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    Highlights for week ending June 14, 2003


Special Coverage on the Cooper v. IBM Pension Lawsuit

There has been major coverage in the press lately concerning the Cooper v. IBM pension lawsuit.

  • Binghamton Press & Sun-Bulletin Special Report: Pensions in the balance. Excerpt: When IBM abandoned its traditional pension plan, employees were outraged and launched a court battle. Now, the issue is about to be decided. This special report will help you find out what's at stake.
  • If link is broken, view Adobe Acrobat version [PDF--35 KB].

  • Binghamton Press & Sun-Bulletin: Court ruling expected soon on IBM pension plan. Employees contend Big Blue saved billions by reducing retirement expense. Excerpt: Unlike most of the lawsuits that have tackled technical issues, the IBM case is likely to produce a ruling on the larger issue of age discrimination. Federal age discrimination laws cover all employees age 40 or older. "I'd like to see a judge with some courage to say the king has no clothes," said Norman Stein, a professor of law at the University of Alabama who testified at a recent IRS hearing on this issue on behalf of the Pension Rights Center. "I think cash balance plans flunk on the decency test, and there's not anything compelling in terms of policy to have the courts bend the rules to accommodate them," he said. The AARP, formerly the American Association for Retired Persons, also is critical of cash balance plans, which generally accumulate benefits at the same rate no matter how long a worker is employed.

    The IBM employees' case asks the federal court to toss out a 1994 pension credit formula that covers 61,000 IBM employees because it discriminates against workers as they get older. In addition, the lawsuit asks the judge to strike down the 1999 cash balance plan covering another 80,000 employees. During three days of hearings in December and January, IBM's lawyers never addressed the issue of whether employees were better off with the new pension plans or if their benefits had been reduced. Instead, they focused on the fact that the retirement benefits remained generous by many standards. Cooper thinks that comparing IBM's new retirement benefits to newer high-tech companies misses the point. If link is broken, view Adobe Acrobat version [PDF--35 KB]

  • Binghamton Press & Sun-Bulletin: Documents show IBM could save $2 billion in costs. Excerpts: A few months before the first of two overhauls of IBM's pension plan, executives were told the initial change could save $2 billion toward the company's bottom line over 10 years. ... "The brochures that came out described it as an improvement and didn't describe it as any kind of benefit cut," said Steve Bruce, the lawyer representing employees. IBM internal e-mail messages, memos and other documents made public as part of the federal lawsuit show executives hid their motives. Five years before the mid-1999 changeover, Louis Gerstner, who was then IBM's chief executive officer, received memos on projected savings, and a warning that the pension changes would alter Big Blue's corporate culture significantly. ...

    In July 1994, IBM's director of total compensation advised Gerstner that a new pension plan -- what employees were told later that year was a new pension credit formula -- might produce $117 million in savings the first year and $2 billion over 10 years. A further reduction in the company's retirement expenses occurred in July 1999 when a cash balance pension plan was created. Employees younger than 40 with less than 10 years of service were automatically put into this plan.

    The 1994 memo to Gerstner, who had joined the company in April 1993, pointed out that Big Blue had no separate retirement plan for executives. ... A 1999 company document made public in the lawsuit shows that 1,186 top executives were eligible for participation in the supplemental executive retirement plan. Court documents reviewed by Gannett News Service didn't indicate how many executives were eligible for the top hat plan.

    "While the above changes are important and will control overall labor costs, there are a number of risks associated with implementation," the July 1994 memo warned. Among them: "The significant reduction in retirement benefits for our existing population, particularly those with up to 25 years of service; the introduction of executive plans which will receive internal and external visibility; and the fact that this design focuses attention on our new employment relationship that shifts emphasis from our long-service career orientation." In other words, IBM could face bad publicity because of the new executive perks and the reduction in retirement benefits for everyone else.

    In 1999, when IBM unveiled its new pension plan to employees, court records show that top executives exchanged e-mail complaining that some middle managers weren't following the company line and were telling employees what they assumed to be the truth: The changes were designed to save money. If link is broken, view Adobe Acrobat version [PDF--35 KB]

  • Read Tom Bouchard, Senior Vice President, Human Resources, May 3, 1999 memo to employees explaining announcing changes to the IBM Retirement Plan and the IBM Retiree Medical Plan [PDF--7 KB].


  • Following the announcement of changes to the IBM Retirement Plan and IBM Retiree Medical Plan, Phil Webber, an IBM Human Resources Vice President held a meeting on June 23, 1999, concerning the changes. This note [PDF--23 KB] is a summary of that meeting written by an anonymous attendee. Excerpt: Here are my personal comments about all this. I state my opinion about how I think HR & execs view some of the issues -- I hope I'm wrong about some of the comments.

    I believe the main future issue is employees' lack of trust with executive comments/decisions. Was this action only done to ensure the stock price would stay high as executive stock options matured ? I know that seems cynical, but unless IBM is completely open about why this was done and all of the impacts, employees will be left to speculate. Particularly bad was the decision to hide the information about how the old & new plan compare for individual employees. (I was glad Phil W. didn't say some of the early HR spin that ESTIMATR had to be taken off-line to upgrade the software.) I don't believe there is any excuse for that action.

    I'm not sure if Phil Webber & HR really understands that practically everyone is really upset (really, really mad) about the changes. It isn't just extremists or loud-mouths -- it is everyone (except for new hires who can't imagine ever retiring). Folks who had a choice are also upset ... feeling like they will get screwed in the future. Phil W. mentioned a number of times that it was a problem that many employees didn't understand the old plans. In general, many IBMers (like me) liked it that I didn't have to understand the Pension & Medical Plans. I trusted IBMs comments that they would take care of me on retirement. I could concentrate on doing engineering work (even during my 'off' hours) instead of financial planning.

  • Binghamton Press & Sun-Bulletin: For accountant, the numbers just didn't add up. Excerpts: Kathi Cooper confesses that she's a meat-and-potatoes Midwesterner when she orders steak for dinner at a downtown restaurant here and skips the salad. Her great-great-great-great-grandfather -- a man named Zacharias Lyerly from Culpeper, Va. -- settled in Illinois after the American Revolution. In 1832, at age 77, he went to the government offices in Jackson County, Ill., to ask for his veterans pension. He got it. Cooper is repeating that fight for pension rights in a federal courtroom 167 years later. ... A widow with one grown son and two grandchildren, Cooper has made her fight against IBM's pension changes a personal crusade. She's used her vacation time to attend three of the last four annual stockholder meetings in Kansas City, Mo.; Lexington, Ky.; and Savannah, Ga. In April, she flew to Washington to testify at an Internal Revenue Service and Treasury Department hearing against all cash balance pension plans. "I'll do anything to stop the damage," she said. "Cash balance is no good. It's part of the greed from the 1990s." If link is broken, view Adobe Acrobat version [PDF--35 KB]


  • Binghamton Press & Sun-Bulletin: Judge expects his pension decision to be appealed. Excerpt: Soon the 54-year-old jurist will have a hand in deciding the future of fellow baby boomers working for one of America's largest corporations. Murphy plans to rule within the next several weeks on whether 140,000 IBM employees were victims of age discrimination when their employer changed its pension plan twice in the 1990s. He doesn't take offense in knowing that no matter what his ruling says, no matter how well written and reasoned his opinion is, an appellate court will have the final say.
  • If link is broken, view Adobe Acrobat version [PDF--35 KB]

  • Janet Krueger speculates on how Judge Murphy may rule in the Cooper v. IBM class action lawsuit.
  • Computerworld: 100 Best Places to Work in IT. Excerpt: For the 10th year, Computerworld conducted a survey to identify the 100 Best Places to Work for IT professionals. Nominated companies received a 100-question survey asking about, among other things, their organizations' average salary and bonus increases, percentage of IT staff promoted, IT staff turnover rates, training and development, and percentage of women and minorities in IT staff and management positions. Upon completion of the company survey, participants were e-mailed instructions on selecting a random sample of their U.S.-based full- and part-time IT staffs. Employee survey topics covered included satisfaction with training and development programs, base salary, bonuses, health benefits, stock/ESOP plans and work/life balance. Nearly 12,000 IT employees responded to the employee survey from the final 100 companies selected.
  • Editor's note: IBM does not appear in Computerworld's "100 Best Places to Work in IT" list.

  • iSeries Network: The Disposable IT Worker, Part III: What Lies Ahead? Excerpts: Another change — perhaps brought about by the recession but which seems to have become a new model for the future — is the evolution of the relationship between employee and employer. In the glory days of high salaries and low unemployment, workers could (and did) jump jobs to take advantage of pay premiums for sought-after skills. Now employers seem to have lost whatever remained of the paternalistic or familial relationships they sought to foster in days gone by. “Corporations want to be treated as persons under the law,” says Viall. “But they don’t want to be treated as persons in how they handle their employees. They don’t protect their assets. Corporations have lost their balance.” Janet Krueger, an independent consultant and worker advocate, agrees. “In the U.S., we have developed a mindset to hire people, use their skills for as long as they are valid, and then hire new people,” she says. “Companies don’t retrain them as they go along.” “There’s a message for employers here,” says Frank Gillett, an analyst for Forrester Research: “To the extent that they want continuity in their high-end employees, they should be helping to retrain them.” What do companies like IBM say in response to this charge? IBM declined to be interviewed for this article. That’s not surprising, according to John Brandt, vice president of technical services for iSeries consultancy iStudio400.com: “IBM, [General Electric], and the other big employers won’t discuss this because they don’t report to the workers — they report to the stockholders,” he says. If link is broken, view Adobe Acrobat version [PDF--27 KB].


  • New Jersey Star-Ledger: AT&T retirees trying to protect their benefits. Excerpts: Retirees of many of the largest U.S. companies have been banding together to try to protect their benefits. Grass-roots groups have sprung up at IBM, Verizon and Lucent in recent years -- and now it's AT&T's turn. Larry Cutrone of Bridgewater, who was laid off from his job at a facility in Montvale in 2001, is one of the founders of the AT&T Retirement Association. Members are upset about the company's switch to a cash-balance pension, which they say unfairly penalized older workers. Cutrone, who spoke at the AT&T shareholders meeting yesterday in Savannah, Ga., said his pension went from an anticipated $47,000 a year to less than $24,000 because of the change. Middle managers are angry because union-represented workers have benefits protected by collective bargaining agreements, while top management has generous retirement packages guaranteed by contract.
  • New York Times: Why So Cheery About I.B.M.? Excerpt: Shares of I.B.M. popped last Wednesday when Steven Milunovich, technology strategist at Merrill Lynch, added the company to the firm's list of most promising stocks. The shares rose 2.8 percent. Merrill's support for I.B.M. came nine days after the company disclosed that its accounting — specifically how it recognizes revenues — is the subject of a formal investigation by the Securities and Exchange Commission. From the day of that disclosure until the Merrill recommendation, I.B.M. stock was down 6.4 percent. ... Others aren't so sure. Notwithstanding the instruction given by Samuel J. Palmisano, I.B.M.'s chief, to a reporter to "find something else to write about" besides its accounting, some investors still fret about what may lurk in I.B.M.'s books. The aroma still wafts around I.B.M.'s secretive decision in the final days of 2001 to use the proceeds of an asset sale to offset its sales, general and administrative expenses. That maneuver, which came under previous I.B.M. management and was uncovered by Fred Hickey, editor of The High-Tech Strategist, went against S.E.C. rules and rattled investors. But the S.E.C. never moved against I.B.M. on the matter. While it is impossible to say how the current investigation into I.B.M.'s accounting will play out, to pooh-pooh it seems odd. Wasn't one of the lessons of the late great market mania that rose-colored glasses, while providing a pretty view, can also blind you? If link is broken, view Adobe Acrobat version [PDF--21 KB].


  • Forbes: Microsoft taps IBM exec for intellectual property. Excerpt: Microsoft Corp. on Thursday said it hired a veteran International Business Machines Corp lawyer to oversee intellectual property at the world's largest software maker. Marshall Phelps will assume the newly created position of deputy general counsel for intellectual property and also become a corporate vice president.


  • Wall Street Journal: New Recipe for Cost Savings: Replace Highly Paid Workers. Excerpt: At 10 a.m., the store manager ushered the waiting employees inside the store with a smile, saying he wanted to explain the company's new "staffing model." The first salesman went into the manager's office, then exited quickly. Mr. Wood's heart sank as the salesman cleared out his belongings from a locker and was escorted out the door by another manager. When Mr. Wood's turn came, the manager opened a packet with his name preprinted on the cover and slid the dismissal documents to him one by one. The firing took less than five minutes.


  • Yahoo! Finance: Rare Settlement in Plant-Closing Case. A federal judge has approved a $36 million settlement that -- subject to one condition -- will require the McDonnell Douglas Corp. to compensate about 1,100 of its former employees for the pensions and other benefits they lost when the company shut down its Tulsa, Okla., plant. The outcome in Millsap v. McDonnell Douglas Corp., No. 94-CV-633-H, represents only the third time that employees have prevailed on a claim that a company violated the Employee Retirement Income Security Act (ERISA) by closing a plant with the intent to shed employees whose benefit costs were high or who were on the verge of vesting in pensions.


  • New York Times: Candidate Edwards Calls for Pension Reforms. Excerpt: Democratic presidential candidate John Edwards is calling for changes in the nation's pension system to narrow the gap between top executives and the average worker. Edwards, a former trial lawyer who often cites his working-class background as the son of a millworker and postal employee, touted his proposal as a way to address pension inequities that he said are rampant at major companies. "Executives at far too many corporations today use tricks and gimmicks to give themselves huge benefits while cutting pensions for workers,'' said Edwards, in remarks he planned to deliver Friday. "The economy is still in bad shape and working people in Iowa and across America are counting on their pensions.''

Coverage on H1-B and L1 Visa and Outsourcing Issues

  • Fortune: Down and Out in White-Collar America. Professionals have never had a tougher time finding a job. It's not just the economy; the rules of the game are changing. Excerpts: So what's keeping people like Hill and Thompson from finding jobs? The rudderless recovery and economic uncertainty deserve much of the blame. But it's bigger than that. Increasingly, supereducated and highly paid workers are finding themselves traveling the same road their blue-collar peers took in the late '80s. Then, hardhats in places like Flint, Mich., and Pittsburgh were suffering from the triple threat of computerization, tech-led productivity gains, and the relocation of their jobs to offshore sites. Machines--or low-wage foreigners--could just as easily do their work. ... Not surprisingly, the disappearance of well-paid white-collar jobs has caused a stir among American pundits and politicians who barely made a peep when blue-collar union positions were evaporating in the Rustbelt. Lawmakers in New Jersey, Maryland, and three other states have proposed legislation forbidding companies from shifting work on government contracts abroad. In Silicon Valley the rise of Bangalore and India's high-tech economy is often blamed for the shortage of good IT jobs. "It's the flip side of globalization," says NeoIT's Vashistha. "What happened to manufacturing over the last 25 years is now happening in services. You can't really fight it."


  • The Times of India: Who's afraid of IndianITES? Excerpt: 2015: 3.3 million US jobs may go offshore. 2003: The West waves banners of protest. The big threat: India's backroom boys. Sunday Times on the raging debate... In the beginning they were just code coolies and call centre Charlies. Dour drudges who wrote millions of lines of code for slave wages; and distant drones who answered (in thick Indian accents) basic questions about billing and ticketing in the (American) afterhours. For a while, it had looked perfect — a low-cost, 24/7 work cycle, freeing American workers to do more important stuff. Then, as the never-ending economic downturn spiralled, it began to hurt. More so, when unemployment passed 6 per cent, putting some nine million Americans out of work. ... That would still be okay (for the Americans) as long as they were those boring call centre jobs. But the Indians are now beginning to get non-talking tech jobs, number-crunching jobs, designing jobs and just about every kind of work that required skill, speed and imagination. For instance, accountants at Ernst and Young’s India office now case US tax returns for the firm’s American clients. Indians process claims for major US insurance companies, radiologists interpret CT scans for Massachusetts General Hospital and molecular biologists conduct research for pharmaceuticals. Early this year, the management consultant company AT Kearney sent shockwaves through the beleaguered American economy predicting that over the next five years, financial services companies nationwide are planning to relocate more than 500,000 jobs overseas — nearly eight per cent of US financial sector’s work force — much of it to India.


  • New Delhi (India) Business Standard: Americans turn to Net to protest outsourcing. Excerpt: We are not racists, xenophobes or bigots. We are displaced American workers. Displaced by a little known immigration visa, approved by the Congress at the request of large US corporations.” If you think this is a 70s’ trade union leader breathing fire and brimstone, think again. This is the voice of displaced American infotech professionals on the Internet. At least half a dozen websites condemning outsourcing of infotech jobs to India have come up of late.


  • rediff.com (India): US experts play down outsourcing backlash. Excerpts: Is the "backlash" in the US and the UK against outsourcing to India largely a creation of the Indian media? The observations of two American executives attending the ITES-BPO summit would indicate so. The backlash against India "is news to me", said Michel Janssen, president, supplier solutions, Everest group. He amplified that the issue of protest against outsourcing "is not new to my business" though India may be facing it for the first time. Much the same sentiment was expressed by Kevin M Campbell, president and chief operating officer of Exult. Indians were making too much of it, he felt. "It will pass, go away; just stop talking about it." ... Legislation in the US to block outsourcing to India, even if successful, would only affect government outsourcing, which accounts for less than 1 per cent of the global outsourcing revenue India earns. However, several legislative initiatives in different states are already dead and such an initiative exists only in New Jersey. There it has cost the state nearly $960,000 to save a mere 12 jobs. The realisation is dawning that this is very costly. ... Industry sources feel that India's greatest bet in tackling any outsourcing issue in the US is to keep strengthening its ties with US business. For this, the aim should be to secure more and more outsourcing from US business. In fact, the more captive BPO centres US business has in India, the better it is for the latter as that increases the stake of US businesses in India. Nasscom's strategy is to join the government in proposing that GATS (General Agreement of Trade Related Services) visas be introduced under the current Doha Round of trade negotiations. This will keep work visas and immigration issues separate and make for smooth on-site deployment by Indian software companies.


  • rediff.com: How to tackle the BPO backlash. Excerpt: The developed market economies of the world are about to be turned on their head.


  • HindustanTimes: India seeks refund of dues to past H1B visa holders. Excerpt: India has built up a strong case for the US refunding to Indian professionals their social security contributions made during their temporary employment in the US under H1B visas. The contributions run into $500 million a year.


  • Sify News (India): Jaitely, US official discuss outsourcing laws. Excerpt: United States Trade Representative Robert Zoellick has assured India that the US federal government is opposed to the spate of bills in state legislatures to ban the outsourcing of state contracts for services, Commerce and Industry Minister Arun Jaitely today said. Jaitely told newsmen said the essence of market access on services was that individuals and companies are entitled to the most efficient service at the best rate. And if these efficient services are provided by international organisations, it would not be appropriate for legislatures to impede the market forces, he said adding this principle applied in all areas where market access is granted.


  • SiliconIndia: U.S. government opposes legislation against outsourcing. Excerpt: Addressing a press conference here at the end of his two-day visit to Washington, Jaitley said: "We explained the sensitivities of India's concerns that public and political opinion in India regards it completely contrary to the spirit of market access. Therefore such a proposal does create an adverse environment when market access negotiations in various sectors are on. "The USTR was very appreciative of our stance and he told me that the federal government of the U.S. considers these proposals as 'bad policy'. The federal government opposes it and is trying to resist it." ... According to a study by management consulting firm A.T. Kearney, financial services companies are planning to move more than 500,000 jobs overseas in order to reduce operating costs by $30 billion annually. A recent report by the Federation of Indian Chambers of Commerce and Industry (FICCI) said American companies had saved $16 billion due to outsourcing.


  • Deccan Herald (India): Outcry against outsourcing termed politically-motivated. Excerpt: Industry leaders, government representatives and analysts unanimously pointed out that the proposed curbs by the US against outsourcing were “politically motivated” and the outcry would die down as soon as the economy bounced back. They also criticised the media for focussing excessively on job losses in the US due to outsourcing from India and failed to highlight the advantages for the US economy. ... The hue and cry on backlash was “much ado about nothing,” said Mr Kevin M Campbell, President and Chief Operating Officer (COO) of Exult, a US-based BPO firm. There was nothing for India to fear about the concerns of loss in job expressed back in the US, he added.


  • The Economic Times (of India): India seeks easy access to 7 key service sectors. Excerpt: Striking a positive note at the ongoing WTO negotiations on liberalisation of trade in services, India has called for opening up of seven key sectors, including computer-related services. ... In terms of horizontal commitments, India wants key trading partners to allow professionals and business visitors to obtain visas without any hitch for stay ranging from 90 days to five years. This should apply to managers, executives and specialists who are involved in delivery of services.


  • The Economic Times (of India): Prudential Insurance to shift 1,000 jobs to India. Excerpt: Despite increasing discontent in US and Britain over outsourcing to India, British insurance company Prudential plans to shift a third of its remaining 3,000 customer-service jobs to Mumbai and save an estimated £16 million a year, a report said on Wednesday. Prudential selected Mumbai over rival locations in east Europe, Asia and Ireland because of lower hiring costs but, as also because "the infrastructure and potential for savings and productivity gains made India a winner”, said Philip Broadley, the company's finance director. The move comes as British Communication Workers' Union issued a warning this week of strikes against BT, the telecommunications giant, over its Indian plans


  • BBC News: BT attacked over call centre plans. Excerpt: The Communication Workers Union (CWU) described the proposals as "catastrophic" for the areas in the UK where call centres are based. BT said no permanent employees would lose their jobs as a result of work being transferred to India. The CWU said that as many as 200,000 UK call centre jobs could be lost across the industry over the next five to 10 years. ... The CWU accused the telecoms company of paying Indian workers just 80p an hour, compared with £6 an hour for call centre workers in the UK.


  • San Francisco Chronicle: Lazarus at Large. SBC's 'Floyd' attracts PUC's eye. Excerpts: Telecom giant SBC is dodging questions about its Indian affiliate, but the facts speak for themselves. Dave Johnston, a Ukiah networking consultant, dug into the Web address I provided for SBC Yahoo's online tech support. He found that when you connect to the system, you're actually being transferred to a server registered to a company called HCL Infinet in -- you guessed it -- India. HCL's Web site says the company's numerous English-speaking employees handle tech support and other services for a variety of corporations worldwide. It boasts of a commitment to quality that "has resulted in some key clients reposing faith in us over the last few years." It doesn't say which clients specifically have reposed that faith. So I gave HCL a call. It was about 1 a.m. at the company's facility in New Delhi, but a sleepy-sounding worker there said HCL has about 2,000 people providing customer service for a wide variety of clients -- among them, SBC.

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