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    Highlights—May 1, 2004
  • Providence Journal: Protesters urge IBM to stem the tide of offshoring. Excerpt: Megaphone in hand, Linda Guyer yelled out a battle cry at the top of her lungs: "Offshore the CEO!" "Offshore the CEO!" the crowd of about 50 yelled back. "What do we want?" she shouted. "Our jobs back!" came the reply. Standing in front of the Rhode Island Convention Center yesterday while IBM Corp.'s shareholders meeting wound down inside, Guyer was trying to whip up a crowd of protesters, unhappy with IBM's decision to move jobs from the United States to other countries. Guyer had just left the company's annual meeting where she told the company's top brass how unhappy some IBM employees are about offshoring -- the process of companies moving technology and service jobs from the United States to countries with lower labor costs, such as India. IBM told The Wall Street Journal earlier this year that it plans to add 5,000 jobs in the United States this year, but also said it plans to move 3,000 U.S. jobs overseas. Guyer wasn't exactly thrilled with what she heard. "I think there's a level of whitewash covering up the thousands of jobs that are scheduled to go," said Guyer, after she put down the megaphone. "I think they should step up to the fact that they are offshoring."

    In the meeting, while introducing a shareholder resolution geared toward halting offshoring, Guyer told the more than 300 attendees that people on her floor at work are training their foreign replacements and have been told they are getting laid off in 30 to 60 days. Standing at a microphone in the middle of the convention center's ballroom, she told Palmisano that IBM's efforts to retrain displaced workers are little consolation "for the guys on my floor that have to go home and tell their wives and their kids that they won't have a job in 30 days because it's going to India and Brazil." Palmisano did not directly refute her statement, instead discussing the company's global presence and its efforts to educate workers. ...

    Although Palmisano didn't take much time during the meeting to speak specifically about offshoring, his senior vice president of corporate strategy, Bruce Harreld, did talk during an interview last week about IBM's position. Harreld said IBM's take on the offshoring debate is that offshoring is not really a concept that applies to a global company. "What's offshore and what's onshore when you're a global company?" Harreld asked. The company has seven research facilities around the world, more than 310,000 total employees and is planning to hire 15,000 people across the globe this year, he said. If link is broken, view Adobe Acrobat version [PDF--65 KB].


  • Providence Journal: Big Blue sees red from its team. Emotions run high as current and former members of the IBM family pepper CEO Samuel Palmisano with questions about pensions, health-care benefits and job losses. Excerpts: Samuel J. Palmisano is the top executive of world-famous IBM. But to people who spoke at yesterday's annual shareholders meeting, he was simply "Sam." Indeed, some of the angriest voices among the 354 shareholders and others who gathered in the stadium-sized ballroom at the Rhode Island Convention Center were those who count themselves as part of the IBM family. People who worked at IBM. People who retired from the company. And people who are watching IBM jobs go to India. Many of them traveled from Vermont and New Jersey, Washington, D.C., and Florida to attend yesterday's meeting. Some paid their own freight to stay at $109-per-night rooms at the Holiday Inn. As the shareholders spoke, news reporters from CNBC, CNN, Reuters, Business Week and the local ABC affiliate gathered as about 50 protesters -- current and former IBMers and other union members -- marched outside the convention center shouting through bullhorns and demanding that the company stop shipping U.S. jobs overseas. IBM's 52-year-old chairman, president and chief executive officer was on the defensive yesterday.

    The future is precisely what worries Art Richter.The silver-haired IBM retiree stood up during the question-and-answer part of the meeting and told his former boss that retirees' pensions are being eroded. Their standard of living is declining. "Where is family values?" Richter asked. "Where is commitment? Does management have no shame?" Palmisano responded, "Your concerns are very valid about the cost-of-living increases; about the cost of health care." At one point, Palmisano announced that IBM would respond to specific concerns from retirees at a "town meeting" after the shareholders meeting adjourned. But only former IBMers were allowed to attend, not the media. (Security guards even turned away the wife of one IBM retiree because, she said, she never worked for the company.)

    Among those who attended yesterday's shareholders meeting was Sandy Anderson, a 62-year-old retiree from Vermont who co-founded Benefits Restoration, an independent organization of IBM retirees, after he learned that his contribution to his IBM health-care premiums more than doubled, to more than $5,000 a year. Benefits Restoration is working side-by-side with the Alliance@IBM, formed in the 1990s as an offshoot of the Communications Workers of America, to fight against reductions in pension benefits. Recently, the group has been focused on fighting the offshoring of IBM jobs overseas. When Palmisano responded to a question about the movement of jobs abroad, saying, "We view this as a much broader issue, it's phenomenally complex," one elderly shareholder named Evelyn Davis from Washington, D.C., blurted out: "You know darn well that's a little shyster type of an answer!" Pat Joselyn, the red-headed director of communications for Benefits Restoration, told Palmisano about a man who was practically in tears because his $1,125-a-month pension barely covered his $900-a-month in health insurance payments. "I can go back to work," Joselyn said. "But there are some IBMers who are older or ill. If link is broken, view Adobe Acrobat version [PDF--19 KB].


  • Providence Journal: Protesters greet IBM shareholders at Providence meeting. Excerpt: "We want shareholders to start paying attention to what the company is doing to employees and retirees," said Lee Conrad, national coordinator for the Alliance@IBM, a group that advocates for IBM employees. A few hours later, the protesters were joined by members of several Rhode Island labor groups, doubling the group's size for a late-morning rally timed to coincide with the end of the shareholders' meeting. City police were stationed outside the building and yellow barriers were placed near entrances, but the scene was orderly. The group had the sympathy of at least one shareholder. Chester Kurowski, 82, of Pawtucket, says he wonders how the trend to offshoring will affect his two grandchildren. "For a short term gain, I think we're going to pay a price," Kurowski said. Employee and retiree shareholders inside the meeting also spoke in support of employees and retirees, according to Conrad. The meeting was open only to shareholders. "This is the one time all year that a manufacturing employee with one share of stock can stand up and question the CEO and board of directors," Conrad said.

    Samuel J. Palmisano, IBM's chairman and CEO, touched on employee compensation, retiree benefits and "global trade" during his remarks to shareholders. He noted that the company "persisted in investing in employee salary increase programs and continued to pay out employee bonuses every year during the recent economic downturn." (Emphasis added by editor). "For many years now, our retirement benefits have been unsurpassed in the IT industry," Palmisano said. "Unlike nearly every competitor, we offer U.S. employees a solid pension plan, a company match in the 401(k), retiree medical coverage and periodic opportunities to buy discounted company stock." If link is broken, view Adobe Acrobat version [PDF--41 KB].


  • Linda Guyer comments on the surprise town hall meeting for IBM employees and retirees. (This meeting was announced during the shareholder's meeting). Full excerpt: When I was speaking about one of the resolutions, I thanked Sam P. for the town meeting but said that we needed more notice, because most Alliance members would be at the rally, where we were going to be talking to CNN, CNBC, and many other members of the press. I also mentioned that we'd be on Lou Dobbs that evening (which we were). The two VP's that were at the town hall meeting were Nick Donofrio and Randy McDonald. Since only employees and retirees were invited to that meeting, it would seem to serve two purposes: to take the contentious issues that come up in the shareholder meeting away from the view of the press and shareholders; and to give a "we care" message from the execs to the retirees and shareholders. I do know of one person who attended and I will ask them how it went. Everyone else was at the public rally where we were bombarded with press coverage. I have to say the support for the rally was tremendous with many local union members from the Newspaper Guild, CWA, Teamsters, local citizens and others was tremendous.


  • Sandy Anderson, Interim President of BenefitsRestoration@IBM, has written an excellent report of the 2004 Shareholders meeting and the "town hall" employee/retiree meeting that followed. Excerpt: Since I chose to join the Town Meeting after the shareholders meeting, I missed my chance at meeting the media at the rally outside….probably missed my 15 minutes of fame but I felt it more important to discuss with IBM executives the plight of retirees.At a guess, I would say that there were about 100 people in the Town Meeting; most were retirees with a some current employees sprinkled throughout. I would say that the majority of the questions asked were related to retiree pensions and benefits. One current employee voiced her concern that, as a young employee, she did not want to think that her future included sitting in a meeting like this at some time asking the same kinds of questions about her pension. Others voiced concerns about COLA’s (Cost of Living increases), cost of medical contributions, prescription drug plans and one current employee voiced the concern that every time he sits down to look at whether he can afford to retire, he learns that the cost of medical premiums prevents him from doing so. Read Sandy's complete report.


  • Associated Press: IBM Shareholders Vote to Expense Options. IBM Shareholders Vote to Require Company to Treat Stock Options As Business Expense. Excerpt: IBM Corp. shareholders voted Tuesday to require the company to treat stock options as a business expense, though the impact of the decision is muted because financial regulators are on the verge of imposing the same rule. he options proposal, which is non-binding, was put forward by a large union pension fund and won the support of 54 percent of stockholders at IBM's annual meeting. Seven other resolutions sponsored by investors failed, including measures to re-examine executive compensation and change the company's retirement plans for employees. When the vote on the options proposal was announced, chairman and CEO Sam Palmisano responded that IBM would expense options when the Financial Accounting Standards Board officially requires it. ... With IBM coming off a successful 2003 -- profits of $7.6 billion -- and increasing its dividend Tuesday by two cents, to 18 cents per share, no shareholders expressed beefs with the company's business strategy. However, several retirees and current employees complained to Palmisano about IBM's administration of pensions. The company is embroiled in a federal class-action lawsuit over its 1990s shift to "cash-balance" pension funds, which a judge has ruled discriminates against older workers. Palmisano said the company expects to win that case on appeal, and said IBM is "beyond the industry norm at taking care of retirees."


  • BusinessWeek: Seeing Red (and Green) with Big Blue. While union activists and disgruntled retirees protested at IBM's annual meeting, investors were smiling. They got a dividend hike. Excerpt: Corporate-shareholder meetings were once tame affairs, where chief executives delivered palliatives to blue-haired folks in the audience. Well, no more. IBM's annual meeting in Providence on Apr. 27 had more in common with a contentious small-town school-budget meeting than a corporate snooze fest. Anti-offshoring protesters demonstrated outside, and inside the Rhode Island Convention Center, dissident shareholders raised objections to everything from executive compensation to retiree benefits to human rights in China.

    The employees and retirees had a lot to get off their chests. Before and after the meeting, the Communications Workers of America staged a demonstration outside to protest IBM's transfer of several thousand computer-services jobs to India and other countries to take advantage of lower wages. Carrying placards and shouting "Offshore the CEO," about 30 demonstrators paraded in front of the convention center. Linda Guyer, a programmer at IBM's Endicott (N.Y.) facilities and president of the Communications Workers' Alliance@IBM, said the offshoring issue has become a rallying cry for the union, which has signed up 6,000 of IBM's 120,000 U.S. workers. Says Guyer: "Employees started to wake up and say, 'Uh-oh, I might lose my job.' There's tremendous fear about this."Both inside and outside the hall, retirees objected to pension-plan changes that reduced their medical benefits. Sandy Anderson, a 36-year IBM employee from Burlington, Vt., who retired in 1997 and says his family's monthly health-insurance costs have risen this year from $157 to $561, accuses IBM of breaking its promise to maintain pension benefits. A federal court judge last year ruled that the way IBM changed its pension provisions violated age-discrimination laws. According to some estimates, its liability could be as high as $6 billion.


  • Forbes: IBM meeting draws offshoring, health care protests. Excerpt: In addition to a group that seeks to unionize IBM called Alliance@IBM, members of Benefits Restoration, which is fighting the higher costs of retiree medical insurance, and local groups of The Programmers Guild and The Organization for the Rights of American Workers are expected to protest outside the meeting. "There are two issues that we're going to focus on at the rally. Number one is the offshoring of jobs," said Linda Guyer, President of Alliance@IBM. "Our message to IBM is to tell the truth," she said, regarding how many jobs are going overseas, what type of jobs and where they are headed. IBM said in January that it will shift 3,000 jobs from the United States to developing nations this year as part of a plan that includes adding 4,500 net new jobs in the United States and 15,000 total, pushing its head count to about 330,000 this year. Guyer says she believes IBM is underestimating that number. An IBM spokesman declined to comment.


  • CNET News: IBM shareholders voice concerns. Excerpt: IBM faced calls to change its pension program and complaints over its plans to hire overseas workers during its annual meeting Tuesday.


  • The Register (United Kingdom): IBM workers call for shareholders to 'Offshore the CEO'. Excerpt: A group of IBM employees protested the company's annual shareholder meeting held today in Providence, Rhode Island, taking shots at the outsourcing of jobs and executive compensation packages. Alliance@IBM - Communications Workers of America Local 1701 - led the protests with around 60 people rallying ahead of and after the shareholder meeting. Despite attempts to undermine the rally, the workers had their say, displaying signs with the slogans "Export executive traitors, not US jobs," "Offshore the CEO" and "Retrain for what?". Alliance@IBM also introduced several shareholder resolutions calling for more transparency into executive pay and changes to the practice of outsourcing jobs overseas. "I think we got our message out before, during and after the meeting," Linda Guyer, president of Alliance@IBM and a software project manager for the company, told The Register. The protesters were not deterred by efforts to lessen the impact of the rally. Security officials forced the demonstrators to stand in front of a locked door of a large complex, meaning they could not display their messages to as many incoming shareholders. Still, they spread out in a line as far as they could before the meeting and then were allowed to move to another entrance after the meeting. ... In March, IBM put $25m behind the Human Capital Alliance program, which is billed as a fund to help encourage employee retraining efforts. But as Guyer pointed out, $25m is not a heck of lot of money for a company the size of IBM. "Spread over all of IBM's employees, that's nothing," she said. "It's a PR stunt. The program is not even set up yet. For people losing their jobs over the next 6 months, it will not do them any good."


  • VNUnet (United Kingdom): IBM staff in offshore outsourcing protest. Workers stage rally at company AGM against offshoring of 'thousands' of US jobs. Excerpt: Chanting "Offshore the CEO," staff and former employees demonstrated against IBM's increased focus on outsourcing and cost cutting. The demonstration was organised by Alliance@IBM and the Communications Workers of America unions, which also submitted proposals on corporate governance to be discussed at the company meeting. "IBM has admitted that thousands of jobs are being sent offshore to India, China, Brazil and other countries, with plans to increase this outsourcing," said Lee Conrad, national coordinator for Alliance@IBM, in a statement. "This raises serious concerns about the long-term job prospects for workers in the US, and also about the need to ensure that customers have the quality service they expect to receive from IBM." The Alliance asked for a review of the company's executive pay policies to see whether they create an undue incentive to make "short-sighted decisions" such as an over-reliance on offshore employees.


  • Communications Workers of America (CWA): IBM Employees Challenge Outsourcing, Retiree Issues at IBM Annual Meeting. Excerpt: The demonstrations also will focus attention on the crisis that IBM retirees are facing, Conrad said. "The people who built this company are taking the brunt of IBM's cost cutting moves as company executives enrich themselves. Retirees have had no cost-of-living increases in their pension checks for many years. Meanwhile, the out-of-pocket costs and medical co-pays that retirees must pay are eating away at what little money they now receive," he said. IBM retirees were hit with a health care premium increase of 29 percent in 2003 and a whopping 67 percent in 2002, the Wall Street Journal reported on March 16, 2004. And IBM, like other companies, will get a subsidy from the federal government under the Medicare program, even if it transfers even more costs to retirees.


  • The Journal News (Westchester, Rockland, and Putnam Counties, NY): Controversy looms at IBM annual meeting. Excerpt: Most shareholder resolutions are submitted by unions or pension funds, Lally said. But in the case of IBM, just two of the eight shareholder resolutions came from institutions. IBM's current and former employees are active proposal writers. The most notable is former IBMer James Leas, a Vermont patent attorney who is back for the fifth time with a resolution to give employees a choice of pension plans. His argument got a boost last summer when a Federal District Court in Illinois ruled that the pension plan changes IBM made in 1999 and 1995 violated federal age discrimination laws. IBM overhauled its pension system in 1999 to switch most of its 140,000 U.S. workers to cash-balance plans from traditional pension plans. ...

    Institutional Shareholder Services sided with shareholders on three of the resolutions, including a returning attempt by retired IBMer Donald Parry to prevent executives from using appreciation in the pension fund to pad profits for the purposes of setting pay. "Pension fund income can distort true operating performance, which should be the basis for determining executive bonuses and compensation," ISS wrote. Parry — who helped train Palmisano when the CEO joined IBM more than 30 years ago — said he's disgusted with management's determination to include pension gains when setting pay. "It's not illegal, but it's unethical and immoral, I think," Parry said.


  • Coverage of previous IBM shareholder meetings is available here:

  • Poughkeepsie Journal: IBM link to political fund alleged. Teamsters file for disclosure. Excerpt: Some work IBM Corp. did for Britain's Labor Party has become controversial just as Big Blue readies for its annual meeting in Providence, R.I., today. The Teamsters union has a shareholder motion on the ballot asking for full disclosure of all political donations, which IBM opposes on the grounds it does not make any, period. But the British press has picked up on the issue, pointing to software work IBM did for Prime Minister Tony Blair's Labor Party ''for next to nothing," citing a 2001 memo from a party official. If that's accurate, which IBM denies, the work could be construed as a form of ''soft money" contribution. The deal involved campaign software installed at the party's old Millbank headquarters to help with election campaigns, UK press reports have said.


  • The Observer (United Kingdom), June 22, 2003: IBM 'paid Revenue £700m over tax evasion' Excerpt: IBM paid the Inland Revenue an estimated £700 million to settle claims of tax evasion in 2001, says a disaffected former employee of the US computer giant. If the allegation is true, the payment would almost certainly be the largest of its kind in Revenue history. IBM declined to confirm or deny the claim yesterday, calling it 'rumour and speculation'. ... In 1999 Churchhouse claimed that IBM UK had transferred artificially high royalties to its loss-making American parent in the early Nineties, in an attempt to reduce the group's global tax bill. He said that this alleged 'transfer pricing' allowed the company to evade up to £330m in UK taxes.


  • The Observer (United Kingdom), April 25, 2004: US investors up in arms over IBM's Labour links. Excerpt: IBM faces a revolt by US investors this week over its links with the Labour Party. The computer giant is to be questioned about services allegedly offered to Labour for 'next to nothing' at its annual shareholder meeting in Rhode Island on Tuesday. The potentially stormy meeting threatens to rekindle controversy over a deal Labour struck with IBM to install election campaign software at the party's old Millbank headquarters. The work raised eyebrows because IBM regularly bids for lucrative Whitehall IT contracts. Carin Zelenko of America's Teamsters Union, which holds a large stake in IBM via its pension funds, said: 'If IBM has spent investors' money on direct or indirect political contributions, in the UK or anywhere, we want to know why.' Zelenko has tabled a motion calling for IBM to declare all political donations. The motion is backed by the giant Calpers fund.


  • Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
    • "A More Important Question" by "Dose of reality". Excerpt: A better question is “Does IBM have a brain?!”. Making the right decision is based on a rational business analysis. Impact and reaction of key stakeholders is what should drive behavior – these are the real checks and balances on “bad” behavior. Age discriminatory pension-driven employment decisions should be pre-empted by potential legal ramifications, bad PR, and employee flight or fight. Virtual elimination of incentive compensation to rank and file would be avoided due to the expected impact on productivity, initiative, and retention. Setting of unrealistic business objectives would be avoided due to concerns about the impact on long-term prospects and the risk of rendering the targets irrelevant. Structuring long-term contracts in a way to enable easy achievement of early year targets, with out years subject to interpretation and potential contention, in order to maintain the appearance of a healthy booking/pipeline picture would be avoided due to concerns about reputation and future unrecoverable loss of revenue streams and opportunities. Instead, we have engaged in all of these activities in order to maintain the expected earnings growth. The primary mitigating factors are our size, stakeholder inertia, lead-time to experience the downside of these actions, and well-coordinated spin & damage control. These can’t last forever, but the current management team just needs to ride the crest long enough to sail into early retirement, or onto the next shell game. Where are the shareholders and the board? Oh I forgot, the former are busy just looking at the daily ticker, and the current quarter’s earnings outlook, and the latter are in bed in every sense of the word.
    • "Worst Salary Plan since 1973" by "ancientblueconsultant". Full excerpt: I looked at the salary plan data from my predecessors files and mine (I've been a manager for almost 12 years) and this is the worse (least money) plan I can find. I'd estimate that up to 40-60% of employees won't get raises this year. Caveat...speaking only for IGS.
    • "Travel Policy is another resource grab" by "Dose of reality". Full excerpt: Restrictive travel policies are a sure sign of hidden profit centers. This is true of those with travel carriers (American/Delta), as well those with administrative vendors (Amex). The full inflated costs are passed through to clients, while IBM gets "rebates" from vendors for volume and exclusivity. It is an old trick, and another example of desperate cost side P&L strategies (like pay cuts, bonus elimination, age-discriminatory pension plan-driven layoffs, ratcheting up to unsustainable utilization targets etc.) Your inconvenience is not part of the equation. Your description of what has been experienced over the last year is more than enough reason to move on, and more than fair warning to anyone thinking about coming to work here. IBM will become a home for the desperate, overpaid, underskilled, and otherwise unmarketable.

  • Wall Street Journal: EEOC Proposal Over Medicare Sparks Protest, by Ellen E. Schultz. Excerpt: AARP strongly opposes the proposal, saying it would encourage employers to drop benefits for retirees who reach age 65. "The EEOC is supposed to be charged with protecting older people and enforcing discrimination laws -- not to begin carving out exceptions," says David Certner, AARP's federal-affairs director. It would be illegal, for example, to offer someone $20,000 to retire, but not offer the same to someone because they are 65. "Why should you be able to do with health benefits what you can't do with other benefits?" he asks.
    • "alwaysontheroad4bigblue" explains why this proposal likely won't affect IBMers. Full excerpt: For all intents and purposes, IBM has already eliminated retiree health benefits for retirees younger than 65. Current and future retirees are now in one of three situations for retiree medical benefits: a) You're currently retired, or are eligible for IBM's "legacy" retiree medical plan: IBM has fixed its contribution at a certain dollar amount, and IBM has no plans to adjust this amount for inflation. The additional cost of retiree medical insurance is deducted from one's pension. In some cases, retirees are having to write a check to IBM because their pensions are too small to cover the increases. b) You're in the Future Health Account group. When you retire, you may use the money in your "account" to buy insurance from IBM at whatever rate they choose. Most people guess that your account will run out in three to four years after retiring. ) You're a recent new hire. IBM has eliminated all retiree health benefits for new hires.

  • Channel 3 TV, Louisville, KY: GE Execs Hear Complaints From Retirees At Annual Shareholder Meeting. Excerpt: Despite Immelt's upbeat message, scores of elderly retirees -- some reminding the audience of their military service in World War II -- arrived from such GE strongholds as Schenectady, N.Y., Lynn, Mass., and Erie, Pa., to criticize management for what the former workers said was the company's failure to pay adequate pensions. "It's our pension, not GE's," shareholder Helen Quirini of Schenectady told Immelt and other executives. Quirini, 84, who retired in 1980, said GE will not need to spend much to keep its retirees happy. "The cost of financially rewarding retirees will gradually diminish until we die," she said.


  • St Petersburg Times, courtesy of the Salt Lake Tribune: Blumner: America's working poor need to revitalize union movement. Excerpt: We may think rock-bottom prices for DVDs and crock pots at stores such as Wal-Mart are a boon to our household budgets, but the social costs are incalculably high. Essentially, we are underwriting cheap and exploitative employers with welfare programs -- food stamps, public housing, etc. -- and the earned income tax credit, a subsidy paid to low-wage workers that supplements the paltry pay of "greeters" and cashiers, burger-flippers and hotel maids. Meanwhile these jobs are creating a permanent underclass. Anyone making $8 per hour -- the average wage at Wal-Mart -- is still well below the federal poverty line of $18,850 for a family of one adult and three children. ... Meanwhile, the gap between rich and poor is widening without any discernible concern from those at the top end. Greedy executives think nothing of making obscene salaries, thousands of times more than their lowest paid workers. In 2003, the average CEO of a major company received $9.2 million in total compensation, while the current minimum wage of $5.15 per hour provides full-time employees a gross annual income of $10,712. Trickle down is feeling more like spit upon. This is unhealthy and unstable. It is in our nation's long-term interest to address these gaping disparities. People in difficult economic straits, who see no reasonable hope for future advancement, are not invested in society. With no stake in the status quo, a restlessness can take hold. For our own security, the bedrock promise of America -- that of upward mobility into a broad and thriving middle class -- needs to be revived.

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • Reuters: Firms mute job-migration talk in U.S. election year. Excerpt: Mum's the word for U.S. companies exporting jobs to India and other countries in a presidential election year. But their silence isn't golden. Instead, it's rooted in fear. ... Executives, who have recently become much more reluctant to talk about outsourcing or offshoring jobs, also fear for their own jobs. They worry that their jobs will be next on the chopping block -- if they don't cut costs fast enough. The upshot? The media, investors and analysts are often kept in the dark. "The public discussions are significantly lessened, but that doesn't mean that the activity is going away," said Peter Allen, president of outsourcing consultant TPI. Allen added that companies are more likely to recruit American service providers such as International Business Machines Corp., with offices in India, instead of going directly to Indian service providers such as Infosys Technologies Ltd. This can help them mask where the jobs are going, he said. The fear of political backlash -- and media exposure -- also is driving more clients to ask service providers not to disclose offshoring deals to the media.


  • Outsourcing humor from Despair, Inc. (Editor's note: Fans of motivational posters should not miss this one!)


  • CNN/Money: Answers on Outsourcing. A finance professor argues against placing blind faith in outsourcing. Excerpt: The costs of the decision to outsource are not borne by the decision maker. As a society and as a country, we experience many costs from outsourcing, including the loss of jobs, social costs, higher costs of raw materials and loss of national sovereignty. Loss of jobs reduces the tax base, creates high unemployment benefit costs, and raises the cost of government retraining programs. Displaced, unemployed workers have higher rates of child and spousal abuse, alcoholism, bankruptcy, divorce, etc. As China and India and other large populations grow, they demand huge quantities of oil, gas, steel and other basic raw materials. These costs are born by all of us -- every time we fill our gas tanks, for example. And as a nation, we lose our ability to make independent decisions that are in our best interest when we are dependent on foreign debt and foreign manufacturing. This is a classic externality.


  • New York Times: Send Jobs to India? Some Find It's Not Always Best. Excerpt: "Only certain kinds of tasks can be outsourced — what can be set down as a set of rules," said Nariman Behravesh, chief economist of Global Insight, a forecasting and consulting firm based in Waltham, Mass. "That which requires more creativity is more difficult to manage at a distance." Another Indian executive in the United States who has soured on outsourcing is Dev Ittycheria, the chief executive of Bladelogic, a designer of network management software with 70 workers, also in Waltham. Bladelogic, whose client list includes General Electric and Sprint, outsourced work to India within months of going into business in 2001. But it concluded that projects it farmed out — one to install an operating system across a network, another to keep tabs on changes done to the system — could be done faster and at a lower cost in the United States.


  • WashTech: Indian Business Lobby Fetes Congressional Delegation. Democrats take outsourcing tour to India. Excerpt: In January, two of the most influential Indian trade lobbies subsidized a nine-day, five-city trip for a United States Congressional Delegation to discuss political, defense, health and economic ties between India and the United States. ... Democratic Party leaders and presidential candidate Sen. John Kerry have clearly voiced a position that the Bush Administration’s support of unrestricted outsourcing has hurt the country. So it is eye-opening that a sizable group of Democrats would so willingly participate in an obviously pro-outsourcing travel junket — two Congress members and their spouses billed over $34,000 for the trip — all paid for by CII, the biggest Indian high-tech lobby. ... As the debate over outsourcing has increased, American companies engaged in outsourcing have sought to limit public exposure in which their names are associated with Indian contract companies, mindful of the public outcry that has arisen over unemployment and job security. But Indian lobby groups have not been shy about promoting the positive effects of outsourcing. "I want to promote the India, Inc. brand abroad," said NASSCOM president Kiran Karnik, the former head of the India Discovery Channel, in a profile published on the organization’s Web site. "I want to make India and IT as synonymous as France and wine or Switzerland and watches." ... On a local level, Dobrowner said he would also take a closer look at politicians who promote outsourcing when it comes time to vote. “I don’t want to hear vagaries. If you tell me to go back to college to get reeducated, I want to know what in. Should I go to McDonald’s University and learn to flip a burger? Just tell me what to do.”

  • Computerworld: India upbeat about grappling with labor crunch. Big companies are blamed by Indian service providers for pushing up salaries. Excerpt: As business booms for Indian IT outsourcing service providers, hiring and retaining software engineers at salaries considered reasonable in that country has become difficult. Despite the staff crunch, however, multinational companies are still setting up or expanding software development facilities in the country or outsourcing to Indian software service providers. ... However, large multinational technology services companies like Accenture Ltd., Electronic Data Systems Corp. and IBM Global Services are hiring staff by the thousands in India and are being blamed by Indian service providers for pushing up salaries. These big companies "are willing to give 30% to 40% hikes in salaries," said Laxman Badiga, chief executive for staffing at Wipro Ltd., one of India's largest IT services companies.


  • WashTech: For Whom the Bell Tolls: Media Examines The Human Cost of Offshoring. Excerpt: And last week's episode of NBC's "The West Wing," had presidential aid Josh Lyman (played by actor Bradley Whitford) agonizing over the realization that he successfully negotiated a trade pact that allowed a U.S. tech company to offshore 17,000 jobs to India. "Do you ever wonder if we forget the human face of trade? The blood and muscle?", Lyman wondered aloud to another White House staffer. The unintended consequence of the trade pact torments Lyman, who remembers that the Bartlett administration made a promise to the head of the Communications Workers of America during Bartlett's first presidential campaign. The promise, viewers were left to presume, was to protect American technology jobs. It was a promise the Bartlett administration was prepared to break in the interest of "creative destructionism," an oxymoronic term meaning, apparently, that sometimes it is necessary to destroy part of a country's economy in order to rebuild it, to allow it to become more dynamic than it once was.


  • AccountingWEB.com: Outsourcing to India to Increase 50% Next Year. Excerpt: All the talk against foreign outsourcing this political season has not translated into action by U.S. executives, who plan to send 50 percent more work to India next year. According to a study by Ernst & Young, while opposition to outsourcing has intensified in the presidential campaign and among union groups, the flow of work to India has remained constant, the Financial Times of London reported. "The sentiment is very strong. None of our participants felt business on the ground had been affected," said Gopal Jain, a private equity investor involved with the Indo-American Chamber of Commerce in Mumbai, which jointly produced the report. The study backs up forecasts by the National Association of Software and Service Companies (Nasscom), the main group representing India’s booming technology industry.


  • San Jose Mercury News: Tax relief for offshoring? Excerpt: Infosys Technologies, an India-based software development company with its U.S. headquarters in Fremont, asked the state for more than a million dollars in tax relief, saying the standard tax formula fails to reflect that two-thirds of its U.S. work is done offshore. In its petition to the California Franchise Tax Board, Infosys argues that it pays its engineers in California nine times more than those in India and that difference inflates its California tax liabilities. State tax officials rejected the claim last week. But the request for a lower tax burden by the company -- which derives about 75 percent of its $1 billion a year in revenue from U.S. companies -- left some observers dumbfounded. "They're asking for a tax break on the grounds their payroll costs one-ninth in India,'' said Lenny Goldberg, director of the California Tax Reform Association. "It takes a lot of nerve to ask that, considering the context in which they operate.''

Now on the Alliance@IBM Site:
  • James Leas Speech to the IBM Stockholders. Excerpt: On July 31, 2003, in the class action case of Kathy Cooper v. IBM, a federal court in Illinois declared that IBM had violated federal discrimination law. But IBM stockholders were not convicted. Nor were IBM customers or employees found guilty. Mr. Palmisano, you and your predecessor, Lou Gerstner were responsible for making and maintaining the decisions, and the federal court essentially convicted both of you. The court rejected IBM's excuses that the law changed and that IBM did not know the law. From IBM's own documents Judge G. Patrick Murphy stated that "IBM was aware of the age discrimination issues that would come with the new cash balance formula." The court said that indeed the plan's actuaries told IBM of two separate ways that the cash balance formula violated the law. Thus, from IBM's own documents Judge Murphy concluded that "IBM proceeded [with the cash balance plan] with open eyes and was fully informed of the consequences of the litigation that was sure to come." Mr. Palmisano, the court found that you and Mr. Gerstner knew you were engaged in illegal action. While IBM's liability has now been established, the judge has yet to rule on the remedy, which IBM said could cost it $6 billion. ...

    What if the real purpose of slashing pensions was to use what was then a little known accounting rule treatment of pension money to inflate IBM's profit report with "vapor profit" from the pension fund and boost executive pay? The vapor profit did not help stockholders because no money could be transferred from the pension fund. It was just an accounting rule gimmick. So only the executives gained, and their personal gain was the underlying reason for the illegal action. Previous IBM executives, to their credit, had done the opposite. They had established and built this pension trust fund that enabled IBM to provide a very valuable benefit to every IBM employee and retiree at no cost to IBM and at no cost to shareholders. The pension provided enormous competitive advantage in attracting and retaining the most talented employees in the industry, and building loyalty and dedication. When you and Mr. Gerstner reneged on that promised pension and retirement medical, you blew that competitive advantage, you blew that loyalty, and you blew that trust.
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