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    Highlights for week ending May 3, 2003


News about the IBM Stockholder's Meeting in Kansas City:

  • The Journal News (Westchester, Rockland and Putnam Counties, New York): IBM optimistic on future. Excerpts: "IBM Corp. stands its best chance in decades to lead the computer industry — this time because of business know-how instead of technological wizardry. That's the message Samuel Palmisano, IBM's chairman and chief executive, delivered to about 300 shareholders assembled for the computer giant's annual meeting yesterday in Kansas City, Mo. "Future growth will not be stimulated by technology alone. This is a historic shift for an industry that has always been fueled by a constant stream of new technologies, products and gizmos," Palmisano said." ..."There was a personal note to the exchange between the IBM chief and Florida retiree Donald Parry — who taught Fortran to Palmisano when he joined IBM. Palmisano told shareholders that he even met his wife in Parry's class. "I was romanced by Sam," said Parry, who wants IBM to calculate executive pay without taking into account any profits in the company pension fund." If link is broken, view Adobe Acrobat version [PDF--18 KB].


  • Poughkeepsie Journal: IBM fights shareholder resolutions. Stock options questioned. Excerpt: IBM retiree Esther Russell won't be carrying any banners or shouting any slogans this morning as IBM's annual shareholders meeting gets under way here. But from her home in Yorktown Heights, Westchester County, she's already done her protesting by voting for a handful of shareholder resolutions IBM opposes. "Whenever the company told me to vote against something, I voted for it, all down the line. I was consistent," said Russell, who retired in 1987 after a career editing manuals and brochures in White Plains.


  • IBM Stockholder Services Web Site: To see a video, listen to an audiocast or read a transcript of the IBM meeting, log on to www.ibm.com/investor/index_stockholderservices.phtml. Note: The most interesting part of IBM Stockholder meetings, the question and answer period, is held after the meeting is officially adjourned. This practice keeps questions that may be embarrassing to IBM executive management or the IBM board out of the public record.


  • Kansas City Star: IBM shareholders defeat plan to expense stock options. Excerpt: Shareholders of IBM Corp., meeting Tuesday in Kansas City, narrowly defeated a proposal to expense stock options. The shareholder proposal, which came up at the company's annual stockholder meeting, received 47 percent approval, strong support for an initiative that lacked the backing of IBM's management. ... Shareholders also defeated proposals to change retirement policies, require shareholder approval of "poison pill" provisions, and remove pension income from the calculation of executive compensation. Donald S. Parry, a former employee from Jacksonville, Fla., who brought the executive compensation proposal, said the company was inflating executive pay by relying on an accounting rule about the treatment of pension income. "IBM is subsidizing its actual cost from pixie dust," Parry said. If link is broken, view Adobe Acrobat version [PDF--18 KB].


  • Linda Guyer, president of the Alliance@IBM reports on her impressions of the meeting. Excerpts: There was a decidedly warmer atmosphere at Sam Palmisano's first Stockholder Meeting since the monstrously behaved Gerstner left IBM. Sam was out in the demo area that preceded the meeting room, shaking hands and slapping backs of the stockholders that were there, in stark contrast to Gerstner's disdain for hobnobbing with the common people. Even the colors on the stage background were warmer than in the past. During Sam's speech about the state of the company, his voice rose noticeably louder when he stated that IBM has funded the pension plan to the tune of $4 billion dollars. This emphasis I believe can be credited to the increased sensibility our executives have about the pension, due to our continued strong activism over this issue. Alliance members posed most of the questions this year, and answers from Sam were free of the vitriol that characterized Gerstner's responses in previous years. In fact, last year, I was so tired of Gerstner's condescension and arrogance that I formed my question as a statement and requested no answer; Lou did move on to the next question, but couldn't resist an interlude about how, again, employees who have been financially ripped off are merely afraid of change.


  • "alwaysontheroad4bigblue" posts the question he asked concerning the Cooper v. IBM lawsuit concerning changes to the IBM pension plan. Excerpt: "Mr. Palmisano's answer to the question was brief. He first said that the Xerox case was different than IBM's. He then said that as a matter of policy, the company does not comment on legal action against the company."


  • James Leas, a former patent attorney and engineer at IBM, spoke in favor of resolution #6, a shareholder proposal he submitted concerning pension and retirement choice. Mr. Lea's speech is highly recommended. IBM CEO Sam Palmisano appeared visibly disturbed as Mr. Lea read his speech, but to his credit, did not interrupt. Read the Lea speech [PDF--12 KB]. Excerpt: Proxy Voter Services made the following points in urging its clients to vote for this resolution: “The questionable manner in which the company has implemented the new cash balance pension plan has caused a major public outcry. In response to this growing criticism, Senate hearings were carried out to investigate. The Wall Street Journal (along with many other publications) has discussed the topic in detail so investors are well aware that these accounting profits are not real earnings. In one article, Business Week identified IBM as one of the top companies in stating millions of dollars in income from its pension fund and thereby, padding its profits. The unveiling of the new plan has resulted in negative public sentiment, poor employee morale, and loss of trust between executives and employees. “Reneging on benefit promises made to workers goes against management’s argument that adopting a more portable retirement plan will make the company more competitive in terms of attracting and retaining top employee talent, as it sends exactly the wrong message to the pool of skilled employees that IBM must recruit from if it is to succeed in a today’s competitive marketplace."


  • TheStreet.com: IBM Shareholders Turn Down Options Measure. Excerpts: Shareholders of IBM gave the thumbs-down to a proposal to expense stock options in a close vote, although the company probably will have to factor the cost into its results before too long anyway. The Financial Accounting Standards Board is currently hammering out standards for how companies should account for options. ... IBM's reported net income would have dropped by a stunning 34% last year if it had been required to expense options. According to its annual report, expensing options would have reduced its net income of $3.58 billion in calendar year 2002 to $2.38 billion. On a per-share basis, diluted earnings would have slid from $2.06 to $1.39.
  • New York Times: Discord Over Efforts at Valuing Pensions. Excerpt: Bush administration officials said yesterday that the way pension values are now measured is flawed, to the detriment of the entire pension system, and that proposed fixes by corporations threaten to weaken the system even more. Peter R. Fisher, the Treasury's under secretary for domestic finance, suggested a new approach that would more closely match the dates each company's employees would retire with the maturities of the assets in that company's pension portfolio.


  • Wall Street Journal: Employer Groups Ask Congress To Decrease Pension Liabilities. Excerpt: Employer groups lobbied Congress to allow them to make pensions appear better-funded without contributing more money, saying many companies can't afford to make enough contributions under the old rules. Tens of billions of dollars in pension liabilities would vanish under the provision, already proposed as part of broad legislation changing pension rules. It would let employers use a higher discount rate to determine the contributions they must make to their pension plans, freeing up money for other investments. Opponents say such a move would put employees' pensions at higher risk.


  • Wall Street Journal: Why Even a Rallying Market Won't Save Your Retirement. Excerpts: It's worse than you thought. ... The result is that the 401(k) is looking increasingly like a tattered promise, and there is growing concern that millions of Americans won't have enough for retirement. The 401(k) was created two decades ago as a way to let employees save for retirement while deferring taxes. The effect has been to turn employees into their own pension managers. For many workers, the 401(k) and Social Security are all that stands between them and a bleak retirement.


  • Arianna Online: Pensions For Execs, Shaft For Workers. Excerpt: Now that the war in Iraq has been declared officially over, can the media please put aside their preoccupation with Scott Peterson's new hairstyle and focus their attention on the sputtering U.S. economy? And in a week when even Fortune, the corporate playbook, has adorned its cover with a CEO with a pig's head and the title "Oink! CEO Pay Is Still Out Of Control," how about starting with the guys running corporate America? They have, after all, in the course of the last year gone from American Idols to America's Most Wanted, the most stunning transformation since Ozzy Osbourne morphed from a bat-chomping satanic rocker into America's cuddliest dad. But no matter how battered their reputations may be, they still appear determined to rescue themselves instead of their sinking ships. For today's captains of industry, the maxim in a crisis seems to be: "To hell with the women and children -- save the lifeboats for us!"
  • ... In just a few short years, the nest eggs of the American worker have gone from sunny side up to seriously scrambled. In an effort to level the lopsided pension playing field, Rep. Bernie Sanders (I-Vt) and Rep. George Miller (D-Calif), along with 124 co-sponsors, have introduced legislation that would make it harder for companies to force older workers to switch to cash-balance pension plans. To drive his point home, Sanders showed how such a conversion would affect the pensions of his fellow Congressmen. Denny Hastert, for instance, would see his $540,000 lump sum benefit shrink to $164,000. And Tom DeLay's retirement pay-out would be cut by 60 percent, shriveling from roughly $608,000 to $251,000. "If members of Congress think that cash-balance payments are good for American workers," declared Sanders, "then they must believe that cash-balance pensions are good for themselves."

  • Pension Rights Center, courtesy of BenefitsLink.com: Statement of Norman P. Stein. on Behalf of the Pension Rights Center on “Challenges Facing Pension Plan Funding” the Subcommittee on Select Revenue Measures Committee on Ways and Means U.S. House of Representatives, Washington, DC. April 30, 2003 [PDF--34 KB]. Excerpt: The business community has advocated a replacement rate equal to as much as 105% of a composite high-quality, long-term corporate bond rate. The choice of such a rate is, however, to a large extent arbitrary and arguably has no sounder theoretical grounding than the 30-year treasury rate. If the latter overstates liabilities in a manner detrimental to plan sponsor flexibility, the former may well understate liabilities and may result in an era of plans unable to satisfy benefit commitments.


  • American Benefits Council: Testimony of Kenneth Porter Director, Corporate Insurance & Global Benefits Financial Planning, The DuPont Company, on behalf of the American Benefits Council Before the Subcommittee on Select Revenue Measures Committee on Ways & Means United States House of Representatives Washington, D.C., April 30, 2003 [PDF--26 KB]. Excerpt: The American Benefits Council (Council) is a public policy organization representing principally Fortune 500 companies and other organizations that assist employers of all sizes in providing benefits to employees. Collectively, the Council’s members either sponsor directly or provide services to retirement and health plans covering more than 100 million Americans.


  • Forbes: Two IBM executives sell 25,000 common shares. Excerpt: Two senior executives at International Business Machines Corp. (nyse: IBM - news - people) sold 25,000 common shares in the company last week, pocketing more than $2 million, according to regulatory filings released on Monday. Paul Horn, senior vice president and head of research, exercised options for 20,000 shares at $36.06 apiece on April 23. He sold them the same day for $85.44 each.


  • iSeries Network: Palmisano’s Plump Paycheck Positions Him Well on Forbes’ List. Excerpt: Although Palmisano did pretty well for himself last year, his compensation is small potatoes compared to what his predecessor, Lou Gerstner, walked away with. In Forbes’ 2001 survey covering 2000 compensation, the last year for which Forbes published information on Gerstner, IBM’s former head honcho ranked 6th overall on Forbes’ list and 3rd in Computers & Electronics. For that year, Gerstner took home a $2 million salary, $8 million bonus, nearly $60 million in stock gains, and nearly $34 million in other compensation, for a total package of $103.4 million -- in a year when his fellow computer company CEOs earned a median paycheck of $3.6 million. Such tidy paychecks won Gerstner a spot on Forbes’ list of the 400 richest Americans in 2002, 2001, and 1999. If link is broken, view Adobe Acrobat version [PDF--30 KB].


  • Annex Bulletin: Exodus Begins...Three Senior Gerstner Aides Sell Millions of Dollars'-Worth of IBM Shares.
  • Excerpt: Three senior IBM executives with roots in the Gerstner administration sold $5 million of dollars'-worth IBM shares in the last several days, suggesting an exodus (or a purge, take your pick) of the old guard at Armonk may be under way on the eve of the IBM Annual Meeting. ... Of course, even such an extravagant pay package pales in comparison to Gerstner's earnings and stock option exercises from prior years, when he and his cohorts on the IBM Board raided the IBM treasury to the tune of nearly half a billion dollars (see the chart and "Sir Lou OutLayed Lay!" Apr 1, 2002).

  • San Francisco Chronicle: Cushy landing for CEO in 2002. At $188 million, PeopleSoft package pampers executive. Excerpts: Like many tech companies, PeopleSoft skidded through 2002. The Pleasanton software firm's shares plummeted 53 percent. It earned $182. 6 million, down 5 percent from 2001. And sales tumbled 8 percent. But Chief Executive Officer Craig Conway won a raise. Including options, PeopleSoft estimated his total package soared to $188 million, quintuple his 2001 compensation, according to the company's proxy statement filed earlier this week.


  • New York Times opinion by Paul Krugman: The Acid Test. Excerpt: Warren Buffett has called C.E.O. compensation the "acid test" for reform. Between 1970 and 2001, in an orgy of mutual back-scratching by C.E.O.'s and their boards, median pay among the top 100 executives soared from 35 times that of the average worker to more than 500 times as much. So what happened in 2002, as unemployment rose, wages failed to keep up with prices and stocks declined — and stories of corporate malfeasance filled the news? Nothing. O.K., not exactly nothing: some of the huge options grants at the top went away, reducing the average among the top 100. But according to Fortune, which put a pinstripe-clothed pig on its cover, median pay among top executives rose another 14 percent. If link is broken, view Adobe Acrobat version [PDF--16 KB].


  • Computerworld: Exporting IT Jobs. Excerpt: The writing is on the wall. If you are a programmer or an application developer, or work on the IT help desk or in data center operations, your IT job is in jeopardy, and here's why. In an unrelenting push to lower IT costs, more and more companies are tapping cheaper offshore labor to handle routine tasks such as application maintenance and help desk support functions. Even companies that farm out IT work under pay-as-you-go and other hosted computing models to U.S. outsourcers—such as IBM and Hewlett-Packard Co.—are contributing to the loss of jobs, because these domestic service providers are also shipping IT work abroad. IBM Global Services, for example, is India's fifth-largest employer.


  • Computerworld: Magna Cum Unemployed. Excerpt: My heart sinks when I read stories about IT workers such as those at Siemens in Lake Mary, Fla., who were replaced by L-1 visa workers and made to train their replacements. The matter is compounded by the trend of sending IT jobs offshore, as summed up in the ominous proclamation of Ann Livermore, HP's services chief, when she stated, "We're trying to move everything we can offshore," in an interview in a December 2002 Forbes article. Taking these things into account, I am convinced that the IT industry is being undermined.


  • Computerworld: The New IT Worker: Angry and Proactive. Excerpt: When IT specialist Jim Mangi decided to help form a union at IBM in 1999 after the company changed its pension plan, the worst part was telling his father, a Big Blue retiree. "What's he going to think? What's he going to say to his son ... who is going to start union organizing?" Mangi recalls. But as it turned out, his father was all for it. "He knows it's just not what it was," says Mangi, secretary of Alliance@IBM, which is affiliated with the Communications Workers of America (CWA). ... Much of what union organizers do is educate IT workers, who largely remain reluctant to join unions. Indeed, the CWA, which represents about 700,000 workers in technical areas, estimates that only about 5,000 of its members are in IT. Mangi lets employees know when IBM is hiring H-1B visa holders by posting on a Web site copies of the federal form that employers must file when hiring workers from overseas. He says he does it to make people aware that even though IBM may be going through layoffs in the U.S., the company may also be applying to hire foreign laborers.


  • Computerworld: Surviving Offshore Cutbacks. Project management and industry expertise provide workers the best protection. Excerpt: By shipping some of the company's IT programming and application development work to India, Honerkamp has reduced Clopay's IT staff from 90 people, including consultants, to 35. He has no regrets about this decision. Outsourcing many IT functions has kept his budget stable and allowed him to add services. The decision to outsource network management, for instance, let him add network monitoring and other services for the same price.


  • Computerworld: International Backlash. Excerpt: The outsourcing of IT services and back-end business processes such as customer service to India, the Philippines and other low-cost countries is seen as a big cost-saver in corporate boardrooms in the U.S. and Europe. But laid-off workers see it differently: Offshore outsourcing is moving jobs outside of their countries, and they are pushing policy-makers to put on the brakes. Government officials in the U.S. and several European countries are awakening to the plight of laid-off technology workers and are considering proposals that would slow the growth of outsourcing.


  • Computerworld: Saving jobs, raising costs. Excerpt: A bill that would prevent offshore outsourcing for work done for state contracts was passed by unanimous vote by the New Jersey State Senate in December and is now being reviewed by the government committee in the state assembly. State Sen. Shirley Turner says she was moved to craft the bill when she read in local papers that eFunds Corp. in Scottsdale, Ariz., moved its service center from Green Bay, Wis., to Mumbai, India, after being awarded a seven-year, $326,000-per-month contract to process electronic welfare-benefits transfers and food stamp cards for about 200,000 state residents.


  • Computerworld: Surviving a Sea Change. Excerpt: The IT community, from code jockeys all the way up to the executive suite, is undergoing a sea change. The existence of everything IT, from job categories to entire departments, is up for reassessment, reassignment -- and maybe even headed toward redundancy. The most obvious change involves the loss of IT jobs. Many have gone abroad, and they aren't coming back. Offshore outsourcing as a percentage of IT budgets went from 12% in 2000 to 28% in 2003, according to Forrester Research. The U.S. Bureau of Labor Statistics estimates that there are now 212,000 unemployed computer and mathematics professionals. No doubt the number would be even higher but for the IT workers who have given up and moved on to different careers.


  • Computerworld: Salary Comparison. Excerpt: A look at programmers' annual salaries in various countries illustrates why offshore outsourcing is becoming popular among companies trying to cut costs. The average salary for a systems programmer in the U.S. is $63,331. ... India: $5,880


  • The Financial Express (Bombay, India): IBM Tight-lipped: Palmisano Lends Ear To Krishna. Excerpt: With the lid firmly down on the agenda sans any media interaction, the chairman of the world’s largest IT company IBM Samuel J Palmisano, who took charge in October last year, kicked off his three-day India visit with a closed-door meeting with Karnataka state chief minister SM Krishna and officials from the state IT department.


  • Courtesy of "nfrpartners": IBM retirees (and employees) can use the IBM online bookstore. This IBM bookstore offers all the products you will find at www.barnesandnoble.com but IBM employees and retirees receive at least 10% off all products and free standard shipping on all orders placed (reduced rate second day and next day air is also included in the IBM discount.) Here is the IBM bookstore site: http://btob.bn.com/index.asp?sourceID=0040025182&btob=Y When you order through this site you're discount is applied automatically at checkout.

This week on the Alliance@IBM Site:

  • May 1: IGS Layoffs today - We have heard of layoffs in IGS San Jose, and in the Business Consulting part of IGS. No numbers have come in yet - if you have a layoff package please mail a copy of it to us: Alliance@IBM, 36 Washington Ave., Endicott, New York 13760 - this will help us compile the numbers.


  • Layoffs are expected in May! Please read these helpful pages before it's too late!


  • The Research Triangle Park (RTP) Alliance@IBM has published its May 2003 newsletter. It's well worth a read, even if you're not located in RTP as most of its articles apply to all IBMers. Read the RTP Alliance@IBM May 2003 newsletter [PDF--233 KB]. Stories featured in this issue include:
    • Alliance Members Attend Gerstner's Raleigh Book Signing
    • Local IBMers Speak Out at Cash-Balance Hearings in D.C.
    • Good Bye Vacation (a must read for IGS employees)
    • Sick Building Syndrome and Mold on the RTP Campus
    • Skills Deficits Can Be Used to Justify Layoffs (advice on what to do when IBM asks you to update your skills profile).
    • Local Alliance at IBM Activities
    • IBM Discriminates Against Older Workers

In politics:

  • New York Times editorial by Paul Krugman (courtesy of The International Herald Tribune): Swap Bush's tax cut for a plan that actually helps. Excerpt: So why should tax cuts take priority over health care? I know the party line: Tax cuts for high earners are the key to economic growth, and a rising tide lifts all boats. But there's not a shred of evidence supporting that claim. More than two decades after the supply-siders began their tax-cut crusade, ordinary workers have yet to see a rising tide. The median real wage is only 7 percent higher now than it was in 1979, with all of that increase achieved after President Bill Clinton raised taxes on the top bracket. If American families knew what was good for them, then most of them - all but a small, affluent minority - would cheerfully give up their tax cuts in return for a guarantee that health care would be there when needed. And even the affluent might prefer to live in a society where no sick child was left behind.


  • New York Times: House G.O.P. Tax Cuts Outdo Bush Plan in Favoring Wealthy. Excerpt: The analysis by the Tax Policy Center at the Urban Institute and the Brookings Institution found, for example, that taxpayers with incomes of more than $1 million would get an average tax cut this year of $105,636 under the plan outlined on Thursday by Representative Bill Thomas of California, the chairman of the House Ways and Means Committee. Under the Bush proposal, the average cut for these people would be $89,509. By the same token, taxpayers with incomes between $50,000 and $75,000 would get an average tax cut this year of $734 under the the Bush plan and $712 under the Thomas plan; those with incomes between $40,000 and $50,000 would get an average cut of $482 under the Bush plan and $456 under the Thomas version. Similar disparities exist with the smaller tax cuts at lower income levels. Eighty-four percent of all taxpayers have incomes of less than $75,000. If link is broken, view Adobe Acrobat version [PDF--19KB].
"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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