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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
- 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
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.
- 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
- 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
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
(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:
- 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
- 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
comments. Excerpt: It is interesting to note, that expensing IBM stock
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:
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.
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.
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
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.
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
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".
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
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
- 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
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:
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:
- 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
- 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
- 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).