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Highlights—February 19, 2005
- Janet Krueger answers
several questions pertaining to IBM's 1995 changes to its defined benefit pension plan. Full
excerpt:
Question: Yet IBM is in effect saying, any dollars
my dollars> earn don't
go to me and even though I will be retired one year less for every additional year I work,
there is no increase in my annuity payment. Why?
Answer: There are scenarios for some employees, if they assume
no salary increases, where the age 65 annuity payment
actually goes DOWN if they continue working.
Question: Is this addressed in the current litigation?
Answer: You bet it is! It is extremely age discriminatory.
One of the pieces of documentation presented to the
court is evidence that a 1994 presentation to the
board, as well as one to the Society of Actuaries, the
pension plan designers bragged that this plan design
would motivate older employees to voluntarily resign,
without IBM having to go to the expense of offering
them golden parachutes... IBM has agreed not to appeal the portions of the
lawsuit charging IBM with age discrimination in the
1995 plan.
Question: It's my understanding the settlement will not change the 1995
plan, but seek a one time settlement to cover problems (employee losses) up to the 1999 switch
to cash balance.
Answer: You are partially correct. The settlement agreement
calls for a separate settlement to address age
discrimination problems in the 1995 formula. For
employees who have already left IBM, the settlement
will be collectable as either a one time cash payment
that can be deposited in an IRA account or as an
annuity. Employees who are still at IBM will be able
to decide how their share of the settlement should be
distributed after they leave IBM at the same time as
they make their retirement selections for the base
pension distribution. Your assumption that the settlement only attempts to
provide redress for the harm inflicted between 1995
and 1999 is incorrect -- the settlement formula will
attempt to redress the harm done for the entire length
of time employees were covered by the 1995 plan,
including years beyond 1999 for those who had the
option of staying in the 1995 plan.
I hope that helps your understanding!
I'm just as anxious as the rest of you to see what the
settlement formula looks like -- the latest word I've
heard is that the settlement notices probably will not
finalized until at least the end of March. Apparently,
the task of designing a fair and equitable
distribution formula is a lot more complex and time
consuming than was originally anticipated...Janet Krueger,
Rochester, MN.
P.S. I am planning to attend the IBM annual meeting in
Charleston on April 26 -- it would be great to see
lots of you there!
- Janet Krueger: Class
cert of another IBM lawsuit. Full excerpt: Louisiana's First Circuit Court of Appeal in Baton
Rouge, Louisiana upheld, in a brief memorandum opinion
issued on Tuesday, the certification of a nationwide
class of former IBM employees who left IBM after
availing themselves of an early termination package
called ITO II, in 1992. Shortly after the employees'
departure, IBM "suspended" one of the benefits in the
ITO-II package, the REAP benefit, that provided for a
reimbursement of education expenses up to $2500 per
person. The benefit was never reinstated.
The suit was
filed under state law contending, in effect, that the
ITO-II benefits were part of the consideration for
releases signed by class members releasing IBM from
liability to the class members for age discrimination
in connection with the down-sizing. The case claims
that a party to a release (such as IBM) cannot
unilaterally alter the consideration promised for a
release after the release has been given. According to
IBM's records, the class consists of 25,000 or more
retired IBMers and their spouses in all 50 states and
DC.
The case was filed in the 19TH JUDICIAL DISTRICT
COURT FOR THE PARISH OF EAST BATON ROUGE, STATE OF
LOUISIANA, NO. 421-453, in DIVISION "D", under the
name of PATRICK J. CUNNINGHAM, ANTON N. ZANKI,AND ALL
OTHER PERSONS SIMILARLY SITUATED VERSUS INTERNATIONAL
BUSINESS MACHINES CORPORATION. The court's decision is
procedural in the sense that it decides that the case
can proceed as a class action on behalf of all persons
who either took early retirement or "bridged" to
retirement under the ITO-II program. The decision is
not yet final in the sense that it could be subject to
rehearing by the Court of Appeals or discretionary
review by the Louisiana Supreme Court, should IBM
persuade the court that such action is appropriate.
We
will be pleased to provide you with more complete
information concerning the status of the case, the
make-up of the class, the defenses raised by IBM to
the merits of the claims, and the potential
implications of the case for the affected former IBM
employees, if it is of interest to any of your
members. Charles E. Hamilton, III, Lamothe & Hamilton, New
Orleans LA Tel. 504-566-1805; Fax: 504 566-1569.
- Yahoo!: Insider transactions for IBM. Some recent dispositions for corporate officers include:
11-Feb-05 |
KELLY, JOHN E. III |
5,446 |
Disposition (Non Open Market) at $93.235 per
share. |
$507,757 |
10-Feb-05 |
SANFORD, LINDA S. |
26,422 |
Option Exercise at $31.6725 per share. |
$836,850 |
10-Feb-05 |
SANFORD, LINDA S. |
31,886 |
Sale at $92.33 - $92.38 per share. |
$2,945,000 |
1-Feb-05 |
MILLS, STEVEN A. |
3,424 |
Disposition (Non Open Market) at $93.70 per share. |
$320,828 |
1-Feb-05 |
MACDONALD, J. RANDALL |
3,016 |
Disposition (Non Open Market) at $93.70 per share. |
$282,599 |
1-Feb-05 |
KOHNSTAMM, ABBY F. |
3,184 |
Disposition (Non Open Market) at $93.70 per share. |
$298,340 |
1-Feb-05 |
KELLY, JOHN E. III |
3,260 |
Disposition (Non Open Market) at $93.70 per share. |
$305,462 |
1-Feb-05 |
HORN, PAUL M. |
1,880 |
Disposition (Non Open Market) at $93.70 per share. |
$176,156 |
1-Feb-05 |
HARRELD, J. BRUCE |
2,911 |
Disposition (Non Open Market) at $93.70 per share. |
$272,760 |
1-Feb-05 |
MOFFAT, ROBERT W. JR |
2,617 |
Disposition (Non Open Market) at $93.70 per share. |
$245,212 |
1-Feb-05 |
LINEEN, EDWARD M. |
2,243 |
Disposition (Non Open Market) at $93.70 per share. |
$210,169 |
1-Feb-05 |
IWATA, JON C. |
1,615 |
Disposition (Non Open Market) at $93.70 per share. |
$151,325 |
1-Feb-05 |
ELIX, DOUGLAS T. |
4,049 |
Disposition (Non Open Market) at $93.70 per share. |
$379,391 |
1-Feb-05 |
DONOFRIO, NICHOLAS M. |
3,497 |
Disposition (Non Open Market) at $93.70 per share. |
$327,668 |
1-Feb-05 |
ZEITLER, WILLIAM M. |
3,085 |
Disposition (Non Open Market) at $93.70 per share. |
$289,064 |
1-Feb-05 |
SANFORD, LINDA S. |
2,949 |
Disposition (Non Open Market) at $93.70 per share. |
$276,321 |
26-Jan-05 |
VEST, CHARLES M. |
4,000 |
Option Exercise at $23.25 per share. |
$93,000 |
26-Jan-05 |
VEST, CHARLES M. |
4,000 |
Sale at $92.71 per share. |
$370,840 |
17-Nov-04 |
MOFFAT, ROBERT W. JR |
4,928 |
Option Exercise at $31.6725 - $36.0625 per share. |
$167,000 |
17-Nov-04 |
MOFFAT, ROBERT W. JR |
3,000 |
Sale at $96.18 per share. |
$288,540 |
15-Nov-04 |
O'DONNELL, DANIEL E. |
2,486 |
Sale at $95.61 - $95.65 per share. |
$238,000 |
11-Nov-04 |
JOYCE, JOHN R. |
73,864 |
Sale at $93.8104 per share. |
$6,929,211 |
11-Nov-04 |
JOYCE, JOHN R. |
73,864 |
Option Exercise at $31.6725 - $51.155 per share. |
N/A |
10-May-04 |
DONOFRIO, NICHOLAS M. |
117,416 |
Option Exercise at $18.6575 - $36.0625 per share. |
N/A |
10-May-04 |
DONOFRIO, NICHOLAS M. |
114,644 |
Sale at $87.3556 per share. |
$10,014,795 |
|
- ComputerWorld: Fiorina
to get millions, home security. Her severance package includes $21.38M in cash. Excerpt:
In a filing with the U.S. Securities and Exchange Commission, Hewlett-Packard Co. on Friday
detailed the severance package for former Chairman and CEO Carly Fiorina, who will get a cash
payout of $21.38 million, as well as $50,000 for financial counseling and legal and outplacement
services. Fiorina also gets to keep her PC equipment and technical support for a three-month
period, HP said in the filing. In addition, the company will provide the former executive with
administrative support for a six-month period and maintenance of her home-security system for a
one-year period, according to the filing.
- Wall Street Journal, courtesy of the Pittsburgh Post-Gazette: Follow
the CEO's money -- that is, if anyone can. By Jesse Eisinger. Excerpt: Successes or failures, chief executives
generally become vastly wealthy after serving their stints. But just how wealthy is often anyone's
guess. Gillette CEO James Kilts is slated to receive an estimated $185 million pay package for
having offloaded the razor maker to Procter & Gamble. The Wall Street Journal tapped an actuary
and an excise-tax expert from an accounting firm to come up with that figure. The Boston Globe
commissioned its own analysis from an executive-pay consultant, which came up with $173 million.
The different figures underscore a problem: It's next to impossible to know for sure how much
executives make in total compensation. This inability to get accurate readings on executive pay
comes as many investors think spiraling CEO pay has become dangerously delinked from performance.
- Seattle Post-Intelligencer: Honoring
promises made to workers. By Elaine Chao,
U.S. Labor Secretary. Excerpt: Working hard and "playing by the rules" has for generations
of Americans been the guiding ethic for leading an honorable life and attaining financial security.
Millions charted their career and finances based on a promise that when they retired they would
have a stable income from a defined pension plan to live on the rest of their life. These workers
trusted in that promise, planned around that promise and reasonably assumed that it was inviolable.
The $12 trillion in current pension assets is testament to the American people's hard work and
faith in the future. Nearly $2 trillion of these assets reside in traditional defined benefit
pension plans covering 20 percent of the nation's work force. The 34 million Americans covered
by these traditional plans played by the rules. The disturbing truth is that some companies and
their unions have taken advantage of inadequate federal pension rules and recklessly underfunded
their plans. Those who behave responsibly and strive to maintain well-funded plans for workers
and retirees suffer when the Pension Benefit Guaranty Corp. (PBGC) has to assume the pension
liabilities of bankrupt plans and these costs are passed through to the remaining plan sponsors
paying insurance premiums.
- Plan Sponsor: Class-Action
Filed Against PNC over Cash Balance Switch. Excerpt:
A class-action lawsuit filed in federal court is alleging that PNC Financial Services violated
federal pension law by altering the method by which pension benefits are calculated. The lawsuit
was filed in Philadelphia federal court on behalf of PNC current and former employees affected
by the move, according to a press release from the law firms filing the suit. The seven count
complaint accuses PNC of illegally converting its defined benefits pension plan into a cash balance
plan in 1999, a move that resulted in pension benefits reductions as employees age, according
to the press release.
- Plan Sponsor: Citigroup
Sued Over Cash Balance Plan. Excerpt: A lawsuit seeking
class-action status filed in federal court is alleging that Citigroup’s cash-balance pension
plan violates minimum accrual rules. The lawsuit, filed in Brooklyn, alleges that the Citigroup
plan - which was created in 2000 with the merging of multiple plans - violates "backloading" rules,
which are minimal accrual stipulations that make it illegal to use a pension formula that gives
disproportionately high benefits in later years, according to the Wall Street Journal. Under
the company's old plan, benefits were calculated by multiplying years of service by salary, while
under the new plan benefits grow every year by a percentage of pay plus interest. The Citigroup
plan, however, provides much lower percentages for younger workers than it does for older workers.
The suit claims that this causes the plan to fail a minimum accrual test, according to the Journal.
- Los Angeles Times: Hillarycare,
Anyone? Excerpts: The grand debate on the United
States' most serious moral and fiscal problem has begun. Congress, the White House and state
governments are fixated on healthcare, on its spiraling costs (consuming one-quarter of the nation's
economic growth since 2000) and on the shame of 45 million people being without health insurance.
Oh, sorry. Wrong universe. Maybe privatizing Social Security and banning gay marriage really
are more important. If so, there's a lot we have to concentrate on ignoring. As a Boston University
study released last week shows, healthcare costs, which are rising far faster than inflation,
are beginning to cripple the ability of companies to compete globally and threatening to bankrupt
counties that care for the poor. Per-person costs in the U.S. are two times higher than those
of Canada, France, Germany and Britain — which, by the way,
provide healthcare to all their citizens. [...]
Selling the latest free-market fix is the new secretary of Health and Human
Services, Michael Leavitt, who claims that he will be able, with tax credits and private plans,
to insure 12 million to 14 million low-income Americans more cost-effectively than by enrolling
them in Medicaid. That claim mystifies most healthcare economists. In recent years, Medicaid's
costs have risen by 9% a year — too much, but below the 11% average rise in employer-paid
premiums. Medicaid in the last few years has been the safety net preventing a wobbling economy
from creating even more millions of uninsured people.
- United Food and Commercial Workers: Calif.
Congressman Calls for Investigation into Bush Administration's Sweetheart Deal with Wal-Mart
on Labor Violations.
So-called ‘compliance agreement’ gives preferential treatment to major Republican
donor. Excerpt: After disclosure of a secret agreement between the U.S. Department of Labor
and Wal-Mart giving the giant retailer the authority to conduct its own investigations of employee
wage and hour complaints, Rep. George Miller (D-Calif.) today requested an investigation by the
DOL’s Inspector General to determine whether the arrangement represents a sweetheart deal
between the Bush Administration and one of the nation’s most frequent violators of labor
laws.
Under the arrangement, disclosed by The New York Times on Saturday, Wal-Mart will be allowed
15 days to investigate and rectify employee complaints before DOL conducts any investigation.
Upon receiving a complaint about a potential violation of wage and hour laws, DOL’s field
offices around the country are now instructed to notify the DOL office in Little Rock, Arkansas,
which will then notify Wal-Mart’s headquarters in Bentonville, Arkansas of the complaint.
The Department will not launch its own investigation during that time and it remains unclear
under what circumstance it would launch an investigation after the 15 day period ends.
Miller
said that such an arrangement could allow the giant employer to cover up evidence of a violation
and would discourage aggrieved employees who might fear retribution from the company. Miller
also sent a letter to Labor Secretary Elaine Chao today asking for more information about the
arrangement.
- Labor Blog: Yes,
Wal-Mart's Deal was Unique. Excerpt: Some folks have wondered whether Wal-Mart's deal was
par for the course with the Bush administration's pro-corporate policies, or a really special
treat for one of its top corporate donors. According to Hill Democrats who have now analyzed
other corporate compliance deals, the answer is that Wal-Mart was given a real sweetheart deal.
The DOL tried to argue the Wal-Mart deal was just like compliance agreements signed with Sears
and Foot Locker, but that's not what close analysis of the Wal-Mart deal shows... [...] Read
the whole analysis at the link. The bottom line is that no corporation has ever been given this
kind of "get out of jail free card" by the Department of Labor. Essentially, Wal-Mart
was free to violate the law at will and, if it got caught at any time, all it had to do was give
the money stolen from its employees back within fifteen days. And anywhere the company wasn't
caught, it could just pocket the money. And in no case would the company ever have to pay another
fine.
- Washington Post: Officials
Defend Cost of Medicare Drug Benefit. Importation, Negotiation Ideas Rejected. By Ceci Connolly. Excerpt: Under attack from leaders
in both parties over skyrocketing prescription drug prices, two top administration officials
yesterday rebutted claims that costs could be significantly lowered if President Bush would allow
drug importation and permit the government to negotiate with drugmakers on behalf of senior citizens.
[...] n two hearings on Capitol Hill, senators vented their frustration about the growing price
tag for a drug benefit that will cost more than $100 billion a year by 2014, according to the
Bush administration. Over the next decade, Medicare drug coverage is estimated to cost $1.2 trillion,
though McClellan predicts offsetting savings that would bring that down to $724 billion. Sen.
Edward M. Kennedy (D-Mass.) and Rep. Henry A. Waxman (D-Calif.) wrote Bush on Tuesday suggesting
that Medicare could save $190 billion over the next decade if the seniors program adopted the
price-negotiating model used by the Department of Veterans Affairs. They reached that figure
by taking the gross cost of the Medicare drug program ($905 million) and applying a conservative
estimate of the VA discount (about 45 percent).
Vault Message Board Posts
- "I'm
just curious" by "Happy Indian". Full excerpt: Hello all - I'd left PwCC/Monday/IBM
BCS in mid 2003, and haven't come to this board since. A conversation with a former colleague
last week pique my curiosity as to the state of BCS, so here I am. While I guess this
is a variation of the common theme of the board, I AM sincerely curious as to why people
are still sticking around after so many cycles of minimum/no so called 'raise' and 'bonus'.
Could people be that afraid of changes and still work on jobs that require you to essentially
start on a new job every 6 months or so? Hard to understand... Lastly, in case you're
looking, as no doubt some of my ex-colleagues are, the grass is greener outside of BCS.
Since leaving in mid 2003, my base salary is up by 50%, with 15% bonus on top of that.
I got much more say on choosing which assignment I want to go to and the utilization
target for senior consultant is only 1700hrs/yr. While things were a bit rough at the
end, I had a good time at PwCC and so wish the best of luck for all...
- "Left
early 2003" by "ibmprostitute". Full excerpt: I left IBM in early 2003
after 6+ years (PW, PwCC). It was the best career decision I could have made. After 2 years
of over 100% utilization, I had just had it. I am still consulting, but for a company that
keeps to their promises and knows what it means to support work/life balance. I stop by
this board every so often and it is like watching a train wreck occur in front of my eyes.
Nothing at BCS has changed. I am amazed that they are able to hire, but more amazed that
anyone from PwCC is left. Who can blame recent college graduates that are excited about
their first real job? Unfortunately they too will soon see the real “IBM” I still
occasionally work with some folks from IBM BCS and just can’t understand
what keeps people around. So many broken promises. How could anyone have confidence in
either GR or MC? These two could not even run a Gas Station successful. While the working
classes have been busting their hump for a few pennies, GR and MC have been collecting
millions. Why is it that IBM always seems to hit or beat Wall Street numbers, but almost
never meets its goals for bonuses? Maybe its because those setting the internal targets
receive bonuses paid on the external targets. I also enjoyed my time at PwCC, but after
the IBM takeover, I can’t think of one
good thing that happened. There are much better options available.
- "What
city to live in" by "kindaoldibm". Full excerpt: If you join IBM
in BCS / IGS, you're joining the part of the company that us old-timers refer to as "the
strap an airline seat on your ass" division. Pick a city where you can live within
a short commute to a very major airline hub, i.e. Dallas, Atlanta, Chicago. Commuting
out Monday morning and back Friday night is bad enough without dealing with connecting
flights. IBM has had a long term relationship with American Airlines, and you're "strongly
encouraged" to use the corporate travel selection, so, everything else being equal,
pick a hub where AA has a strong presence.
- "turnover" by "BCS_Blue".
Full excerpt: Per an inside source in the HR community, turnover for BCS - those leaving
IBM - is up around 27-30% which is unheard of in old blue circles, and even higher than
we experienced at PwCC. Management is concerned about the decline in bodies available
to staff engagements which puts more pressure on remaining staff...and creates a recurring
vicious cycle. Now, to stem this tide - and, prevent another wave, both bonuses and raises
should be given in 2005. Finally, Dose - some of "the best and brightest" have
hung around for the simple reasons of: 1) vesting, 2) been protected by new blue partner
from overbearing IBM, and, finally, 3) vesting and other comp considerations still coming
to us that other employers haven't been willing (until now) to renumerate for.
- "Admin
question - moving on up!" by "BigBlueBeast". Full excerpt: Here's
my admin question, phrased per Dose's guidelines. I submitted a verbal resignation to
my manager/partner at the beginning of last week and a written resignation to my manager/partner,
the practice administrator and the 2 RDMs for my practice with notice that this coming
Friday would be my last day. However, no one has responded or contacted me about it yet.
I know the email went out - I verified with my project manager who was cc'ed on it. What
gives? Is this normal? Am I supposed to do anything else? I followed the W3 separation
checklist and see nothing else in my court. I just can't bring myself to to call IBM
up and beg them to process my separation. So freaking typical.
- "Don't
Worry - Backlog and Lies" by "ancientblueconsultant". Full excerpt:
The process is bogged down with all the good people leaving. Your management may also
be trying to cover it up temporarily to save their hides as well. Before Friday, be professional
and notify your clients to tell them you are leaving and have given notice. Have a copy
of your resignation note in case they wish to see it. I've heard of cases of voluntary
departures where management went to clients after employees had left and told clients
the employees had been fired. Give them a forwarding address and e-mail. They would appreciate
the heads up. Make sure you have anything you want to keep off the laptop. Get any names
addresses, etc. you want to keep.
On Friday, send your good-by e-mail to you manager AND THE THREE
REPORTS ABOVE HIM/HER. Tell them you are re-verifying your departure, be courteous and respectful
as for guidance as to what to do with any blue pig assets. Tell them you've notified
clients as well, in light of the lack of guidance from your business lead, PDM and RDM's.
Copy the management of the RDM and PDM as well. Use the acknowledgement feature of Notes.
Print out the note. Once you get a RECEIVED back from any party, print that note and
then proceed to wipe out your hard drive on your laptop. This will protect you from prying
eyes for anything you had on the laptop. Don't do anything with the IBM assets (other
than wiping out your drive) you own until you hear from the blue pig again. Any further
communications should be backed up in writing. Copying up the chain will make sure something
gets done.
- "First,
you see a bright blue light" by "deep_eye". Full excerpt: at
the end of a tunnel, then deceased relatives, start calling your, no-no, sorry - that's
a different moving up scenario. It was almost the same for me, but by end of the first
week - a torrent of activity. Frantic calls from a wonkette in Texas (who knew nothing
about me), going through the separation process, the address to send the laptop, Amex
cards, etc. I am a little surprised that you are well into your last week with none of
this happening. Your manager and RDMs should be very familiar with the process at this
point. You might want to reiterate your departure date to the PA and RDM, I think the
remaining partners are numb to the waves of departures at this point. Hmmmm... maybe
they are swamped with personnel processing tasks, I'm certain you are not the only one
voting with your feet this week.
- "LVG's
Dancing Lessons" by "GoingBackwards". Full excerpt: LVG may have
gotten the elephant to dance, but it was probably to avoid the hot coals, rather than
out of glee and joy. The things LVG took out of IBM were, in short, its heart and soul.
More specifically, respect for the individual - one of the "basic beliefs" from
nearly Day One of the Watson days. With this went valuing the employees as people, valuing
them for their contributions to the company and its success, and the family-type atmosphere
that further helped to make the employees feel valued and proud that their contributions
and hard work actually mattered. With LVG came the all important short-term quarterly
bottom line measure of the company's success. He and his other exec buddies are still
living fat and happy while ... well, you see what's happened to the rest of the employees.
For many long-term employees (those who have survived), it took quite a while for this
betrayal to sink in. It was hard to believe that this was the "new" IBM. LVG
and his elephant are legends in his own mind.
- "What
LVG Did" by "ancientblueconsultant". Full excerpt: LVG saw an
opportunity for the deal of the century. He begged his buddies to let him in and paid
them off. He then brought in a fabulous team of lawyer, propagandist/marketer and some
other specialties. He proceeded to identify everything he could manufacture as wrong
in the culture and wiped out the senior management. He then created a culture of fear
and retribution which has given birth to a huge bureaucracy to protect mid level management
so they can't be blamed. In the meantime, he quietly pushed the stock upward to save
the then large investors and manipulated the pension funds to keep the price up there
as he pillaged the treasury by selling every asset he could find. As he left, he commissioned
people to re-write history to protect his hide. He didn't dance with the elephant. He
was the elephant...
- "Hmmmm...where
to begin, where to begin..." by "deep_eye". Full excerpt: Your first
observation is patently incorrect. I am no longer in BCS nor are many of the others who
post here. And yes, amazingly enough, sometimes the grass really is greener. In my own
case, I secured a 40%+ salary boost, stock awards (not options, mind you), a signing bonus,
tuition reimbursement, etc., etc. Not to mention a work-life balance approaching normalcy.
True, businesses have always had pressures, what separates the winners from the losers
however, is HOW THEY RESPOND to those pressures. IBM will not change because they will
always be able to hire and staff projects with polyannas who have the attitude that "I
got plenty of nothing and nothing's plenty good enough for me." If you can see "changes
filtering through now," you have obviously been ingesting
the Kool-Aid that IBM management has been proffering for the last three years. According
to this view, "a better BCS future is always just ______(fill in the blank) months
away." Sadly, months slip into years and surprise!! nothing has changed. Your argument
becoming partner is irrelevant - if we follow this to its logical end, you should never
expect better/fairer treatment from BCS, UNLESS you make partner. Moreover, is BCS the
be all to end all? I think not. I know of many, many people who were told they would
not make partner, but have received considerable promotions and advancements once they
left BCS. I find this aspect of your argument most troubling of all.
- "OK,
I'll Bite Pt 1" by "Dose of reality". Full excerpt: Since I'm in
a good mood today, I'll keep this cordial and clinical. I'm not sure if your conclusions
come from your point of view/perspective, or from a general denial. I'm willing to give
you the benefit of the doubt on the first round. Boom and bust profit/compensation cycles
have been around ever since our friends in the Netherlands started selling Tulips in
the early 17th century. Well-managed companies do not allow this whipsaw to totally obliterate
the delicate employment balance that exists with the vast majority of staff. The actions
BCS has taken are flawed on two dimensions – how it was executed and for how long.
I will not deny that compensation had gotten ahead of its long term
trajectory coming out of the Y2K bubble. However, that phenomenon did not grant BCS a license
to throw out the economics and management dynamics of a normal performance evaluation cycle.
If there is a need for a downward “mark to market” of compensation, then it should
be executed with the same care, differentiation, and discretion with which an upward MTM is.
It should be based on merit, relative performance, and expected future value of resources. It
should also include some increases and even greater decreases to provide room for them. Explain
to me how the across the board reductions, zero-sum bonus advances, and elimination of incentive
compensation is fair, or how it can position BCS for long term success?! The incredibly unsupportable
premise embedded in this decision is that everyone has the same “inflation” factor
to their market value. Since that premise is so unfounded, the inevitable result is that those
that are pulling their weight and have value will leave, and those that were previously inflated
more than the average inflation factor will stay. No question that the anecdotal evidence proves
this theory.
The other “how” part of this equation has to do with the
relative hit given to rank and file consultants versus partners. The relative amount of compensation “windfall” that
had accrued to partners in the boom years was an order of magnitude higher than that which accrued
to the average band 6 – 10. However, the relative amount taken back from rank and file,
vis a vis their current marketability, was significantly higher, and the resulting loss to delivery
capability was much greater. Translation – we should have cut numbers and compensation
of partners more deeply and much sooner, instead of pursuing the morale killing actions we did.
As far as the “how long” part, recovery in the industry
started in 2003, yet we are still screwing staff. The simple reason is that we virtually lopped
off our arms and legs, so that when opportunities came back, we no longer had the reach to capitalize
on them. We are in the predicament we are in now, not because of the environment, but due to
the short-sighted and flawed decisions we made in 2002 (PwC) and 2003/2004.
The other backdrop to this is the fact that this ostensible reaction
to “salary inflation” has been mixed in with the move down market (into commodity
services) and benchmarking between PwC and BIS. Both of these initiatives led us to set the
mark on compensation even lower than we would have otherwise. These constructs are all pointing
in the same direction, yet those that were responsible for the latter two decisions put the
entire burden on the market, and refuse to admit how much of the current pain has been self-imposed.
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Coverage on H1-B and L1 Visa and Off-Shoring Issues
- itWorldCanada: Forum
to address low enrollments in IT college programs. Excerpts: Most industry experts
would agree enrollment in IT college and university programs has steadily declined over
the last few years. But when it comes to the reasons for this drop and its implications,
not everyone sees eye to eye. [...] Declining enrollment, said Uremovich, creates a “vicious
circle” for educational institutions. He noted that colleges are very responsive
to the industry and if they stop attracting large student numbers...they tend to cancel
programs, which means fewer graduates. "But if business and industry, somewhere down
road, have a problem meeting their own human resources needs," it will be difficult
for colleges to ramp up again, Uremovich said. [...] Despite decent job prospects, enrollments
have steadily declined, with the biggest drop, at least at Algonquin, in the software development
program. Uremovich said this might have something to do with fears of offshore outsourcing. “There
is still a significant amount (of software development) that takes place in Ottawa, but
if you look at the news and hear about all that activity that has moved offshore, the perception
is that it is not a good area to get into.”
- ComputerWorld: IBM
to open Innovation Centers in Brazil, China, Russia.
Excerpt: Hoping to strengthen its presence in the world's emerging markets, IBM plans
to open new Innovation Centers in China, Brazil and Russia, the company said in a statement
this week. The centers, which were set to be officially announced today, will serve as
resources to local venture capital firms, developers, systems integrators and software
vendors by providing them with access to IBM products and technical information, the
statement said. The company already operates 25 such centers worldwide and currently
has operations in Shanghai, Sao Paulo and Moscow, according to IBM's Web site. More than
a dozen new centers will eventually be opened, the statement said.
- Denver Post: Unions
rally to keep contract work in U.S. Full excerpt: Union workers rallied on the west
steps of the state Capitol to support Senate Bill 23, which would prohibit the state from
hiring contractors that send work out of the U.S. John Coffey, who worked for IBM Corp.
for more than 11 years until he was laid off eight months ago, said he trained the Canadian
worker who took his job. "It's unacceptable to me that after paying Colorado taxes
for years that this money is being used by this government to send state jobs overseas," Coffey
said. Neither lawmakers nor union officials offered an analysis that says how much money
Colorado government is spending on contractors hiring workers overseas. The bill is scheduled
to be considered by a Senate committee next week.
- News 4 Colorado: Workers
Fight Offshoring Of State Jobs. Full excerpt: Former IBM computer programmer John Coffey
knows what happens when companies send jobs overseas. Coffey said he was forced to train
his replacement in Canada, then lost his $72,000-a-year job at IBM in Boulder. He applied
for another opening in IBM, only to be told it was a Canadian job and he could not have
it. Now he's looking for a job overseas, while his wife works at Starbucks to provide benefits
to his family of six.
"It's just not right," he told a gathering organized by
the AFL-CIO at the state Capitol to support a measure (Senate Bill 23) that would bar
state contractors from sending taxpayer-funded jobs overseas. The bill has been introduced
and is awaiting scheduling for a hearing. A similar measure was killed last year after
business organizations, including the Colorado Association of Commerce and Industry,
said a number of large corporations are benefiting from the improving national economy and need
to make decisions about where to expand. Business groups said the legislation sends the wrong
message at a time when Colorado is trying to compete in the global marketplace.
A spokesman for IBM did not return a phone call seeking comment. Union president Steve Adams
said taxpayers should not be paying to send jobs overseas. "We've lost thousands of jobs
in this state to offshoring and now have 130,000 Coloradans who are unemployed. The
state cannot solve the problem of offshoring, but they can make sure our tax dollars don't
pay for it," he
said. The new measure would bar companies that receive state service contracts from
shipping jobs overseas and require companies to certify they will not have work performed
overseas.
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Coverage on Social Security Privatization
- Detroit Free Press: GOP wary
of adding to rising U.S. debt. Excerpts: Stung by sticker shock, congressional Republicans
are struggling to embrace President George W. Bush's ambitious and expensive agenda while
avoiding the economic and political pitfalls of massive new debt. The numbers speak for
themselves: Ten-year cost projections are $2.2 trillion to overhaul Social Security, $724 billion
for the Medicare drug benefit, $1.1 trillion to make tax cuts permanent, and untold billions
to secure Iraq and Afghanistan beyond this year.
- Center for American Progress: Social
Security Privatization: The Retirement Savings Gamble [PDF]. Excerpts: As President Bush continues to push for
Social Security privatization, many new
issues are surfacing, adding to the already substantial list of costs and risks of
privatization. Under privatization, workers would be allowed to divert a large share of
the
money that currently goes to Social Security into private accounts. The risks of saving
for
retirement would be privatized. This includes the chance that financial markets will
underperform for long periods of time, which is known as market risk. A worker’s
birth
date could determine the size of his or her retirement account. The difference from
worker to worker could vary widely. This could result in generations of workers with less
money than they thought they would have for retirement and considerably less than they
would have under the current Social Security system. Given few alternatives, future
governments will be compelled to come to the aid of workers who have saved too little
for retirement. Reasonable estimates show that this could add between $600 billion and
$900 billion in present value terms to the costs of privatization over the next 75 years.
Considering historical data and reasonable forecasts for the future,
this analysis
highlights the following points about market risk under Social Security privatization:
- Market risk is severe. Depending on a worker’s birth date, the retirement benefits
generated from putting 10 percent of earnings in a private account for 35 years
would have ranged from 100 percent to less than 20 percent relative to preretirement
earnings.
- The extraordinarily high retirement income generated from the booming ‘90s
stock market was the equivalent of winning the generational lottery – unlikely to
be repeated regularly. Even under these beneficial circumstances, a privatized
system favored by President Bush could have cost the government more than $1
trillion in today’s dollars over the past three decades in a government bailout of
the Social Security system to assist those who accumulated too little for
retirement.
- The primary alternative to a government bailout of the Social Security system,
older workers working longer, would create enormous labor market pressures.
Without changes in wages, the unemployment rate could have approached 13
percent in the past 30 years if older workers had wanted to work longer to
compensate for having too few retirement benefits.
- Projecting past trends into the future, it is likely that the government will face
additional costs to bail out a privatized Social Security system that provides too
few benefits. The present value of these additional costs will average between
$600 billion and $900 billion over the next 75 years and could exceed $1 trillion.
- Washington Post: Holes
in a Web of Budget Deceit. By E. J. Dionne Jr. Excerpts:
Let us stand back in awe at the Bush administration's genius. Few administrations in
our history have been more successful in setting the terms of the political debate. None
has been as skilled at getting its facts accepted as plausible even when they are not.
None has looked so principled, even when it said one thing while doing another. More
than any of his predecessors, President Bush understands the conventions of journalism
and the traditions of political debate. These require that respectful attention be paid
to whatever claims the president makes. Journalists who have the temerity to question
whether the claims ring true (or whether the numbers add up) can count on being pummeled as
liberal ideologues, even when they are only seeking the facts. [...]
Oh, yes, and the administration's "tough" budget doesn't
even include the costs of the Social Security plan or the long-term costs of the war
in Iraq, let alone the huge costs of permanently fixing the unintended effects of the
alternative minimum tax. As one critic put it, Bush's spending cuts "may grab headlines
but will have little impact on the tide of red ink that Bush has ridden since 2001." Bush's
budget "will
obscure an agenda that is likely to generate ever-larger deficits over the coming
decades" and "resembles
Swiss cheese -- and the holes may be more interesting than the substance." Are those
the words of a big-spending, Bush-loathing, partisan Democrat? Nope. They come from a budget
commentary in the current issue of Business Week, a magazine that can hardly be accused of
ultra-leftism. Then there was a description of the Bush budget as "tough
talk, but not enough to reassure the world that U.S. public finances are in safe
hands." That
would be from the Financial Times, another journal free of any taint of Marxism.
- Washington Post: Conservatives
Join Forces for Bush Plans. Social Security, Tort Limits Spur Alliance. By Thomas B. Edsall. Excerpts: With billions
of dollars at stake, a large network of influential conservative groups is mounting a
high-priced campaign to help the White House win passage of legislation to partially
privatize Social Security and limit class-action lawsuits. Corporate America, the financial
services industry, conservative think tanks, much of the Washington trade association
community, the Republican Party and GOP lobbyists and consultants are prepared to spend
$200 million or more to influence the outcome of two of the toughest legislative fights
in recent memory. [...]
The emergence of the center-right phalanx backing the Social Security
proposal is a major victory for the Cato Institute, a prominent libertarian group. In
the late 1970s and early 1980s, Cato was almost alone in its willingness to challenge
the legitimacy of the existing Social Security system, a politically sacrosanct retirement
program. Recognizing the wariness of other conservatives to tackle Social Security, Cato
in 1983 published an article calling for privatization of the system. The article argued
that companies that stand to profit from privatization -- "the banks,
insurance companies and other institutions that will gain" -- had to be brought into
alliance. Second, the article called for initiation of "guerrilla warfare against both
the current Social Security system and the coalition that supports it." Just 22 years
later, the business alliance is fully on board in the drive to create partially private
Social Security accounts.
- Washington Post: Poorest
Face Most Risk on Social Security. Bush Plan's Success May Hinge on Perceived Safety. By Jim VandeHei. Excerpt: Because Social
Security is often the biggest or the only source of retirement money for the poorest
Americans, low-income workers would be hit particularly hard if the markets plunged and
they were left with smaller benefits than they would have received under the current
system. Under the Bush plan, low-income workers would be required to purchase an annuity,
which pays a fixed stream of money until the person dies, or set up an alternative
way that keeps them above the poverty level until death using their personal account
funds. The administration said such mandates are needed to keep seniors from falling
into poverty by emptying out their accounts upon retirement. Fay Lomax Cook, director
of the Institute for Policy Research at Northwestern University, called the accounts "much
too risky." "The whole purpose of Social Security has always been to ensure
basic income to those no longer able to work. That basic income can no longer be guaranteed" under
the Bush plan, she said.
- San Francisco Chronicle: Budget
Programs Facing Cuts, Elimination. Excerpt:
Here are the 154 programs that President Bush wants to eliminate or cut in his 2006 budget
proposal. Bush would terminate 99 programs and make major spending reductions in 55.
Separately, the administration listed eight major reforms Bush proposed that also would
produce spending cuts. Of the terminations, Bush has recommended 59 of them before. Twenty-seven
of the 55 programs targeted for spending reductions have been previously submitted to
Congress.
- Houston Chronicle: Fake
reporter's questioning of the president fits into the administration's widening pattern
of manufactured journalism. Excerpt: The practice
of buying ostensibly independent reporters and writers to shill for politicians deceives
the public and corrupts the free media. Allowing fake reporters to compete with credentialed
journalists for sparse press conference time with the leader of the free world demeans
the whole process.
- Los Angeles Times: A
New Idea for Social Security. By Paul H. O'Neill.
( Paul H. O'Neill was Treasury secretary in the Bush administration from January 2001
to December 2002). Excerpt: The debate over what we should do, if anything, with the
Social Security system is heating up. A political campaign-style assault has already
begun; in the weeks and months ahead, prepare to be buried in markedly different versions
of the truth. If you are like me, you hunger for something better from the political
class. How about a new idea to offer financial security for each American when he or
she reaches retirement age? Here's one way.
- St Petersburg Times: Fix
Medicare first. The financial difficulties
facing Medicare are more immediate - and more severe - than those facing Social Security.
Excerpts: So it is not clear why Bush would choose to take on Social Security, a relatively
stable program, and ignore a much more pressing need: bolstering Medicare's shaky finances.
None other than the board of trustees for Social Security and Medicare, all of whom
are appointed by Bush, put the comparative risk in perspective. The Social Security
trust fund is good for another 37 years, the trustees reported in their most recent
annual report. The trust fund for hospital insurance (referred to as HI) under Medicare
will be tapped out in 14 years. In fact, HI is already dipping into the fund to meet
expenditures, while that day is more than a decade away for Social Security. (The medical
insurance portion of Medicare that covers doctors' fees and the upcoming drug coverage
are treated differently, because the law requires that they be fully funded each year
by recipient fees and general revenue.)
- St Louis Post-Dispatch: Labor
department bars distribution of newsletter criticizing reform. By Philip Dine. Excerpt:
The Department of Labor is trying to stop federal employees from receiving a union newsletter
that includes an article critical of President Bush's plans to change Social Security.
The department has distributed the quarterly newsletter since 1978 to 7,500 union members
and other Labor Department employees outside of Washington as part of its contract with
the union that represents those workers. But officials decided to block distribution of
the current edition after learning about a column that referred to "the risky,
ill-conceived White House plan to save Social Security by destroying it." A top
department official told managers to "take necessary and reasonable steps
to stop distribution of this edition ... any existing bulk mail not distributed should
not be distributed," according to an internal memo obtained by the St. Louis Post-Dispatch.
The column, written by a union lobbyist, urged union members to write legislators opposing
Bush's plan to change Social Security, saying it "will reward Wall Street by funneling
Social Security dollars into risky private accounts." Next to the article in the
newsletter was a sample letter for mailing to legislators.
- AARP: Get the Truth About Private
Accounts. Social Security
is in the line of fire. Many in Washington want to take the hard-earned money workers
pay into Social Security and divert it into private accounts. But did you know that diverting
money into private accounts would weaken Social Security, put benefits for future generations
at risk, and do nothing to ensure long-term solvency? Private accounts are not a way
to strengthen Social Security. Besides, the transition to a private account system would
cost trillions of dollars -- which would add to the federal deficit and increase the
federal debt. That is not the legacy we want to leave to our children and grandchildren.
We know there is a better way to strengthen Social Security. And AARP is firmly committed
to ensuring that the only secure source of retirement benefits for America's families
is not put at risk. It's time we have a national debate about what changes best meet
the needs of all generations. We'll never get to a national solution until people
realize that private accounts created out of Social Security are a problem, rather
than a solution. Please help us spread the word by forwarding this message to your friends
and family, using the "Tell a Friend" feature above. We all have a lot at stake
in this debate, and we urge you to stay informed and get involved. Visit www.aarp.org/socialsecurity to get the real facts, read our daily blog, view public opinion polls, and contact Congress.
- National Public Radio: Lessons
Learned from Britain's Private Retirement Plan. By Kathleen Schalch. Excerpt: If the Bush administration creates private retirement
accounts, it won't be alone. The British were among the first to take the plunge, and
it hasn't turned out the way many expected. (Editor's note: This Morning Edition segment
is a "must listen to" report).
- New York Times editorial: What
Does Alan Greenspan Want? Excerpts: It
was inevitable that Alan Greenspan would make news when he testified before the Senate
Banking Committee on Wednesday that he supported private accounts in Social Security. "So
if you're going to move to private accounts, which I approve of," he said, "I
think you have to do it in a cautious, gradual way." But Mr. Greenspan said so much
more that, by any measure of logical consistency, could hardly be read as approval. [...]
Mr. Greenspan also stressed the importance of closing Social Security's long-term funding
gap - an estimated $3.7 trillion hole that will develop over 75 years, the usual span
of time used by Social Security's trustees to gauge the system's soundness. Then he pointed
out that money accumulating in private accounts would do nothing to close the long-term
funding gap in Social Security. The only way to do that is to increase taxes or cut benefits,
or to adopt some combination of the two. Unlike the president, Mr. Greenspan acknowledged
the huge benefit cuts that would be inherent in a private system. Speaking of Mr. Bush,
he said, "I gather what he has in mind is that the amounts that go into the private
accounts are offset, after discount, with benefits that would have been paid with those
monies in the Social Security system." That's Greenspan-ese for this: "Every
dollar you put into a private account, plus interest, would be subtracted from your traditional
Social Security benefit."
- New York Times: Three-Card
Maestro.
By Paul Krugman. Excerpts: Alan Greenspan just did it again. Four years ago, the Fed
chairman lent crucial political support to the Bush tax cuts. He didn't specifically
endorse the administration's plan, and if you read his testimony carefully, it contained
caveats and cautions. But that didn't matter; the headlines trumpeted Mr. Greenspan's
support, and legislation whose prospects had previously seemed dubious sailed through
Congress. On Wednesday Mr. Greenspan endorsed Social Security privatization. But there's
a difference between 2001 and 2005. In 2001, Mr. Greenspan offered a convoluted, implausible
justification for supporting everything the Bush administration wanted. This time,
he offered no justification at all. [...]
Let me make a detour here. The way privatizers link the long-run financing
of Social Security with the case for private accounts parallels the three-card-monte
technique the Bush administration used to link terrorism to the Iraq war. Speeches about Iraq
invariably included references to 9/11, leading much of the public to believe that invading
Iraq somehow meant taking the war to the terrorists. When pressed, war supporters would admit
they lacked evidence of any significant links between Iraq and Al Qaeda, let alone any Iraqi
role in 9/11 - yet in their next sentence it would be 9/11 and Saddam, together again.
Similarly, calls for privatization invariably begin with ominous warnings
about Social Security's financial future. When pressed, administration officials admit
that private accounts would do nothing to improve that financial future. Yet in the
next sentence, they once again link privatization to the problem posed by an aging population.
And so it was with Mr. Greenspan. He painted a dark (and seriously exaggerated) picture of
the demographic problem, and said that what we need is a "fully funded" system.
He then conceded that Bush-style privatization would do nothing to improve the system's
funding.
- Economic Policy Institute: Removing
the Social Security earnings cap virtually eliminates funding gap. Excerpt: Using relatively pessimistic assumptions about
future growth in productivity and immigration, the Social Security Administration (SSA)
actuaries estimate that Social Security trust fund revenues will fall somewhat short
of covering scheduled benefits over the next 75 years. Until recently, President Bush
had signaled opposition to any revenue increase to close that shortfall. On February
16, however, President Bush indicated his willingness to consider raising the cap on
income subject to the Social Security tax. SSA actuarial estimates show that eliminating
the cap would virtually eliminate the projected 75-year funding shortfall. This shortfall
is less severe than is often presented by proponents of Social Security privatization.
SSA's projections show that a 1.9 percentage-point increase in the existing payroll tax
dedicated to Social Security would close the projected funding gap over a 75-year period.
Using slightly less pessimistic economic assumptions about the next 75 years, the Congressional
Budget Office (CBO) has estimated the gap could be closed over the next 75 years with
just a 1.0 percentage-point increase.
- Los Angeles Times: GOP
Takes to Heartland With Social Security Plan.
By Janet Hook. Excerpt: Republican leaders in Congress, faced with the political reality
that there is little grass-roots momentum behind President Bush's plan to overhaul Social
Security, are planning to spread out across the country next week to try to build a constituency
for change — and to take a watchful measure of voters' response. GOP leaders are
encouraging rank-and-file members to hold town hall meetings in their home states and
districts during next week's congressional recess, arming them with briefing books, PowerPoint
presentations and a video of Bush making the case for major changes in Social Security.
[...] The town hall presentations are part of a coordinated political effort that involves
the White House, the Republican National Committee and outside business groups, as well
as congressional leaders. The intensity of their combined focus is a measure of how concerned
Republicans are about one of the biggest obstacles facing Bush: a public that has been
largely lukewarm to or fearful of his approach to restructuring Social Security.
[...]
The Republican efforts are being bolstered by business lobbyists and
other conservative groups who back a Social Security overhaul. Representatives of those outside
groups meet regularly with GOP leaders to share information and plot strategy. A coalition of
business groups — the Coalition for the Modernization and Protection of America's Social
Security — began running ads Thursday in publications that circulate on Capitol Hill to
promote a campaign it called "Generations Together."
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New
on the Alliance@IBM Site:
- WorkDay Minnesota: Bush
budget could hurt workers left jobless by trade deals. Excerpt:
Workers who lose their jobs because of unfair trade deals will have to battle teenagers,
veterans and other workers for a smaller pool of training money, under President George
Bush's proposed budget. In his budget for the year starting Oct. 1, the president wants
to combine the Trade Adjustment Assistance program -- currently serving workers dislocated
by trade deals -- with others serving jobless adults and teens into one big block grant--and
let states decide how to spend the money.
- Job
Cut Update: Alliance@IBM has received further information from employees on recent job
cuts and resource actions. We don't believe it is complete yet; and we will not list
locations at this time, so that we can protect workers identities. The cuts occurred
in IBM Global Services units. The total number so far, is about 250. We are also getting
reports of employees being given separation packages not related to resource actions;
but in response to PBC evaluations. Many of those cut in resource actions and separations
are being reported as "over 40 years old". Stay tuned for information as we
receive it. See our visitor
comments section for update on RTP.
- Resource Action Alert!! - Alliance@IBM is hearing of job cuts in IGS:
Distribution Sector, Tech Support, Deskside Support Services, Operations and Network
Services. If you have any information, please e-mail us at: endicottalliance@stny.rr.com
- Pension Lawsuit Questions & Answers (updated Jan 12, 2005). Read this to determine how
this lawsuit affects you.
- Think
Twice for January/February 2005 [PDF]. (Editor's note: This issue
is a "must read."). Articles in this issue include:
- The Fight Continues...at Lenovo
- Outsourcing Blues
- PBCs and Behavior Modification
- Message From the President
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