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    Highlights for week ending September 20, 2003
  • TechsUnite.org and the Alliance@IBM: Vermont AG investigating age discrimination in IBM layoffs. Excerpt: Vermont’s Assistant Attorney General for Civil Rights opened an investigation of age discrimination in IBM’s layoffs in August, shortly after 780 IBMers were given their severance pay checks on August 5. The investigation could lead the government to demand that IBM reinstate older workers with back pay and other benefits. Before the end of August, Kate Hayes, the Vermont Assistant Attorney General, announced that 32 older laid off IBMers filed complaints with her office under federal and state law charging that IBM laid them off because of their age. Research done by IBM employees indicates that employees age 45 and older have a higher chance of being laid off, and that probability dramatically increased with age.

    Why is IBM especially targeting older workers? By cutting employment before retirement eligibility IBM can slash pension fund obligation, increasing the profit report from the pension fund under an arcane accounting rule. The company also avoids retirement medical for these older worker, further increasing the profit report. Executive incentive compensation is tied to the report of profit. In essence, top IBM executives are pocketing millions of dollars of company money for themselves by targeting older workers for layoff.

  • Forbes: Calif. court to decide if IBM cancer suit to proceed. Excerpt: The first of about 250 worker health lawsuits filed against IBM across the country reaches a critical juncture in a California court this month, when a judge rules on whether to let the case of four cancer-striken former employees go to trial. The four have charged that they were poisoned by chemicals while working at an International Business Machines Corp. electronics factory in San Jose. Workers at IBM plants in Minnesota and New York have made similar claims.

  • Union Network International (UNI): CWA Gets Excellent Contract at Verizon Thanks to Mobilization and Support. Excerpt:The Communications Workers of America (CWA) reached a tentative 5-year collective bargaining settlement with Verizon Communications that meets the union's key goals of protecting members' job security rights, healthcare and other benefits and provides fair wage and pension improvements. The agreement, covers 60,000 workers in 12 states in the company's Northeast and Mid-Atlantic operations. A similar settlement was announced by the International Brotherhood of Electrical Workers representing another 18,000 Verizon employees.

  • Denver Post: Avaya dumps pension plan, enhances 401(k). Excerpt: Business communication system provider Avaya Inc. is switching from a defined pension plan for U.S. salaried employees to a beefed-up 401(k) plan, following a trend of corporations getting out of pension plans in favor of other options. The company, which has about 2,400 employees in Colorado, said Friday that the changes, affecting its approximately 8,300 salaried employees in the United States, will take effect at year's end. ... The switch does not affect Avaya retirees or the company's 5,200 union workers, who recently negotiated new contracts.

  • Wall Street Journal: Treasury to Issue Guides On Cash-Balance Payouts. Excerpt: The feud over cash-balance plans has focused on how the new-style pensions can hurt some older workers. But there is another issue tied to cash-balance plans brewing in Washington that has to do with the way employers calculate payouts to all departing workers. The Treasury Department is expected to issue guidelines on how to calculate the payouts as part of broader rules on cash-balance plans. Employers have been looking for guidance, and some have been lobbying heavily for favorable regulations, which they hope could help overturn recent appeals-court decisions requiring employers to pay higher lump sums. ... The lump-sum issue also came up in a "doctored" memo on Treasury letterhead distributed on Capitol Hill earlier this month by a lobbyist for International Business Machines Corp., which has been sued over age-discrimination issues with its own cash-balance plan. The Treasury said it is investigating but declined to say how the document was altered. IBM has said it believed the document to be genuine. If link is broken, view Adobe Acrobat version [PDF--37 KB].

  • Wall Street Journal: Push for Broad Pension Change Is Losing Steam in Congress. Employers Won't See Any Major Relief To Help Ease Burden of Nest-Egg Funds. Excerpt: The outlook for broad pension overhaul has dimmed, with Congress likely to offer employers only narrowly focused relief from the financial burdens they face for their traditional pension plans. Concern has been growing among lawmakers about pensions and retirement security in recent months, as corporate scandals and a slow economy have exposed weaknesses in the current system. But with time running out to clear legislation this year, lobbyists and some Capitol Hill aides predict lawmakers won't have time to pass more than a few provisions. Those measures likely would focus on giving businesses relief, possibly on a temporary basis. The lack of momentum on many retirement-savings changes reflects the knottiness of the underlying issues, which directly affect Americans' all-important nest eggs -- and have big implications for many employers and financial services firms, too. If link is broken, view Adobe Acrobat version [PDF--24 KB].

  • New York Times: Senate Panel Votes to Give Pension Relief to Companies. Excerpt: The Senate Finance Committee voted yesterday to give companies a break on their pension requirements, which would save them about $60 billion over the next three years, according to a new government analysis. America's pension funds now have a total deficit of about $400 billion — a record — and unless the rules governing pension financing are eased, many companies will have to start making large contributions to close the gap. The Senate bill would shield companies from having to do that during a slow economy, helping them conserve cash. But it would also weaken the pension funds, the government projections show.

  • Business Day (South Africa): Are IBM's trustees meeting obligations? (Scroll about half way down the page to view article). Full excerpt: The law requires that all those who look after other people's money must exercise "utmost good faith, care and diligence". This story is about utmost good faith. Managers who do not observe this can go to jail for 15 years. Trustees of pension funds fall squarely into this definition (section 2(a) Financial Institutions (Protection of Funds) Act). IBM is among the richest of the world's multinationals. It is the last place you would expect to find an increasingly acrimonious argument between its pensioners and the company. But that is the case right here, in SA.

    An argument has been running for the past six or seven years between an action group of pensioners and the company. The pensioners claim successive company-appointed trustees have breached their fiduciary duties, misinterpreted rules and ignored others intended to inform and protect members. Are IBM pensioners being done out of their just rewards? On the basis of the information available, I don't know. But what is clear is that the pension fund suffers intractable disputes with the number of company-appointed trustees always equalling those elected by members. And it also appears as though successive ranks of company appointees have acted only in IBM's favour.

    It looks suspiciously as though the fund is grossly underfunded and cannot afford what pensioners think is their entitlement. But the trustees are obliged to act in the interests, not of IBM, but of the fund. What smells is that the trustees were advised to ask the court for a declaratory order as to the fund's obligations. The IBM appointed trustees opposed this. That, by itself, suggests bad faith. IBM was found guilty in a US court of bad behaviour towards its pensioners in July this year. The judge found IBM was tampering with pension fund earnings to boost the firm's showing. I hope that's not happening here. Meanwhile, if the pensioners want any advice, head straight for the Financial Services Board.

  • Houston Chronicle: Perhaps cost cutting too damaging to social contract. Excerpt: Brooks Hamilton is a figure-it-out-and-do-it kind of guy. An employee benefits attorney who is also a major geek, he is comfortable with both words and numbers. Over the last 10 years we've traded spreadsheets, talked about retirement planning, and worked on ways to improve defined contribution plans -- the things most people know as their 401(k) or 403(b) plan. Not long ago, we collaborated on a paper, "Reinventing Retirement Income in America" for the National Center For Policy Analysis. So it's a little strange to see him sitting pensively or to hear him expressing doubt.

    But that's what he's doing. He's worried. I ask what's on his mind. "The social contract," he answers. He says it the way some people would say, "My Visa bill." "I've just become really unsettled with the hardball way senior management (in corporate America) wants to play with the masses. "I think we're missing a bet. We shouldn't eat our children to avoid starvation. We have too few businesses focused on what's good for the country, too many focused on their very short-term business interest," he says. "What's the social contract?" I ask. ...

    The question is whether retirement in dignity is part of the social contract. I've never thought that a pension was a gift. The phrase `wages and other conditions of employment' includes a pension. What you were required to do was structure compensation so it included `retirement in dignity.' "What has bothered me is that our business schools have taught slash-and-burn --- if you can cut payrolls to make a profit, you get an A.

  • Boston Globe: Fewer get workplace health plans. Premiums rise, coverage drops over decade. Excerpt: Americans who receive health insurance through their employers have dropped to less than one- half of all workers from about two- thirds a decade ago, according to a report on the nation's health coverage released yesterday by the US Bureau of Labor Statistics. ... "Employer-sponsored coverage has traditionally been the mainstay of the US healthcare system, and if it begins to erode we're going to have larger numbers of people without health coverage," said Sara Collins of the Commonwealth Fund, a health research organization. The study found 45 percent of US employees have health insurance at work, down from 63 percent in 1993. In New England, 43 percent of workers are covered. Walter Marshall, a bureau economist in the Boston office, called the drop in nationwide coverage "dramatic." But he warned the data may overstate the trend, in part because of coverage shifts within two-income families.

  • New York Times: Quick: What's the Boss Making? Excerpt: Richard A. Grasso, the toppled chairman of the New York Stock Exchange, is not a large man, but he fell with a thump that is being felt in corporate boardrooms across America. Directors of big companies, already under pressure to demonstrate independence from management, are now worried that they will be blamed for failing to explain not only how much but how they pay chief executives. After all, none of them want to end up acknowledging in public, as some directors of the exchange did, that they do not really understand what the chief has coming. Mr. Grasso's pay plan was a marvel of complexity. It looked like a $188 million wedding cake, with tier upon tier of bonuses and pension enhancements stacked so high that they left onlookers gaping. The outrage that followed the disclosures and led to his resignation last week may not spur directors to cut executive pay. But, compensation experts say, it may cause them to simplify pay plans and will almost certainly force them to produce more detailed explanations of how the plans are constructed.

    Mr. Grasso's arrangement was unusual in allowing him to collect his pension money without retiring, it mirrored the plans of many large companies in its complexity. At I.B.M., for example, senior executives can participate in pension and benefit plans that are not available to the typical worker. Besides long-term incentive plans, these executives receive a supplemental executive retention plan, I.B.M. Personal Pension Plan, executive deferred compensation and I.B.M. Savings Plan. For Louis V. Gerstner Jr., the retired chairman of I.B.M., those tributaries combined to produce annual payments of more than $2 million in retirement. His successor, Samuel J. Palmisano, stands to receive more than $3 million in pension annually after he retires, but shareholders would be hard-pressed to figure that out from the latest proxy statement from the company. To estimate Mr. Palmisano's pension, an investor would need to calculate his average compensation over five years and study a table of 48 numbers to find the correct range. But in what may come to be known as the post-Grasso era, more companies may head in the direction of G.E., which acceded this year to the demands of union officials at the A.F.L.-C.I.O. and eliminated one special benefit for executives. The plan that G.E. scrapped had allowed its five highest-paid officers to defer pay and earn interest of 12 percent to 14 percent on their money — more, it seems worth noting, than even Mr. Grasso got. If link is broken, view Adobe Acrobat version [PDF--26 KB].

Coverage on H1-B and L1 Visa and Outsourcing Issues
  • CIO Magazine: The Hidden Costs of Offshore Outsourcing. Moving jobs overseas can be a much more expensive proposition than you may think. Excerpts: The current stampede toward offshore outsourcing should come as no surprise. For months now, the business press has been regurgitating claims from offshore vendors that IT work costing $100 an hour in the United States can be done for $20 an hour in Bangalore or Beijing. If those figures sound too good to be true, that's because they are. In fact, such bargain-basement labor rates tell only a fraction of the story about offshore outsourcing costs. The truth is, no one saves 80 percent by shipping IT work to India or any other country. Few can say they save even half that. As just one example, United Technologies, an acknowledged leader in developing offshore best practices, is saving just over 20 percent by outsourcing to India. (Editor's note: We highly recommend reading this article if you are involved in outsourcing decisions, or are a victim of outsourcing). If link is broken, view Adobe Acrobat version [PDF--264 KB].

  • Hindustan Times (India): Bush totally against scrapping H1-B visas. Excerpt: At a private reception attended by eight Indian Americans in Jackson, Mississippi, Bush vehemently expressed his opposition to House Resolution 2688, a Bill introduced by Republican Congressman Tom Tancredo of Colorado, according to those attending the meeting. ... "Bush spread his hands as wide apart as possible and stated unequivocally that 'Tancredo and I are at opposite ends of the pole. I fully do not support Congressman Tancredo's Bill against H1-Bs'," Shah told IANS.

    Besides Bush, other noted luminaries at the reception included former senate majority leader Trent Lott of Mississippi as well as Karl Rove, the President's chief campaign advisor. Sampath Shivangi of Mississippi organised the exclusive Indian American delegation. ... Currently, there are some estimated 900,000 H1-B employees in the US, 35-45 per cent of whom are from India, according to AILA. "Judging from the President's strong negative reaction to the Tancredo bill, it's apparent that he understands that the current unemployment situation in the US is not due to H1-B visa holders taking American jobs," Shah contended. ... "As soon as I mentioned the visa, he (President Bush) knew what I was talking about, he knew about the Tancredo bill, he knew what it meant. From his immediate grasp of the H1-B issue, and his strong support for continuing the programme, he understands also that these foreign specialty workers are basically a much needed element of our economy," Shah said. By implication, some observers contend the President is not going to be against business outsourcing as well. ...

    Shah also submitted AILA's proposal on the L-1 visa programme to counteract the various legislation currently pending in Congress to limit its usage. "The L-1 Visa programme is heavily used by the Indian community. Last year, Indians comprised 24.4 per cent of the worldwide L-1 visas issued, making them by far the number one group of users of this visa programme," Shah stated.

  • ComputerWorld: Study: IT worker unemployment at 'unprecedented' levels. Excerpt: Unemployment for IT workers reached 6% this year, an "unprecedented" level for a profession that was once a sure path to a well-paying job, according to a new study that also found that foreign-born workers now account for a fifth of all IT employees in the U.S. The report also found that the percentage of laid-off foreign-born IT workers is slightly higher than for U.S.-born workers. ... Randy Rosenthal, manager of computer operations at Southwest Securities Group Inc. in Dallas, has seen the same trend: highly qualified people with multiple degrees applying for jobs IT managers once had trouble filling. "That tells me that 6% has hit the IT area pretty hard," he said.

  • Wired News: Protesters Mourn Tech-Job Drain. Excerpt: Nearly 40 unemployed engineers and software developers met Tuesday with labor activists from the Communications Workers of America in a protest outside the Hyatt Regency hotel in Burlingame. Their goal: to call attention to discussions taking place inside at the 2003 Nearshore & Offshore Outsourcing Conference. The two-day conference focuses on ways for companies to reduce costs by outsourcing IT work to countries like India and Russia -- a practice that critics say is undermining the U.S. economy.

  • San Francisco Chronicle: Offshore debate. Job export issue pits companies against workers. Excerpt: Inside the hotel, more than 250 senior executives, mostly from Bay Area technology and financial services companies, gathered for a conference to learn how to cut costs by increasing their use of foreign tech workers, a process known as "offshoring." Two years ago, the conference drew less than half that number. Outside, about 50 picketers organized by the Communication Workers of America chanted, "Hey, hey, ho, ho, offshoring's got to go" as conference attendees entered the building. Among the picketers were workers who had lost their jobs to overseas competition and others who fear the same fate. Several protestors who are still employed said they had used vacation time to participate.

  • The Your Job Is Going To India Web site is a rich source of information on outsourcing issues. We recommend it highly.

  • CNET News: Labor activists picket outsourcing event. Excerpt: Labor unions face an uphill battle gaining a foothold in an industry that has been indifferent, if not hostile, to organized labor. The CWA, whose tag line is "The Union for the Information Age," has begun testing the waters. It recently teamed up with WashTech, an IT workers activist group in Seattle, to launch TechsUnite.org, a Web site dedicated to highlighting the problems that computer industry workers face. The site has 14,000 registered subscribers, 900 of which are in California, CWA organizer Joshua Sperry said. The union also is lobbying politicians to study offshore outsourcing and support legislation that would limit foreign work visas.

  • Wired News: Bidding Your Job Bon Voyage. Excerpt: "This is disgusting," said stockbroker Martin Gonnet. "Leaving aside the issue of jobs lost in this country, this strikes me as nothing more than a slave market where you can buy desperate people very cheaply and use them until you find someone who will work for even less." In the Outsource World pavilion, two dozen Indian companies are pushing people, products and services. Indian firms have recently become concerned that they may see cutbacks in their bustling outsourcing industry as other countries begin to offer cheaper rates for the same work. In the other corner, occasionally glaring over at the Indian firms' booths, are the crews from Romania and Bulgaria, whose representatives insist they are the obvious "correct cultural choice" for European and American firms.

  • Kansas City Star: Sprint will outsource technology jobs. Excerpt: Sprint Corp. has hired two companies to spearhead an outsourcing project that eventually could send hundreds of local technology jobs overseas. The Overland Park company said it had signed contracts with IBM Global Services and EDS to develop and maintain some Sprint software. Sprint expects to save $150 million over the life of the five-year contracts. An undetermined number of computer programmers and others will lose their jobs as Sprint tries to both cut costs and streamline its massive information technology operations, said Michael Stout, Sprint's chief information officer since May. ... In announcing the outsourcing program, Sprint is joining other American companies that have turned to consulting companies to farm out basic jobs. Many of those tasks, in turn, are completed in India, Pakistan and elsewhere, where salaries are substantially lower.

  • InfoWorld: H-1B hearing: Companies say foreign workers needed. Excerpt: The unemployment rate of electrical and electronic engineers has reached an all-time high," said John Steadman, president-elect of the Institute of Electrical and Electronics Engineers-USA. "This translates to hundreds of thousands of unemployed U.S. engineers. These are people who are degreed and capable U.S. engineers." Unemployment among electrical and electronic engineers reached 7 percent in early 2003, Steadman said. ... Backers of the H-1B program argued Tuesday that the visas aren't taking away U.S. jobs, because some technology companies still can't find qualified workers for some positions. Ingersoll-Rand has searched for more than a year to fill a plastics engineer and an industrial robotics engineer position, finally settling on a Canadian resident in both cases, said Elizabeth Dickson, advisor of immigration services for the industrial equipment manufacturer.

  • The Age (Australia): Unions urge: save Telstra jobs. Excerpt: Workers' unions have called on the federal government to "save Australian jobs" after Telstra outsourced an IT contract to an Indian firm. Around 200 people gathered outside Telstra's Melbourne office to protest against Telstra's $75 million deal with Indian information technology company Infosys. The Community and Public Sector Union (CPSU) estimates between 200 and 400 jobs will be cut from Telstra's existing contractor, IBM Global Services, as a result of the Infosys contract. Victorian Trades Hall Council secretary Leigh Hubbard said the federal government should intervene to stop the "exporting of Australian jobs". "They (Telstra) are owned by us as taxpayers and as taxpayers we demand that they not only take account of shareholder value but also the need of workers in the community," he said.

  • Forbes: Giant Sucking Sound. Excerpt: The new Electronic Data System office in Mumbai (formerly Bombay) is half a world away from company headquarters in Plano, Tex. Getting to this Indian office requires a bumpy two-hour drive from downtown Mumbai. At every stoplight women dressed in rags and holding emaciated, dull-eyed infants tap car windows to beg. In the slums lining the roads, thousands of people live crammed into dirt-floored rooms, sheltered from monsoon rains by plastic sheets. At the end of the drive is a heavily guarded, new office tower that rises above the slums. This is where Amit, 24, works. "This is Andy. How may I help you?" he says politely, hour after hour, to the Midwesterners who have forgotten their e-mail passwords or need the phone number of a colleague. EDS (nyse: EDS - news - people ) hired Amit and 500 of his colleagues--young men and women dressed in khakis or saris--to answer phone calls and e-mails on behalf of American companies that have outsourced tech work or customer service calls to EDS.

  • CNN/Money: It's an OutsourceWorld. Excerpt: Just past the Hewlett Packard (HPQ: Research, Estimates) exhibit at the 22nd PC Expo, OutsourceWorld pitched its booths, filled with reps from more than 80 global outsourcing companies who want to help customers -- U.S. firms, mostly -- cut costs and raise productivity by farming out work, quite often overseas. In booths decorated with the flags of Nepal, South Africa, Egypt and many more nations, company and country representatives touted the advantages of moving work abroad. An Indian software development company, DSS Infotech International Inc., promised customers savings of up to 50 percent by moving work to its development centers. Bulgaria noted its information technology (IT) professionals make, on average, just $300 a month. IBM commandeered a cafe to ply potential customers with free coffee and brag about its outsourcing abilities.

  • InformationWeek: Report: IT Workers Face Confidence Crisis. Unemployment and outsourcing are creating a crisis of confidence among domestic tech professionals, according to a report by the IT Workforce Data Project Excerpt: Others jobs have moved overseas or been lost to overseas IT professionals who have either immigrated to the United States, or been brought in by employers via H-1B temporary employment visas or L-1 visas that permit multinational companies to transfer employees to the United States for as long as seven years. The number of L-class visas reportedly has tripled over the past decade. Of particular concern, the report noted, was that L-1 visas carry no cap on the number of employees eligible for transfer and no requirement to match prevailing local wages. The study also cited reports that some companies transfer L-1 employees to U.S. offices, then shift them to outsourcing services for external customers, further decreasing employment opportunities for domestic IT workers. India accounted for one quarter of L-class visas in 2002, the report said.

  • InformationWeek: Identity Crisis. Excerpt: Last Tuesday morning in Burlingame, Calif., unemployed hardware engineer Cary Snyder was taking lessons from the pros on the finer points of picketing: Chants get you heard, big signs get you seen, and a permit prevents the police from asking you to leave. Snyder had joined other technology workers and local organized-labor representatives on the sidewalk outside a hotel that was hosting an offshore-outsourcing conference. It was a surreal experience, he says. "I never thought of myself as ever needing to do something like this or thinking that the white-collar engineer in Silicon Valley would ever have such an incredible need," says Snyder, who can't find work despite a solid resumé and 20 years' experience. ... The issue of unionization isn't new, but it may be gaining traction. The Washington Technology Council, an offshoot of the Communication Workers of America, has 275 dues-paying members. Another CWA affiliate, Alliance@IBM, is made up of IBM employees. Both work to promote employee concerns, such as retirement benefits and off-shore outsourcing, and influence legislation.

  • WashTech: Lawmakers seek fix on white-collar job visas. Excerpt: Facing the deadline and business pressure, senators sought a short-term fix limiting the number of annual visas for white-collar workers entering the U.S. for such training. Business witnesses, forced by committee chairman Orrin Hatch (R-Utah) to pick a number, favored either 115,000 or 195,000 L-1 visas per year--but argued there should be no limits and the market should decide. No labor witnesses were invited. John Steadman, speaking for the Institute of Electrical and Electronics Engineers, countered by advocating a limit of "zero." He said that exports of white-collar engineering jobs pushed joblessness among those highly skilled U.S. engineers from 1 percent to 5 percent in the last three years. Senators from both parties, except Hatch, were concerned about the white-collar job loss. Sen. Edward M. Kennedy (D-Mass.) said New York securities firms predicted that their U.S.-based computer technology jobs would drop from 800 people now earning $150,000 each to zero in three years. "They'll all be overseas at $10,000 each," Kennedy said of those jobs.
This week on the Alliance@IBM Site:
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