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    Highlights—July 31, 2004
  • Wall Street Journal: Medicare 'Windfalls' Pose Hurdle for Government, by Ellen Schultz. Excerpts: The draft of proposed new Medicare-drug regulations underscores the federal government's concern employers could receive tax-funded "windfalls" from a subsidy intended to encourage them to maintain private prescription-drug coverage. However, the government agency that would administer the subsidy notes in the draft that preventing such windfalls could be legally difficult, although it is seeking comment on ideas to reduce the potential for abuse of the subsidy system. The law, enacted last December, provides subsidies for employers to encourage them to continue to offer drug coverage to retirees over age 65. Washington is trying to prevent companies from dumping millions more retirees into a federal drug-coverage program that is set to begin in 2006.

    Critics blasted the law earlier this year when it was discovered employers could collect subsidies based not just on the cost of the prescription coverage to the employer, but even for costs paid by retirees themselves. Employers and lawmakers initially argued employers wouldn't be able to get a windfall, and Bush administration officials insist employers won't be eligible for the subsidy unless they offer benefits that are at least equivalent to those offered under the Medicare program. However, the proposed regulations, released by the federal Centers for Medicare and Medicaid Services, or CMS, on Monday, express concern that under the current statute, employers could actually receive more in subsidies than they pay for retiree prescription-drug coverage. This isn't apparent from the summary released to the media and public, but is detailed in the 86 pages of technical language pertaining to employer subsidies, deep within the more than 1,300-page document.


  • Motley Fool: Retirement's Second Leg: Pensions. Excerpts: When the government uses the word "pension," it means any kind of employer-sponsored retirement benefit. But when people talk about pensions, they're usually talking about what are technically known as "defined-benefit plans." These plans pay a monthly retirement benefit based on formulas that consider such factors as years of service and average salary. Employers are responsible for most (if not all) of the funding, and they're in charge of managing the money (though they usually hire investment firms). Pensions gradually became an integral source of retirement income for many Americans. In fact, the triumvirate of pensions, Social Security benefits, and savings make up the traditional three-legged stool that many folks use to prop up their retirements. However, future retirees can't put as much weight on that stool as their parents did.

    "ibmmike2006" comments that some in IBM haven't had the defined-benefit pension "leg" pulled out from under them. Excerpts:
    • Now go to chart 2 of the IBM proxies and look at the IBM SERP plan starting in 2001, Sam will get $677,000 a month for life—65% of his final 5 year average compensation. Chart starts at $500,000 to $12,500,000 annual life pension for IBM executives. Prior to Gerstner, the highest amount was $2,500,000 in 2000. This article fails to mention that, where the money went, straight to "improved" executive compensation plans like SERP. IBM 2000 Proxy SERP where Sam would have made $1.3 million maximum annually from his age 60 retirement and Gerstner is receiving $1,140,000 annually. This was the dramatic increase in the SERP funding from $1.3 million to $8.125 million for Sam. (See http://www.ibm.com/annualreport/2000/flat/proxy_stmnt/10_5_proxy_stmnt.html.)
    • IBM 2001 Proxy SERP where Gerstner changed the SERP where Sam will make $8,125,000 annually. Nice payoff for Lou taking the 20,000,000 million shares of IBM stock in 1998, I suppose. If you wonder where IBM suddenly got a sudden surge of money to support the increase in the SERP for Sam from $1.3 million to $8,125 million annually for life, look to the IBM Pension Trust Plan Surplus where $18 Billion disappeared in two years ending 2002. (See http://www.ibm.com/annualreport/2001/proxy/pr_execcomp.html.) This shift of wealth from Pension Trust funds to SERP's was not an accident.


  • MSN Money: How the 401(k) system fails most people. OK, so you actually have a 401(k). But what does that really say about the security of your retirement? Not much, according to one expert. Here are 3 big problems with the system. Excerpt: "Now ask yourself a question. If only 5% of the people can retire in dignity, can the board of directors, the investment committee, the trustees, the accountants and all the providers claim they've honored their fiduciary duty? "I say no," Hamilton answered. Later in the conversation, Hamilton puts the situation another way. He likens the fiduciary to a general: "If a general took an army of 1,000 into battle and returned with 50 survivors, leaving the rest as casualties on the field, what do you think would happen?" Before I can answer, he says, "The general would be court-martialed." What Hamilton sees coming is worker rage as millions of workers realize the scope of the failure they are facing and the complacency of those responsible -- the fiduciaries. He calls it "a perfect legal storm." I asked if there was any evidence of this coming legal storm. "It has not escaped the attention of the plaintiffs' bar that a RICO violation will trigger triple damages and only requires that two or more people be involved in a conspiracy to enrich themselves by diminishing the well-being of others," Hamilton noted. (RICO, passed in 1970, stands for Racketeer Influenced and Corrupt Organizations Act and was originally intended as anti-organized crime legislation.) "Remember," he said, "ERISA (the Employee Retirement Income Security Act of 1974) imposes a fiduciary duty that is greater than anything previously defined in western civilization -- a duty of faithfulness, loyalty and care."


  • Annex Research: Gerstner's Compensation, 1997-2001. Excerpt:
      Salary Bonus Other Long-Term 401(k) Stock Sales
    (Est. pre-tax gain)
    Total
    1997 $1,500,000 $4,500,000 $5,081 $2,094,018 $102,600 $6,705,008 $14,906,707
    1998 $1,875,000 $7,500,000 $12,384 $4,145,419 $191,250 $32,800,000 $46,524,053
    1999 $2,000,000 $7,200,000 $66,376 $5,250,717 $285,000 $87,732,699 $102,534,792
    2000 $2,000,000 $8,000,000 $96,400 $3,585,407 $276,000 $59,887,423 $73,845,230
    2001 $2,000,000 $8,000,000 $82,888 $2,190,819 $300,000 $115,130,197 $127,703,904
    Total $9,375,000 $35,200,000 $263,129 $17,266,380 $1,154,850 $302,255,327 $365,514,686
      3% 10% 0% 5% 0% 83% 100%


  • CNN/Money: CEO pay hikes double. Corporate Library survey finds median raise for S&P 500 CEO was 22.18% in 2003. Excerpt: The watchdog group said that stock options and awards of restricted stock drove the larger pay hikes. But most elements of the pay -- base salary, annual bonuses, restricted stock, long-term incentive payout, value realized from stock options and total compensation -- showed increases. The only type of compensation not to show a gain was the value of stock option grants during the year. "This double-digit rise in pay shows that calls for pay restraint appear to be being ignored," said the statement from the group.


  • WashTech News: Microsoft’s India workforce doubles. Internal documents detail contract employee work agreements. Excerpt: Last week Microsoft Corporation announced that it would pay out $30 billion in stock dividends, but the company didn’t bring up the potentially controversial news that it has twice as many employees in India as reported in June. Microsoft now employs nearly 2,000 workers in India, double the 970 number it previously acknowledged, as shown in internal company documents obtained by WashTech News. Microsoft employs more than 1,000 contractor workers in addition to 900 full-time employees. The documents suggest that the contractors and employees are involved in high-level development projects and not just low-level work such as call center customer service. The documents include detailed lists of Microsoft staff at its Hyderabad and Bangalore offices, and Master Services Agreements between Microsoft and multiple Indian vendor agencies, including Wipro, Infosys and Satyam. The agreements refer to projects such as .Net Application Security for the company’s developer platform, and the Migration Guide and TAPI (Telephony Application Programming Interface), testing for Longhorn, the successor to Windows XP that is due out in 2006.


  • Reuters: IBM says options would have hit Q2 net by 12.7 pct. Full excerpt: IBM's net income would have been 12.7 percent lower if it had expensed stock options in the June quarter, the world's largest computer company said in a regulatory filing on Friday. Armonk, New York-based International Business Machines Corp. (IBM) said it would have reported second-quarter net income of $1.74 billion instead of $1.99 billion had it expensed stock options under the fair value method. The expensing would have reduced its earnings per share by 15 cents to $1.01 per share, Big Blue said in a filing with the Securities and Exchange Commission. Last year in the second quarter, expensing stock options would have cut net income by 13 percent. Accounting regulators have been pushing for a rule that would require companies to treat employee stock options as an expense, but they have not yet determined what method they will use to value them. IBM, whose shareholders earlier this year urged the company to start treating options as an expense, has said it will start expensing them when it is required to do so by regulators.
    • "ibmmike2006" comments. Excerpt: It is interesting to note, that expensing IBM stock options would reduce IBM profits by 12.7%. From $1.99 Billion to $1.74 Billion or $250,000,000 in profit disappeared, $1 out of $8 in profit went into the 3,000 IBM Executive's pockets as stock options. If I divide $250,000,000 million by 3,000, it equals about $83,333 a head. Now this might be simple math, but IBM admits, profits are reduced by 12.7% because of stock options. Sam made $20,000,000 million last year. Outrageous. No one is worth that much especially since most of it is being funded by IBM stock purchased from America's 401K's funds and pension funds managers and the Beardstown ladies.

  • Washington Post: The Tax Break That Corporate Execs Don't Need. Excerpt: Helping uninsured Americans acquire basic health coverage is an important presidential campaign issue. Not only are there an estimated 43 million uninsured, but premiums for those who do have insurance are rising at double-digit rates, employers are shifting an increasing share of the costs onto employees, and many people who used to work for companies that paid part of their insurance are now self-employed and have to foot the whole bill themselves. ... Want to know how to cover all of Bush's plan or make a significant down payment on Kerry's? Here's how: Congress could eliminate a tax break that for the last 50 years has irresponsibly subsidized deluxe health insurance policies, mostly for corporate management. If tax relief for health insurance were limited to basic policies, the additional income tax revenues -- $15 billion in 2004 alone, according to a 2001 Congressional Budget Office estimate -- could go a long way toward covering the uninsured. Moreover, tax breaks for deluxe policies excessively drive up the cost of health insurance, and health care, for everyone. So curtailing this tax break is a winner for the great majority of Americans.

    Yet it (Congress) has never limited the exemption to the cost of a basic policy -- i.e., one with a significant deductible, broad co-payments, limited coverage for a range of expenses and a separate premium for dental costs. Nor does it insist that the exclusion advance the goal of maximizing the number of insured ordinary workers. Instead, it goes along with arrangements that maximize coverage of executives and minimize coverage for all other workers. For example, an employer might pay 100 percent of the cost of a deluxe plan (nominal deductible, modest co-payments and broad coverage, including a generous dental plan) for executives, all tax free, while paying only a small percentage -- or even none -- of the cost of a basic plan for all other employees. (The laws of some states may mandate that employers provide minimum coverage for a certain portion of workers.)


  • 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:
    • "No truer words were ever spoken" by "Dose of reality". Full excerpt: "IBM HR works for themselves and no one else." They are henchmen for the amateurish executives that have been myopically setting financial and staff resource objectives. In a well-run company, they would be a voice of reason that would provide checks and balances against proposed policy decisions that serve to ruin our organizational dynamics. Instead, they blindly follow along, rewarded for compliance and silence, with special recognition for identifying and executing on additional staff-unfavorable compensation and other policy changes that lower short term costs. Their customer service focus is reserved exclusively for managing upward - hence the situation that inspired the original post in this thread. They are simply not measured on real customer service or recruiting efficiency, they are measured on cost reduction targets and deference to the power structure.
    • "What is taking so long!!!" by "Xclusive". Full excerpt: I just wanted to get an objective opinion (I know there's a lot of anger on this board) on my current situation with IBM BSC. I interviewed with the BSC Supply Chain group (S.C.) in the middle of June and was told I would here something in about 7 days. Two days after I interviewed with them I received an email from H.R. saying I was being referred to another group within their S.C. dept. and they will be in contact with their final decision. That was almost five weeks ago. My question is this: After a total of almost 5 frustrating weeks since my on-site interview, positive remarks on my interviews and IPATO test by HR, and a couple of requests for a decision, what are the chances that an offer will be extended? My thinking is, at this point, those that are not "the right fit" should have been informed by now so they can purse other opportunities. I know IBM is a huge organization, but it doesn't take 5 weeks to make a decision about one candidate, or does it? Any feedback, comments or suggestions are welcome.
    • "Don't take it too personally" by "Dose of reality". Excerpt: HR is an institution, a collective, as in the Borg from the Star Trek series. If your entire function is measured based on compliancy and squeezing staff costs, then no one would expect any one in the trenches to do anything different. There are those that are effective in having a positive influence on the organization, but they are limited to the rare breed who are internally motivated to do the right thing. A seasoned empowered "HR Director" would push back based on his superior knowledge of Human Resource Management. He would implicitly understand the ramifications of what we have been doing to staff the last few years and would push back in the name of effective long term Human Resource Management. Absent this, the entire HR function becomes a rubber stamp for the bad decisions that are being made to just make this quarter's/year's numbers. The fiction of company health continues temporarily, those in charge, including our representative HR director, continue to reap their rewards, but the rest of the corporate entity and consequently the shareholders are screwed. Strategy drives objectives, which in turn drives business processes. Our strategy is suspect, our business objectives are unrealistic and short-sighted, and our business processes (of which comp and HR policies are just one example) are reactionary and just serve to close the gaps caused by the first two deficiencies.
    • In answering a question about executive compensation, "mbumburu" states "I left IBM last year. I was a Band D exec and became partner after the acquisition. OTE were about $260K USD. Salary/commission split was 60/40. I made almost nothing on my bonus, as BCS EMEA was tied completely to the overall performance of IGS EMEA."

  • Employee Benefit News: The case for paternalism. Excerpts: Paternalism in employee benefits meant a basic health plan, probably dental benefits, group life insurance and, in large organizations, a pension. There were low, if any, employee contributions for this coverage and, yes, one size did fit all. Then someone got the idea that one size did not fit all, and choice was needed. Egged on by consulting firms seeing a windfall in creating controlled confusion (more plan designs, more communication to explain them, more tools to verify that employees really wanted choice and, more systems to support open enrollments), we began the journey away from the good old company making all the decisions to a work force culture that today allows some employers to simply walk away from all of this without a second thought, as if the capital goods were somehow used up. Consider these statements that I recently overheard at a conference. "We've done everything we can to shift costs to employees and are looking for the next great thing." "Employers need to be able to change their retirement plans to fit the business." It's like there is no relationship between what employers do and the human capital they are doing it to.

    For larger employers, real paternalism for workers used to be expressed as benefits after retirement, a pension, and health benefits, maybe even life insurance. Call it what you will, a reward for long service or deferred compensation during all the years of employment. It was nevertheless a vital part of the employment agreement and one that helped make millions of Americans secure in their retirement years. In today's world of short-term goals, disposable human capital and disenfranchised workers, there will come a time when the old will be new again. What will give an employer the competitive edge in not too many years will be, you guessed it, paternalism. Most likely not the 1950s variety, but a more refined blend of caring, mutual respect and an understanding that, for one reason or another, most Americans like stability and predictability in their lives. They like as little hassle as possible, and they like the feeling of security.

    The employers of choice in the future will be the ones who are willing to make long-term commitments to their workers, find the right balance between company and employee needs, and see value in a stable work force. They will provide a good basic benefits program that protects workers from serious financial risk on all fronts and allows them to accumulate a livable retirement income. They will not change the benefits plan every year or two as short-term fortunes change, and they will adequately fund benefits so they will be there for the long run. They will resist overly generous, trendy benefit improvements that have to be withdrawn when a quarter's earnings target is missed; they will keep a promised reward for long-term employees.


  • Christian Science Monitor: New overtime rules: favoring management? Excerpts: At least 6 million American workers will lose their right to overtime pay starting Aug. 23. At least that's what Ross Eisenbrey, an economist with the liberal Economic Policy Institute in Washington, charges. "It's the worst rollback in employee rights in 57 years," he says, harking back to the passage of the Taft-Hartley Act in 1947, a bill that put some limitations on trade union activities. A Department of Labor (DOL) spokeswoman, Pamela Groover, calls Mr. Eisenbrey's study and attacks by the AFL-CIO, the nation's trade union federation, "misinformation stuff" that "hurts workers." ... Who's closer to right - Eisenbrey or the DOL - may be suggested by the fact that almost every business association in the country is loudly cheering the new regulations published in April and taking effect in four weeks. The list includes the 600,000-member National Federation of Independent Business, the 14,000-member National Association of Manufacturers, and the 3 million-member United States Chamber of Commerce. Business clearly expects to benefit from the new rules. "This rule is an abomination," says Eisenbrey. Bosses, he adds, will be able to work more employees 50, even 80, hours in a week without paying time-and-a-half or anything extra for hours worked beyond 40. Americans already work far longer hours than employees in most rich nations. The French workweek is by law 35 hours.

    To Ross, the new rules are another sign that the DOL "goes out of the way to do bad things for working people." Traditionally the Labor Department under any administration, either Republican or Democratic, has been regarded as a supporter of workers in the perpetual conflict between management and labor over government regulation. The Commerce Department is seen as the protector of business. But organized labor has taken aim at the Bush administration's Labor Secretary Elaine Chao for not taking their side. "We have two secretaries of Commerce," AFL-CIO President John Sweeney has grumbled.


  • Jim Hightower: Wal-Mart Milks Tax payers. Excerpt: Wal-Mart, we're told, is the epitome of free-enterprise in America – work hard, be innovative, achieve efficiencies, and your company will be rewarded with riches! Oh, yes, one more thing, be sure to load up on government subsidies along the way. Good Jobs First, a research center that studies the doling out of public money to corporations, reports that the sprawling of Wal-Mart's empire has been fueled by the steady injection of more than a billion dollars from the pockets of us taxpayers – including taxes paid by local businesses that subsequently have been squeezed out of existence by Wal-Mart's subsidized muscle. Digging into scattered, often-hidden records of state and local governments, the center found 244 cases of giveaways, including construction grants, special tax breaks, and job-training money. The average payout to a Wal-mart store was $2.8 million. Imagine being an independent pharmacy, hardware store, grocery or other shop and having to compete with a multibillion-dollar giant that is then handed an extra $2.8 million taxpaid advantage over you.


  • Yahoo! message board: "Resistance is futile" by "prtdavis2". Excerpt: I am about to be absorbed into the IBM collective and my options are to accept the offer or be laid off. I am a Sprint employee (today, tomorrow, I dunno). We have 1800 people in the Kansas City area being 'rebadged' to IBM, 1000 employees (like me) and 800 contractors. We have a town hall meeting with IBM reps on Thursday - given what some of you know now, what questions would you ask prior to being employed by IBM that would have helped the transition? Is there anywhere I could see the level of the absorbed employees who are retained and for what length of time. From the forwarded documents we've read, they (IBM) says that they "plan" to employ us for a minimum of one year - can I have a reasonable expectation that this is accurate? The 'sales' pitch is that IBM provides us with more opportunity than we could possible get at Sprint (seeing that IBM's IT division dwarfs our entire organization's staff) and that IBM plans on keeping the majority of the employees - if not all - on the same project.
    • Bob Sutton replies. Excerpt: Well Paul welcome to the IBM IGS meat grinder. I'd like to be more positive but that is what it is and the only way IBM makes money on these contracts to blend in new customer staff and infrastructure over time into its common one. In that process they "must" reduce staff and also use the latest and most productive infrastructure to make profit objectives. During the due diligence with Sprint they have already determined who will stay and who will go in the first round of cuts. That will happen after you are rebadged so the customer does not have to get his "hands dirty". Even if you survive beyond a year all IBMers are forced ranked into three ratings; the last one (3) is used to constantly make room for people like you (and the ones to follow) even if they do their job and meet expectations of their performance plan. They call it a "performance culture"... I call it shot the last person in line sort of like the Batan death march in WW2. As Jack Welch the proponent and popularizer of this style of ranking said "it keeps the employees on their toes".
    • "dave49_98" replies. Full excerpt: Hi Paul, They will be telling you all the GREAT things like education. Well on the AT&T account they cancelled training for 3 straight years. You might want to ask how many of the 3500 Original AT&T employees are still with IBM. You also might ask how many of those jobs were transferred to Canada and India. You might ask if you have to bill at least 44 hours a week and then do IBM paperwork on your own time. (I always thought AT&T had BS but nobody holds a candle to useless paperwork like IBM.) You might ask if you have to bill 2000 hours which means if you get 4 weeks vacation you can't take it unless you make the hours up. You also might ask why you only get credit for IBM time for severance when they fire you. So if you have 25 years with Sprint and 2 years with IBM do you only get 4 weeks severance. And lastly I would ask that now they give you 60 days to find a job in the company are they still pulling jobs from job post and forbidding managers from hiring anyone targeted for firing. I am sure the answer will always be the same "You should work that issue through your local management." One last thing you could ask is if you work there 3 years will you meet a career IBM manager. Our interviews were with Equifax managers that worked for IBM and had no clue about AT&T, telecommunications, or much of anything else. They were just told go listen to these guys. You could also ask why they will make everyone band 6, even if you have a graduate degree. (answer its cheaper.) Good Luck

  • New York Times Opinion, by Paul Krugman: Triumph of the Trivial. Excerpt: Under the headline "Voters Want Specifics From Kerry," The Washington Post recently quoted a voter demanding that John Kerry and John Edwards talk about "what they plan on doing about health care for middle-income or lower-income people. I have to face the fact that I will never be able to have health insurance, the way things are now. And these millionaires don't seem to address that." Mr. Kerry proposes spending $650 billion extending health insurance to lower- and middle-income families. Whether you approve or not, you can't say he hasn't addressed the issue. Why hasn't this voter heard about it? Well, I've been reading 60 days' worth of transcripts from the places four out of five Americans cite as where they usually get their news: the major cable and broadcast TV networks. Never mind the details - I couldn't even find a clear statement that Mr. Kerry wants to roll back recent high-income tax cuts and use the money to cover most of the uninsured. When reports mentioned the Kerry plan at all, it was usually horse race analysis - how it's playing, not what's in it. On the other hand, everyone knows that Teresa Heinz Kerry told someone to "shove it," though even there, the context was missing. Except for a brief reference on MSNBC, none of the transcripts I've read mention that the target of her ire works for Richard Mellon Scaife, a billionaire who financed smear campaigns against the Clintons - including accusations of murder. (CNN did mention Mr. Scaife on its Web site, but described him only as a donor to "conservative causes.") And viewers learned nothing about Mr. Scaife's long vendetta against Mrs. Heinz Kerry herself.


  • Washington Post: GE Lobbyists Mold Tax Bill. Firm Saw Subsidy Repeal as Chance to Pay Less. Excerpts: No company in the nation had more to lose than General Electric Co. when the World Trade Organization decreed in 2002 that U.S. tax laws violated international treaties. The multinational conglomerate was saving hundreds of millions of dollars a year in taxes from the export subsidies that the United States had to discard. But in a two-year campaign, fueled as much by brains as political brawn, GE has shaped the legislation that would replace the old export-promotion law in ways that would allow it to save as much, if not more, in taxes, according to both GE lobbyists and congressional aides. In pursuing its financial interest, the company may also have turned the U.S. corporate tax code away from domestic manufacturing and toward expansion of operations abroad. "The bill is truly amazing," said Michael J. McIntyre, a tax law professor at Wayne State University and an expert on international corporate tax issues. "We had an incentive for exports that was illegal and had to be repealed. Now Congress takes the money saved by the repeal and uses it to reduce taxes on the income earned by U.S. companies in foreign countries, thereby making foreign investment more attractive than U.S. investment." ...

    GE was far from alone in trying to fashion what has become the most important corporate tax bill in nearly 20 years. Lobbyists for the nation's biggest companies have dusted off their favorite tax benefits and tried to sell them as part of the legislation. As a result, the measure, which began as a simple repeal of the $5-billion-a-year export subsidy, has swollen to include more than $140 billion in tax breaks over the next 10 years. ... GE is likely to get a lot of what it wants, tax aides in Congress agree. The company certainly has been successful before in passing legislation that has kept its taxes low. Between 1994 and 2001, the company's effective tax rate was above 30 percent in every year but one, according to Standard & Poor's. Last year, the firm's tax payments slid to 21.4 percent of profit even though the top corporate tax rate remained at 35 percent. If the new legislation is signed into law, GE's tax payments are likely to fall further, said Robert S. McIntyre of the liberal Citizens for Tax Justice. "This is the definition of corporate welfare," McIntyre said. "To these guys, old tax breaks have become entitlements, even illegal ones."

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • Wall Street Journal: IBM Now Plans Fewer Layoffs From Offshoring, by William Bulkeley. Excerpts: International Business Machines Corp., adopting new policies to take some of the sting out of job-offshoring, expects to lay off fewer U.S. employees this year because of work being transferred overseas. IBM became a lightning rod for critics of offshoring earlier this year after internal documents revealed plans to send nearly 5,000 jobs to India, Brazil and other developing countries over two years to save on labor costs. Many of the jobs were high-skilled programming positions that pay 75% less abroad. Now, according to new internal documents made available to The Wall Street Journal, the company has adopted new internal-transfer policies aimed at filling more open positions at IBM with employees who would otherwise get a pink slip due to offshoring. IBM Vice President of Learning Ted Hoff confirms the changes and called them a major policy personnel shift. Mr. Hoff wouldn't say how many fewer offshoring layoffs IBM expected in 2004 as a result of the changes. But a person familiar with IBM's plans says it now expects 2,000 U.S. workers will lose their jobs as a result of offshoring, down from the 3,000 the company predicted in January.

    Even when companies try to find new jobs for employees whose work is sent abroad, the employees don't always land similar positions. At IBM, some transfers may mean lower pay. In a script that managers are given, a question-and-answer section says that workers are expected to take a "comparable job" if it is offered. As IBM defines it, a comparable job may be work at a lower employment classification, with up to a 10% pay cut and a shift or schedule change. If workers don't take the comparable job, the Q&A says, it's expected that they "will be separated from the company without separation pay," meaning they are fired. IBM's severance is typically two weeks of pay for every year worked.

    Some critics praised the moves. "It's a turnaround in their philosophy," says Lee Conrad, national coordinator of Alliance@IBM, a Communication Workers of America affiliate that has been trying to organize IBM workers for years. But "it remains to be seen" how many IBM workers offered substitute jobs remain employed, he says. Late last month, IBM notified hundreds of people in a 5,000-person group that develops in-house application software that their jobs might be moved abroad, and that they should start evaluating their skills and looking at options. One person in the group says the notifications had "a devastating effect on morale." One programmer at a New York state facility, who asked not to be identified, says that even though she is a 20-year veteran she constantly is scrambling to lock in future assignments. "Every job I've been on has moved to India and my job now is going to India" in the fall, she says. If link is broken, view Adobe Acrobat version [PDF--28 KB].
    • "Dose of reality" comments. Full excerpt: Pretty clever spin and damage control. There are two dynamics here – the layoffs that are required to make room for offshore labor and the hiring of offshore labor. The fact that IBM is going to encourage internal transfers is a good thing, but it has nothing to do with the number of jobs that will go offshore. The reason for the change of heart is that retention rates have dropped and hiring has become problematic. Facilitating internal transfers mitigates this, and yes there are cost advantages to not having to go external to fill openings. But these one time cost savings (20-30% of annual salary) are insignificant when compared to the annual savings of using offshore labor. Add devaluation of salary levels in the transfer process, and it makes good economic sense to encourage it. A better approach would be to raise retention rates, but that would be too much to ask. However, filling an internal opening with a displaced staff does nothing to slow down the number of jobs going offshore – they are totally unrelated. This will not change the prospective mix of onshore to offshore. Whether you fill a vacancy internally or externally, the global mix remains the same. Believe me, the offshoring juggernaut will continue unabated, and this publicity release is just headline-grabbing noise. This is an example of the IBM marketing/PR machine at its best!

  • Jim Hightower: Covering Up the Reality of Offshoring. Full excerpt: There are lies, damned lies, and statistics... then there's the U.S. bureau of labor statistics. This agency has become the official applier of yellow, smiley-faced stickers on an ugly economy that is stiffing America's workaday majority. For example, the agency has recently been hailing statistics showing that thousands of new jobs are being created – while burying the more telling statistics about the miserly pay of those jobs. What matters to working families is income, not the number of jobs. After all, even slaves had jobs.

    The labor department has recently come up with a new set of smiley-faced statistics to try to defuse the politically-explosive reality that CEOs are now offshoring hundreds of thousands of America's middle-class, white collar jobs. Sure enough, when the statistical report was issued, headlines blared: "Few jobs lost as a result of offshoring, study says." Indeed, the department asserts that in the first three months of this year, only 4,600 of the 182,000 job losses examined were related to offshoring. See... no problem, so let's stop talking about it.

    But it was a statistical deceit. The labor department examined only a small, selected number of total job losses for its report – less than 10 percent. For example, it looked only at mass layoffs by large corporations, ignoring the much more common practice of CEOs who offshore ten jobs this month, 30 the next, and so on. The report also ignores the massive number of jobs that corporations are creating in low-wage countries abroad that don't result in immediate layoffs here, but soon will. CEOs themselves admit that they're presently sending not a few thousand, but hundreds of thousands of jobs out of America – and plan to send more. No statistical hocus-pocus can hide this real-life, greed-induced assault on our country's middle class. And no headline can bury the fact that it's a seething political issue demanding a response.

  • Tampa Bay Online: Capital One Financial Cuts 1,100 Tampa Jobs. Excerpt: Jobs at call centers - one of the area's largest employers - are thought to be at risk as companies move more customer-service operations overseas. But Gray said he does not expect other companies to announce layoffs because of the trend. Capital One paid above- average wages for call centers in the area. Several workers said they made more than $35,000 a year and had strong benefits. "People are hysterical because there are people here who have just purchased homes or in the process of buying homes,'' said an employee who asked not to be identified. ... The company said it will contract with ``U.S. based companies'' to do the work now done by the 1,400 employees companywide who will lose their jobs. Tatiana Stead, a company spokeswoman, said she did not know whether those companies have foreign operations. Some U.S. companies have been contracting, in a trend known as outsourcing, with operations overseas to handle their call center and back-office operations.


  • New York Times: Indians Go Home, but Don't Leave U.S. Behind. Excerpts: Six years ago, Mrs. Dhar and her husband, Subhash, a vice president at Infosys Technologies, the Indian software giant, migrated like thousands of Indians before them, to America's Silicon Valley and its suburban good life. But Silicon Valley is not where their gated housing colony, Palm Meadows, sits. Like growing numbers of professional Indians who once saw their only hope for good jobs and good lives in the West, the Dhars have returned home to India. Drawn by a booming economy, in which outsourcing is playing a crucial role, and the money to buy the lifestyle they had in America, Indians are returning in large numbers, many to this high-technology hub. ... That is the focus of Srikanth Nadhamuni, who returned two years ago after 16 years in America, most of it spent in Silicon Valley, where he helped to develop the Sun Microsystems Ultrasparc and Intel Pentium chips. When he returned, he was appalled by Bangalore's pollution, traffic and poor roads. Tax revenues were not growing commensurate with cities, and therefore neither were basic services. Wealthy individuals and companies had swanky homes and offices, but they were islands. In response, he began developing an "e-government" software platform that uses digital mapping to permit far more accurate property tax assessments and collection. It will allow for electronic tax payment, birth and death registrations, the filing of citizen grievances, the public tracking of small infrastructure projects, and more.


  • Reuters: India's Wipro Q1 net jumps on U.S., telecoms upturn. Excerpt: Indian software giant Wipro said on Friday its quarterly net profit rose 83 percent as it gained from a U.S. economic recovery, a telecoms sector rebound and a weaker rupee. India's second-biggest listed software service exporter and a major beneficiary of corporate America's move to outsource jobs to Asia, said net profit for its first quarter to end-June rose to 3.25 billion rupees ($70 million) according to U.S accounting standards.


  • National Hire American Citizens Society: Quick Facts:
    • H-1B, L-1, Offshoring, and other American worker replacement programs H-1B and L-1 visa holders are temporary non-immigrant foreign workers.
    • Last year, 9 out of 10 American IT jobs went to H-1B and L-1 workers.
    • There are over 1 million American IT workers on the street looking for work.
    • There are over 1.5 million H-1B workers in the U.S.
    • In the next 18 months, 1 out of 10 American technology jobs will be moved offshore.
    • Off-shoring requires the use of H-1B and L-1 visa workers.
    • 40% of the workers in a typical off-shoring project are H-1B and L-1 visa holders working right here in the U.S. The Indian off-shoring firms have stated publicly that off-shoring depends crucially on H-1B and L-1 visas.
    • These jobs will never come back. We must act now to save the future of American technology jobs.
    • The new Bush immigration proposal is yet another American worker replacement program in disguise. All American workers in all job categories and pay scales can be replaced by this program!

  • Associated Press: Text of John Kerry's Acceptance Speech at the Democratic National Convention. Excerpts: And here at home, wages are falling, health-care costs are rising, and our great middle class is shrinking. People are working weekends -- two jobs, three jobs -- and they're still not getting ahead. We're told that outsourcing jobs is good for America. We're told that jobs that pay $9,000 less than the jobs that have been lost is the best that we can do. They say this is the best economy that we've ever had. And they say anyone who thinks otherwise is a pessimist. Well, here is our answer: There is nothing more pessimistic than saying that America can't do better. We can do better, and we will. ... What does it mean in America today when Dave McCune, a steelworker that I met in Canton, Ohio, saw his job sent overseas and the equipment in his factory was literally unbolted, crated up and shipped thousands of miles away, along with that job? What does it mean when workers I've met have had to train their foreign replacements? America can do better. And tonight we say: Help is on the way. ...

    We value an America where the middle class is not being squeezed, but doing better. So here is our economic plan to build a stronger America: first, new incentives to revitalize manufacturing; second, investment in technology and innovation that will create the good-paying jobs of the future; third, close the tax loopholes that reward companies for shipping jobs overseas. Instead, we will reward the companies that create and keep good- paying jobs right where they belong, in the good old USA. We value an America that exports products, not jobs. And we believe American workers should never have to subsidize the loss of their own job. Next, we will trade, and we will compete in the world. But our plan calls for a fair playing field, because if you give the American worker a fair playing field, there's no one in the world that the American worker can't compete against. (Editor's note: Should President Bush address off-shoring issues in a speech at the Republican National Convention or elsewhere, we will report it here).

"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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