, reacted differently from most CEOs, according to a new biography of Watson by USA TODAY's Kevin Maney. He took the huge risk of keeping IBM's factories open and workforce intact despite crashing sales, and he increased spending on research and development. Watson nearly ruined the company, but in the end, it shot IBM past competitors and looked like a brilliant strategy."


  • Crain's Chicago Business: Boeing union to protest pay outs. Excerpt: "Fed up with what it says are "lavish" retirement benefits for top executives, Boeing Co.'s second-largest union plans to speak out at the Chicago-based aerospace giant’s annual meeting here Monday. The International Assn. of Machinists and Aerospace Workers (IAM) will submit a proposal to require shareholders to approve any supplemental retirement benefits for senior executives, including CEO Philip Condit. The machinists contend that Boeing’s executive compensation is excessive and inappropriate given the weak economy and the company's plans to lay off thousands of workers."

In politics:

  • New York Times editorial by Paul Krugman: Jobs, Jobs, Jobs. Excerpt: "...let's pretend that the Bush administration really thinks that its $726 billion tax-cut plan will create 1.4 million jobs. At what price would those jobs be created? By price I don't just mean the budget cost; I also mean the cost of sacrificing other potential pro-employment policies on the altar of tax cuts. Once you take those sacrifices into account, it becomes clear that the Bush plan is actually a job-destroying package. Not that the budget cost is minor. The average American worker earns only about $40,000 per year; why does the administration, even on its own estimates, need to offer $500,000 in tax cuts for each job created? If it's all about jobs, wouldn't it be far cheaper just to have the government hire people? Franklin Roosevelt's Works Progress Administration put the unemployed to work doing all kinds of useful things; why not do something similar now?
"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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