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    Highlights—April 2, 2005
  • Kaiser Network: WSJ Examines UnitedHealthCare's Physician Performance Evaluation Program. Excerpts: The Wall Street Journal on Tuesday examined a multistate UnitedHealthcare program that allows employers to provide financial incentives to employees who visit physicians from a list selected by the company based on their ability to provide efficient and cost-effective care. [...] Some physician groups, such as the American Medical Association and the Medical Group Management Association, have said that the criteria used by UnitedHealthcare to select physicians for the program -- which ranks them based on analysis of insurance claims from 2002 and 2003 -- is imprecise and exclusionary. Physician groups also maintain that UnitedHealthcare excludes certain specialists from the program because no evidence-based criteria to evaluate their performance exist and that the program leads to "administrative confusion within practices," the Journal reports.
  • "Promises Broken" by "west_coast_retired_guy". Excerpt: The first time we were told that retirees would have to eventually "share" to the increasing costs of medical insurance was in the middle of 1991 when the 1991 separation package was announced. Little did we know that "sharing costs" would mean retirees would eventually assume all cost increases. IBM's method of gradual release of bad news to retirees certainly was effective in keeping the issue out of the courts long enough that most of us would be dead even if the issue could be settled in our favor.
  • "Cost of living increase" by "ibmmike2006". Excerpts: If you haven't noticed, COLA's went away with the $18 Billion surplus the IBM Pension trust had in 1998. That same year, Gerstner gave himself 10,000,000 of IBM stock that doubled to 20,000,000 in 1999 with the stock split. He also gave millions of shares to former IBM executives like Katzenbach, Akers, Opel and other IBM VP's in 1998. [...]
    At the IBM Stockholders meeting in Providence, RI, a "tent meeting" was held for retirees to attend in two rooms in back of the main floor where the shareholder meeting was held after the regular session ended. Donofrio and McDonald hosted the meeting and you had to be confirmed as a retiree in order to attend the behind closed door session. There were two rooms partitioned off, one with the "live Donofrio and live McDonald" and the other room was the overflow room with TV's showing what was going on in the adjacent room. Both rooms were the same size, with about 13 rows of seats. A partition separated the two rooms but you could hear voices from the other room, in the overflow room. When we checked in, the usher checked our names and escorted us to the "overflow" room. It became apparent, depending on what your name was, which room you were allowed to be in. There were about 10 people including the IBMers who controlled the microphones in the overflow room. The main room, as the camera panned around, was NOT filled. Not sure of the "List" criteria but the rooms could have been opened up and combined without difficulty. It was quite obvious that the reason for the two rooms was crowd control in case there was a "riot", the crowd of retirees, because it was split in two entities, could be controlled more readily. Everything had been well thought out in advance. It seemed casual and friendly but anything but.
    I think you get the picture. Nick Donofrio (Technology VP) and Randy McDonald (Human Resources VP) answered questions from retirees explaining that health care costs and benefits were being impacted by the 44 million Americans who do not have health care and IBM and other businesses who have health care plans for employees and retirees were subsidizing those who do not have care and that was the main reason of why health care costs are so high. IBM focus was going to be on trying to find ways to reduce overhead, by getting those 44 million off the gravy train. Hence, the reason why IBM employees are having to pay more for their medical costs. Sounds reasonable, but look at the other numbers, the executive compensation, the buybacks and tell me if you really can believe that train of reasoning.
    At the Shareholder meeting, Sam, the IBM CEO announced that the directors decided on buying back "$4 Billion" that is FOUR BILLION DOLLARS of IBM Stock and stockholders should be pleased with that. The CEO, Sam, said that stock options would continue to be "UN-Expensed" until the SEC makes it mandatory to expense Options for everyone. Last year, IBM disclosed to the press that if they had expensed Stock Options, profits would have been 16% sixteen percent less. If you calculate using the profits reported last year of $8 Billion and reduce it by 16%, it is more than a billion dollars of stock options that is going out the back door of IBM to the 3,000 executives and others. [...]
    Gerstner, who received 20 million stock option shares in 1999 will not be listed in CBS Market Watch dot com because he is no longer on the board of directors at IBM and not required to report. But rest assured, Gerstner will be cashing in those options sometime between now and June 30, 2008. In case you have not noticed, Gerstner became one of the 400 richest americans according to Forbes in 2001 with over $600 million in net worth. He had not cashed in the 20,000,000 shares either. Not bad for a 13 year Mckinsey employee, RJR Reynolds and American Express Executive, and touted as a self made man. [...]
    You really need to come to Charleston, SC April 26th to witness what IBM has evolved into. You will see metal detectors, bomb sniffing dogs, and a closed session without press. In essence, a "dog and pony show" for the 200 or so, who attend along with the other 200 or so IBM employees who are assigned to watch the other 200. [...]
    Take the time, grab a plane ticket and come to the IBM Shareholders meeting in Charleston April 26th and ask why IBM does not give COLA's any more. I think, if enough retirees ask the same question, maybe, just maybe, those multi- millionaire VP's and board of directors might grant one. Imagine, taking just $1 billion and putting in the pension fund for a COLA would do instead of buying back $4,000,000,000 IBM shares annually, why not just $3 billion? I am sure the stock market could absorb that, don't you?
  • "Cost of living increase" by "albanyblue2000". Excerpts: IBMMike, I retired in 1990, and I'm 75. I'm only going to address the statement of McDonald/Donofrio, dealing with the 44 million "freeloading" uninsured. Their technique is well known. It's called 'divide and conquer'. The 44 million uninsured represent about 15% of the US population, and they've been with us for at least the past 25 years. Yet, our medical expenses have grown by 10% to 12% EACH YEAR. AND, a significant percentage of that group is covered by medicaid, - which we all pay into, through state income taxes and local real property taxes.
    You all should realize that Donofrio is the designated IBM executive scheissmeister (If you don't know Yiddish or German, look to another board for the translation) of IBM. He gets that nickname from me, as I heard him speak and spin. He accumulated much of his wealth, because he is measured on number of patents awarded, - but not their value to IBM. As a result, IBM has paid for thousands of economically useless patents.
    And, you can expect pretty much the same in this year's stockholders' meeting. If you want to attend and protest, then I'd suggest that the group first contact the print, TV and business media, and arrange for a more public forum. Boycott any closed session prepared by IBM. And, gesticulate during the meeting so that the IBM cameras don't show a pleased acceptance of the report of IBM executives.
  • New York Times: Supreme Court Removes Hurdle to Age Bias Suits. By Linda Greenhouse. Excerpt: Workers who sue their employers for age discrimination need not prove that the discrimination was intentional, the Supreme Court ruled on Wednesday. Adopting a pro-worker interpretation of the federal law that prohibits age discrimination in employment, the 5-to-3 decision held that employees can prevail by showing that a policy has a discriminatory impact on older workers, regardless of the employer's motivation. The decision removed the requirement, imposed by a number of lower federal courts, that employees produce the equivalent of a smoking gun in order to win an age discrimination suit. Since discrimination on the job is often subtle, and proof of motivation often elusive, the need to demonstrate intentional discrimination has led to the dismissal of many lawsuits before trial. [...] In another case involving age discrimination in the workplace, a federal district judge on Wednesday blocked a Bush administration rule that would have allowed employers to reduce or eliminate health benefits for retirees when they reach age 65.
  • New York times: Judge Blocks Rule Allowing Companies to Cut Benefits When Retirees Reach Medicare Age. By Robert Pear. Excerpt: A federal district judge on Wednesday blocked a Bush administration rule that would have allowed employers to reduce or eliminate health benefits for retirees when they reach age 65 and become eligible for Medicare. Ten million retirees could have had benefits cut under the rule, which was adopted last April by the Equal Employment Opportunity Commission. The judge, Anita B. Brody of the Federal District Court in Philadelphia, struck down the rule and issued a permanent injunction that prohibits federal officials from enforcing it. The rule "is contrary to Congressional intent and the plain language of the Age Discrimination in Employment Act," the 1967 law that bans most forms of age discrimination in the workplace, Judge Brody wrote. [...] Christopher G. Mackaronis, a Washington lawyer for AARP, said Wednesday: "The rule was an example of executive arrogance. Federal agencies have no authority to rewrite laws passed by Congress. The rule was adopted in April 2004, but officials tucked it in their back pocket while they courted older voters last year. After the election, they moved forward with the regulation."
  • PlanSponsor.com: Federal Judge Tosses EEOC Retiree Health Benefit Exemption. Excerpts: A federal judge has blocked a federal agency from implementing a controversial rule allowing employers to cut back or eliminate retiree health benefits for workers reaching age 65 and becoming Medicare eligible. US District Judge Anita Brody of the US District Court for the Eastern District of Pennsylvania struck down the April 2004 rule by the Equal Employment Opportunity Commission (EEOC) as unconstitutional and barred the anti-workplace discrimination agency from enforcing it. According to one estimate quoted by news reports, 10 million retirees could have had benefits cut under the rule. Brody's ruling late Wednesday came in a lawsuit filed by the AARP (See AARP Sues Over EEOC Retiree Health Coverage Policy) in which the retiree lobbying group claimed that the rule allowing the retiree benefits reduction or cutoff violated the federal Age Discrimination in Employment Act (ADEA). [...] Also Wednesday, the American Benefits Council (ABC), an industry trade group, blasted Brody's ruling. “Should today’s decision stand, it would hurt all retirees who participate in these plans and further erode employers’ ability to offer these benefits,” said ABC Health Care Legal Counsel Susan Relland, in a statement. “The EEOC rule is a sensible one that validates a long-standing practice supported by unions and employers alike.” (Editor's note regarding ABC statement: Smiley face icon ).
  • BuzzFlash: Lifetime Health Benefits Promise? Read the Fine Print. By Rick Byrne, NOW on PBS. Excerpts: If you're retired and your former company is paying all or part of your health benefits-coverage you think you'll have for life-then you might want to dig out your old paperwork, put on your glasses (while you can still afford them) and read the fine print. Why? It may depend on what your definition of lifetime is. More and more retirees are finding themselves in court to save the health benefits they thought they were promised. And, judging by the decisions returned in a spate of cases, fine print trumps all. It's a story that began in the 1989 when health costs soared and corporations moved quickly to protect their bottom lines by slashing benefits and shifting costs to retirees. Most companies can cut retiree benefits at will. For others, fine print in contracts makes it a little trickier, and this is where the latest plot twist is playing out in courts around the nation.
  • PBS NOW: Ageing in America. Retiree Health Benefits. Excerpts: For many of America's retirees, paying the soaring costs of healthcare is possible only with the help of their company's retirement package—benefits they counted on for life. Today, many companies are moving to cut benefits and shift costs to retirees, forcing some to drop out of coverage and others into court to save benefits they thought were guaranteed. Corporate lawyers are filing preemptive lawsuits against former employees and relying on interpretations of fine print to make their case in court with greater and greater success. In "The Broken Promise," NOW joins THE WALL STREET JOURNAL's award-winning reporter Ellen Schultz to go inside the legal wrangling underway to tell the stories of workers and executives who say these companies are reneging on a promise and putting profits before people.
  • Bloomberg: Quit Planning Your Retirement -- It Won't Happen. By Matthew Lynn. Excerpts: In the U.K., once-generous retirement packages are being rolled back -- and that, in turn, may spread to the rest of Europe. People are starting to adjust to the idea that as they live longer, they will have to work longer. Yet there is a flaw to that -- and it is one that has been barely discussed. While working lives are being stretched out, careers are being shortened. Business is telling people to work through their 60s, yet age discrimination is widespread once people get into their 40s. [...]
    "The changes reflect the move made by many U.K. companies in regards to their pension schemes and is due to the dramatic changes the country has experienced over the last 20 years with a rapidly ageing population with people living longer and a low birth rate," said Vicky Luttig, a Bradford & Bingley spokeswoman, in an e-mailed response to questions. It is hard to fault the reasoning. You can't pay pensions you can't afford. And health has improved dramatically. Most 60-year- olds are in pretty good shape. Why shouldn't they be working? Still, what are they going to do? Business doesn't like old people. In the financial markets, you are meant to make the big money in your 30s and be safely sitting on your yacht in Monaco by your 40s. In the corporate world, you are meant to get on the board by the time you hit 40. In your 50s, you should be farmed out to a series of non-executive jobs.
  • Financial Times: Why IT workers are lying about their age. By Kim Thomas. Excerpt: Tony Wells has 30 years' experience of working in information technology, in jobs ranging from programming to senior management. Two years ago the 49-year-old decided to look for a new job and began sending his CV to recruitment agencies. In the year that followed, not a single agency called him back. As an experiment, he changed his age on his CV to 30 and had five phone calls within three days. His experience is not unique. Two months ago Mr Wells set up an internet support group for older IT professionals who are finding it hard to get work. It now has 60 members, many of whom feel frustrated and angry at the discrimination towards the over-40s they feel is rife in the IT sector.
  • USA Today: Special report: CEO pay 'business as usual'. By Gary Strauss and Barbara Hansen. Excerpts: CEOs pulled in median compensation of about $14 million in 2004, up 25% from 2003, according to a USA TODAY analysis of the largest public companies filing annual proxies through March 25. Compensation includes salary, bonus, incentives, stock awards, stock-option gains and potential returns from fresh option grants. Data were provided by executive-pay-tracker eComp Data Services.

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.
  • "Motivation algebra" by "Dose of reality". Full excerpt: Let's make a hypothetical baseline: Utilization 75%; 2 rating; Bonus .5%. For your additional 400 hours of charged work, and all the blood, sweat & tears that goes along with that you got 3% more gross. Let's say your base is $125k. Incremental gross bonus is around $3,750, or net around $2,500. It works out to about $6 per hour. Get a part time job cutting lawns or babysitting and you can make three times that. Of course, the ultimate carrot is promotion up the ranks, but what is your assigned probability and expected value of that. Is there any meaningful financial reward associated with it? Like I said in a previous post – it is a rigged game of musical chairs where even the winners are losers. Now IBM got an additional $100k of revenue and profit for your incremental utilization. This is where the fundamental flaw is in our resource/comp economics. The EVC (economic value to the customer – you) is totally out of whack with the economic value to IBM. You are carrying the weight of BCS on your back for the more astute loafers out there and getting nothing for it!
  • "brilliant!" by "blizzie". Full excerpt: Dose - your baseline metrics are dead-on. Before I left the blue pig, I realized the fundamentals of this system early on. I would witness my colleagues whoring utilization to the tune of 120% - burning the late night oil - usually just putting in "face time" (chatting over IM, reading industry mags, and many times even less productive activities). After being bitten once by the utilization pig, I quickly adopted the practice of making my utilization to the nearest tenth of a percentage as possible. I knew that I was never going to be appropriately compensated for my additional hours, so I chose to make good use of them on my own. When year end came about, I'd then listen to all the "over-achievers" lament about their lack of increase or bonus and quietly walk away with my (likely) equally poor increase and bonus (in addition to all the free time I enjoyed throughout the course of the year). Naturally, there is only so much anyone will tolerate and I left for greener (and more lucrative) pastures. For those of you still playing the utilization v. compensation hide-and-seek game...unless you're locked in by circumstance, there are far better opportunities out there for you to make your way.
  • "the math" by "wh1ppersnapper". Full excerpt: 40 hour week x 52 weeks = 2080 hours an employee is "available" on the job to IBM. 95% of this as utilization means 1976 hours of productive billable time. 2080-1976=104 hours for "non-productive" time such as vacation, education, sick time, pee breaks, etc. Assume an employee with less than 10 years tenure has 3 weeks vacation (subtract 120 hours) and you are already behind 16 hours on your target. If you have 4 weeks vacation, you are even further behind target! Now assume that same employee takes 2 3-day classroom courses per year towards their Individual Development Plan (since critical skills is one of the four factor analysis applied to the merit cycle)...that's another 48 hours behind target. To meet your 95% utilization target, you now need to work overtime. So, a 95% utilization target is a mandate for unpaid overtime. Let's hope you don't get sick or have to take a pee!
  • "95%" by "KatieNYC". Full excerpt: I was fortunate enough to have a PM that built in 45 hours for us per week, so that helped us meet our targets. I also volunteered for some additional project and proposals that allowed me to double up on hours. Anything over 90% is a crazy target. God forbid you are on the bench for a few weeks – if you are, you can almost never make up the time. I think utilization is important, but certainly not the only metric. It is just easy to measure. I know plenty of deadwood that are fully utilized on long-term projects. Anyway, give the bonus pool, it really isn’t that big of deal if you hit your target or not. So when do we hear about our annual increases?
  • "A little background goes a long way..." by "losingfaithquickly". Excerpts: The integration of us former PwCC'ers into IBM has been, in a word, tragic. First we were lied to about guaranteed salaries for 2 years. Second we were lied to about the banding review process. Third many were lied to about the bountiful opportunities within IBM to be told moving out of BCS as impossible. Many of us are still trying to cope with the loss of opportunity since BCS is ripe with experienced staff tied down by options, the loss of prestige, and the growth of wages outside of IBM. [...]
    I have moved to S&D and I often work with BCS, ITS, AMS, STG, SWG and Research. All I can say is how does IBM stay afloat with such a dearth of talent. SWG creates great products but it's anti-BCS nature is just insane. The research techies are either geniuses or dolts but neither can talk to a customer without a calamity. You have to love a company which gets 3000 patents of which less than 10% are of any value. Some of the patents are truly inane; only granted because nobody else cared to file a patent. The people in ITS are not consultants and prove that each time they arrive at a clients site. The former BIS consultants by and large are 9 to 5'ers who beat a path to the exits at 4:50pm following the ITS'ers who left at 3pm. The performance bar is so low I find myself only competing with former PwCC'ers. I expect to work 60hrs a week, IBM'ers 30 and only achieve 15 hours of actual work. I expect to travel 100%, IBM'ers less than 30%. I expect to be able to drive discussions with clients while my IBM counterparts sit silent in the back of the room. I get my deliverables done in 1/2 the time and pack the room when I speak at public events. This is a playground of opportunity - who would want to leave!
    In S&D I have seen my total cash compensation increase 30% from my BCS beginnings while the effort required to succeed at my job was cut in half (although I still push myself just to get that farther ahead). I think the problem with BCS is just that, BCS. IBM is ripe for pillaging by the talented ex PwCC'ers stuck in BCS. Go west BCS'ers! Legacy IBM'ers should be quaking in their boots because once the ex PwCC'ers figure out how to get around the no transfer rule, and it's possible, their will be a true rout.
  • "I Read Reports before I Left" by "ancientblueconsultant". Excerpts: The percentages are really the tip of the iceberg. The real problem is the skills of the people who have left. The Mckinsey people had counseled the pig that because of the economy they could treat people like dirt and get away with it. They didn't count on the economy turning around and the guts of many key people to leave anyway. The skill problem is very acute in BCS, and worse in ITS and somewhat less in SO. That's why the new HR systems now have "availability date" requirements. It's another barrier to try to hold people from going out of IGS into S&D and other better places in the pig. The merger has been a failure. On demand has been a failure. You can only do some much with accounting voodoo magic, so I suspect Sam will be in hot water by year's end. I predict IGS will be sold off in about 3-4 years.
  • "Very interesting" by "Dose of reality". Full excerpt: So the Mckinsey study was done pro forma, and was the source of the "screw em they got no other place to go" strategy, before the fact? I guess they never considered the fact that the effect of being screwed is additive and cumulative?! Employees have long memories, and there is a thin line between being a dedicated employee and an active job seeker. One you cross over, you rarely come back. Do you think any IBM HR professionals were involved in the assessment committee? Sorry – that’s a trick question with only one answer (there are no IBM HR professionals). Or maybe the Mckinsey consultants skipped class the day they discussed the business cycle?! Perhaps the strategy study and recommendations were commissioned with a time frame of one year?! Now I know that technology has shortened and compressed various cycles, but isn't a one year strategy a little ridiculous – a downright oxymoron?! Maybe the person that commissioned the study only planned on being here for a year or so. The only strategy that would have worked is tearing down the administrative, organizational, and cultural walls among the various groups in IBM. This is a job that no one in the organization had the appetite or skills to complete, requiring a dismantling of the self-serving shadow organization that has been spreading like a cancer the past few decades. One step backward to take three steps forward?? Not with SP at the head.

Coverage on Social Security Privatization
  • Christian Science Monitor: How Social Security could narrow rich-poor gap. By David R. Francis. Excerpts: When Congress created the Social Security system in 1935, 8 of 11 people reaching retirement age were not just poor - they were indigent. They had almost no income. Some lived on the street, many with their children. They relied heavily on charity to survive. Those drafting the Social Security bill wanted to redistribute income to these destitute retirees. They succeeded. Today's seniors are relatively flush. [...] Between 1979 and 2002, the top 1 percent of the population enjoyed a 111 percent increase in their real income, the Congressional Budget Office reported recently. The top fifth enjoyed a 48 percent gain during the same period while the bottom fifth got only a 5 percent income hike. Following Dr. Shiller's theme, income-tax rates could be raised on high incomes. A special tax-based benefit for the working poor could be enlarged and their Social Security pensions boosted to reflect a higher share of their income while working. [...]
    Indirectly, today's Social Security has led to a widening of the rich-poor gap by helping finance Mr. Bush's tax cuts. That's not the system's fault. It's the result of the White House and Congress misusing the system's current surplus. That money is supposed to be socked away for future retirees. Instead, Washington has used it for current spending, including tax cuts that have mostly benefited the well-to-do. [...] Apparently not many in Washington believe in income redistribution today. Eleven days ago, the Senate voted 55 to 45 to adjust taxes on Social Security benefits in a way that would give those making more than $200,000 a year a 14 percent hike in their after-tax benefits, according to Citizens for Tax Justice. Those making less than $30,000 would get zero.
  • New York Times: With Bush Re-elected, Rove Turns to Policy. By Richard W. Stevenson. Excerpts: Under one of his hats, Mr. Rove is running a sophisticated campaign on behalf of the president's Social Security proposals, employing all the components of the national political machine built to re-elect Mr. Bush. Under the other, he is overseeing policy meetings where the administration's senior officials analyze the competing Social Security proposals, bone up on arcane economic concepts and plot how to hit back at the substantive arguments made by people on the other side of the issue.
  • New York Times: Bush Social Security Analogy Questioned. Excerpts: Out on the hustings, President Bush likes to make a case for allowing younger workers to invest some of their Social Security taxes by citing the example of the Thrift Savings Plan, private investment accounts available to members of Congress and other federal employees. "Doesn't it make sense for members of Congress to give younger workers the opportunity to do the same thing with their money that they get to do in their retirement system?" the president asked this week in Cedar Rapids, Iowa, baiting his congressional opponents. "Frankly, if it's good enough for federal workers and elected officials -- putting aside some of your own money in a personal savings account -- it ought to be good enough for all workers in America." What Bush fails to mention is that his accounts differ from Thrift Savings Plan accounts in a key way: They would be carved out of the Social Security taxes nongovernment workers pay. By contrast, federal employees get their accounts in addition to a traditional Social Security benefit check.
  • New York Times: Social Security, Growth and Stock Returns. By Edmund L. Andrews. Excerpts: In barnstorming the country over Social Security, administration officials predict that American economic growth will slow to an anemic rate of 1.9 percent as baby boomers reach retirement. Yet as they extol the rewards of letting people invest some of their payroll taxes in personal retirement accounts, President Bush and his allies assume that stock returns will be almost as high as ever, about 6.5 percent a year after inflation."For the life of me, I can't imagine why anybody would argue against young workers having the ability to invest and build a better retirement for their future," Treasury Secretary John W. Snow said Wednesday in a speech in Bozeman, Mont. A growing number of economists, however, including many who favor personal accounts, say Mr. Bush's assumptions are optimistic. [...] To make the numbers work, the economists contended in their paper, domestic profits would have to grow far more rapidly than they have in the past, or American companies would have to become huge exporters of capital to faster-growing countries. At the moment, the United States is a huge net importer of foreign capital.

New on the Alliance@IBM Site:
  • Job cut alert! Alliance@IBM is receiving information that a resource action is about to happen in IGS. Please send any information to endicottalliance@stny.rr.com.
  • 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.

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