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    Highlights—March 26, 2005
  • Business Insurance: Motorola to phase out pension plan. Excerpts: Motorola Inc. is phasing out its $3.5 billion pension plan covering U.S. employees, as the exodus of big employers from the defined benefit plan system continues. [...] Motorola, which had about $31 billion in revenues last year and about 68,000 employees, joins several other large employers that are moving away from their defined benefit plans. IBM Corp. is the most recent big employer to phase out its defined benefit plan. Like Motorola, employees hired Jan. 1, 2005, or after will be offered an enriched 401(k) plan. Employees hired before that date are covered under a less generous 401(k) plan and a cash balance pension plan.
  • Communications Workers of America: 500 Professional Employees Flock to CWA. Excerpt: Engineers, librarians, social workers - these are just a few of the titles of 534 professional employees in Jacksonville, Fla., who voted 327-36 for CWA representation in an election run by the state Public Employees Relations Commission. The campaign got underway in November 2004, when Ron Roberson, an air-quality control engineer for the city, told his wife about the situation he and co-workers found themselves in: no wage increase for three years, no grievance procedure, increasing employee costs for health insurance and other retrogressive demands from the city.
  • Communications Workers of America: More Bucks for AT&T Execs, Pink Slips for Workers. Excerpt: Top leaders of AT&T continue to outsource members' jobs to India and other countries while feathering their own nests. In a recent SEC filing, the company reported that when the merger with SBC goes through, AT&T CEO David Dorman will receive early access to $17.7 million in stock shares and options that otherwise would have been spread out over several years. A $31 million severance pool was approved for top executives who leave as a result of the merger - but wait. AT&T says it might set aside $100 million for cash retention bonuses to entice the top execs to hang around for at least six months after the merger is completed. Meanwhile, AT&T is planning to shut more call centers next week in Atlanta, St. Louis and Mesa, Ariz., giving the boot to about 1,000 service representatives. CWA is running newspaper and radio ads in those cities blasting the outsourcing of these jobs while AT&T earns huge revenues in our communities and enjoys millions of dollars of taxpayer-funded government contracts.
  • San Jose Mercury-News: Companies cut stock plans for rank-and-file. By Mark Schwanhausser. Excerpts: One of the last big perks for rank-and-file workers in Silicon Valley is on the chopping block. Technology companies -- including titans Hewlett-Packard, Oracle and Microsoft -- are cutting back or eliminating popular plans that allow workers to buy company stock at a hefty discount. [...] Silicon Valley companies risk a backlash from workers who will take big pay cuts while top executives continue to receive lush pay packages with stock options, critics say. Experts say companies will only marginally improve their bottom line under the new accounting rules. "This is greed and foolishness trying to find some guise of rationality," said Corey Rosen, executive director of the National Center for Employee Ownership. "It's a message people aren't going to be happy to hear." [...]
    "It's sad that some companies are capitulating," said Wight, a 35-year-old stock plan analyst. "I view the ESPP as part of my bonus for working hard and being a beneficiary of working with a cohesive group of people who make the stock go up." In a typical stock-purchase plan, workers have money deducted from each paycheck to buy company stock at a 15 percent discount every three to six months. Many companies sweeten the deal by applying the discount to the stock price either at the beginning of the buying period or the end -- whichever is lower. Silicon Valley companies commonly use more exotic variations with a "look-back" feature that factors in prices 24 months earlier. When stock prices rise, workers can pocket up to two years' worth of appreciation on top of the 15 percent discount. If the stock price sags, they can still pocket the discount.
  • New York Times: G.M. to Seek Cuts in Union Health Benefits. By Danny Hakim. Excerpts: Facing their worst financial outlook in years, executives at General Motors said yesterday that they wanted union workers to accept the same health benefit cuts already taken by white-collar workers. "We need a competitive plan for all of our employees," said Gary Cowger, G.M.'s head of North American operations, in a speech at the New York International Auto Show. "An across-the-board competitive health care plan for salaried and hourly employees could save us billions of dollars a year." [...]
    Big Three autoworkers have health care benefits that are the envy of many Americans, with no deductibles or monthly premiums. Salaried workers at the companies, however, pay both deductibles and monthly premiums, with the amounts varying depending on the plan. Altogether, G.M.'s salaried workers pay about 27 percent of their health care bill, while hourly workers pay about 7 percent, according to company data.
  • New York Times: More Help Wanted: Older Workers Please Apply. By Milt Freudenheim. Excerpts: After years of encouraging workers to take early retirement as a way to cut jobs, a growing number of companies are hunting for older workers because they have lower turnover rates and, in many cases, better work performance. [...] AARP, the advocacy group for older people, recently put on its Web site links to 13 "featured employers" - including MetLife, Pitney Bowes, Borders, Home Depot, Principal Financial and Walgreens - that are recruiting older workers with offers of health benefits, training and flexible work schedules. More than 71,000 people have used the Web site this month to seek job information.
  • Society of Actuaries: Public Misperceptions About Retirement Security [PDF]. By Eric T. Sondergeld, ASA, CFA, MAAA. Retirement Research and Mathew Greenwald, Ph.D., Mathew Greenwald & Associates.
Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some of this week's posts follow.
  • "Unresponsive Hiring Process" by "disillusioned123". Full excerpt: What happened? I interviewed on campus for a consulting position, government sector. They loved me - called me back the next day, told me about the good reviews I had... and said they would call me with more details for my start date. After two weeks passed and I still had heard nothing, I followed up with the HR contact. She gave me the "hiring has been frozen" line, but confirmed my salary had been established, my team identified.. they were just waiting for a top level signature. She told me to "hang tight." Two weeks later, things were still "on hold," so I accepted a position with an other company. It has been a perfect fit, so I am very happy with my decision. However, I am curious - what the hell happened? If they didn't want to hire me, why bother stringing me along like that? Any ideas?
  • "didn't close the deal" by "CONsulting_2_long". Full excerpt: You were probably being targeted for a specific engagement that was either delayed or one that ibm ultimately did not win. ibm bcs has sunk to the point that they hire only for a specific need in the name of process efficiency and achieving higher organizational utilization rates. The days of hiring talent for the organization to develop and let mature are no longer the case at bcs or most other mid-tier IT services company. bcs is not a management consultancy. If you are looking for such an experience, seek either established top-tier firms (McK, Bain, ATK, Booz, etc) or find a small niche company like the one that our former colleague ABC is going to run. The large IT services companies will literally treat you as a pork-belly, a slaughtered pig that is completely undifferentiated and that can be dissected piece by piece and sold for profit. Read this board and be thankful on circumstances. Many are not as fortunate as you. Of course, I am a former employee who has been CONsulting_2_long.

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • American Rights at Work: From Offshoring to Organizing: One Tech Worker's Tale. By Myra Bronstein. Mercer Island, Washington. Excerpts: On Friday, March 21, 2003, Myra Bronstein and 17 other software Quality Assurance Engineers at WatchMark, Inc., now WatchMark-Comnitel, in Bellevue, Washington, were called into a meeting by their bosses. The news, delivered in a speech and repeated in an accompanying letter, was grim: they were losing their jobs. The problem wasn’t that they were incompetent, just too “expensive.” From now on, their work would be done more cheaply by workers based in India. There was one final insult.
    “We were told that our replacements would be flying in over the weekend, and we would be expected to start training them on Monday,” recalls Myra, 40, who holds a degree in electronics engineering technology and had worked in the information technology (IT) industry for 14 years. “The letter we were handed said that if we quit, we wouldn’t be eligible for benefits," benefits like severance pay and unemployment insurance—what one needs to survive when laid off. "We were told verbally and explicitly, 'we're paying you for the next four weeks to transition your knowledge, and we expect your head to be in the game every minute.'" For one month, Bronstein trained not one, but two people. All but one of her colleagues did the same. For some, the training lasted five or six weeks. They coped with gallows humor. “We referred to ourselves as ‘the Castaways,’” says Myra, “or ‘Dead Man Working.’” In the end, the company laid off 60 employees, 18 of which had their jobs sent to India.

Coverage on Social Security Privatization
  • The Century Foundation: Social Security: Is It Really a Crisis? [PDF] Transcript of a debate featuring: Paul Krugman, author and New York Times Columnist Michael Tanner, director of Health and Welfare Studies, Cato Institute Joshua Micah Marshall, investigative journalist and blogger, Talkingpointsmemo.com.
  • New York Times: It's 'Private' vs. 'Personal' in Social Security Debate. By Robin Toner. Excerpt: What's in a name? Would a personal account by any other name smell as sweet? Apparently not, according to strategists in the two political parties. In the Social Security debate, one of the most ferocious struggles is over language, whether President Bush is proposing to create "personal" or "private" accounts in the program, whether he is really proposing the "privatization" of Social Security.
  • New York Times: About That Number. Excerpts: The Social Security trustees issued their annual report yesterday and said that by one measure, the shortfall in Social Security's finances jumped from $10.4 trillion last year to about $11 trillion this year. Eleven trillion dollars! The trustees, in service to President Bush's alarmist warnings about the need to do something drastic about Social Security, are dishing up some misleading numbers. It's bad enough that the trustees began some of their calculations with that $10.4 trillion figure. It's arrived at by projecting the system's shortfall over infinity, rather than the usual 75-year time frame - as if the system's finances 10,000 years from now are a legitimate policy concern. Moreover, no less an authority than the American Academy of Actuaries is already on record debunking infinite projections as conveying "little if any useful information about the program's long-range finances" and "likely to mislead anyone lacking technical expertise ... into believing that the program is in far worse financial condition than is actually indicated." [...]
    Some people who interpret the numbers as a deterioration appear to be confused. But others, like President Bush, are being deliberately alarmist. Mr. Bush's persistent misstatements on Social Security leave little doubt that he wants Americans to believe that the system is irretrievably broken so that they will buy into his unnecessary privatization plan.
  • Washington Post: Report Emphasizes Shortfall in Medicare. By Jonathan Weisman. Excerpts: The two independent trustees overseeing Social Security and Medicare broke with the Bush administration's trustees yesterday, saying Medicare's financial problems far exceed Social Security's and are in urgent need of attention. [...] "The financial outlook for Social Security has improved marginally since 2000," wrote Saving and Palmer. "In sharp contrast, Medicare's financial outlook has deteriorated dramatically over the past five years and is now much worse that Social Security's." The three trustees from the Bush Cabinet -- Treasury Secretary John W. Snow, Health and Human Services Secretary Michael O. Leavitt and Labor Secretary Elaine L. Chao -- chose to emphasize Social Security's problems almost exclusively at the report's release. [...]
    "The question in my mind is why are we talking about saving Social Security?" said Bruce Bartlett, a conservative commentator with the National Center for Policy Analysis. While Social Security benefits are scheduled to exceed tax revenue by 2017, Medicare's trust fund, which finances hospitalization of the elderly, reached that juncture last year. The trustees project the Social Security trust fund will be exhausted by 2041, one year sooner than projected last year. But Medicare's trust will be depleted more than two decades earlier, in 2020. Last year's report projected the Medicare trust fund exhaustion date to be 2019. By 2024, Medicare's cost will have roared past Social Security's, Saving and Palmer wrote.
  • New York Times: Republicans Consider Slowing Benefits Growth for Most. By Edmund L. Andrews. Excerpts: Can "progressive indexation" help sell President Bush's plan to overhaul Social Security? Though he has been loath to propose specific measures to reduce future benefits, Mr. Bush and other officials are gingerly promoting the idea as a way to cut costs and still protect low-income retirees. Supporters of "progressive indexation" say it could achieve several goals: it would eliminate a big part of Social Security's long-running financial gap; it would guarantee benefits at current levels and allow them to rise in real terms for people at the bottom of the income ladder. Progressive indexation involves reducing the growth in benefits for people with middle and higher incomes, but letting the benefits keep rising for low-income retirees in future generations. "The president likes it, because it is more favorable to lower-income people than to higher-income people," Allan Hubbard, director of Mr. Bush's National Economic Council, said in an interview this week.
  • Social Security Network: Understanding the Trustees' Projections. Excerpts: The 2005 Annual Report of the Social Security Trustees is now available on the Social Security Administration's Web site. In addition to summarizing the program's operations over the past year, the annual report makes short- and long-range estimates of Social Security's future financial status. Highlights from this year's report include:
    • Promised benefits will exceed income starting in 2017, one year earlier than previously expected. At that point, the reserves now accumulating in Social Security's trust fund will be sufficient to cover promised benefits for two more decades.
    • In 2041, the trust fund will be exhausted, also one year earlier than last year's report projected.
    • If nothing is done, after 2041 the program will still be able to pay 74 percent of promised benefits.
    • Increasing the payroll tax (currently 12.4 percent of taxable wages, half from workers and half from employers) to 14.32 percent each year would be sufficient to completely make up for the long-term shortfall.
    • Under slightly more optimistic estimates, the trustees predict that no shortfall will occur, and the program will continue paying benefits indefinitely.

New on the Alliance@IBM Site:
  • View the Think Twice show [Video, approximately 1 hour, requires RealMedia Player] Editors' note: We highly recommend this video. In it you'll meet leading activists at the Alliance@IBM, hear about the history of the Alliance, get updates on Alliance activities around the country, and hear about the shareholder proposals of interest to IBM employees.

Executive's Corner

We know that many top IBM executives read these highlights. As a service to them, we will occasionally offer links to articles of interest for them and other members of the upper classes.

  • Wall Street Journal: Million Dollar Weekend. By Katherine Rosman and Andrea Bennett. Excerpts: Wealthy travelers now have the option of picking from a range of hotel packages with seven-figure price tags -- but travelers aren't biting. In Brussels, the Royal Windsor hotel has a three-night package that will run guests €1.5 million ($1.98 million) a suite. Among the package's perks: a racing lesson in a Formula One car at the Spa-Francorchamps track. At Little Palm Island Resort & Spa in the Florida Keys, $1 million buys the island's 30 bungalows for three nights and includes such "turndown gifts" as watches and picture frames. At a more affordable price point, $100,000 will get you two nights at the Parker Palm Springs in Palm Springs, Calif., followed by two nights at Le Parker Meridien, its New York City sister property (transfer by private jet included). Travel-industry analysts say hotels are offering the plans because they see more guests going on elaborate excursions booked through other companies. "They're saying, 'How can we get some of that?'" says Bjorn Hanson, a partner at PricewaterhouseCoopers.
"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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