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    Highlights—April 9, 2005
  • New Jersey Star-Ledger: After the job layoff, a far more bitter pill. Excerpts: John didn't simply lose his job, he lost access to the medical benefits that, at little cost, have kept him alive for years. He is a kidney transplant patient whose prescriptions alone cost about $3,000 a month. He says his doctors have told him the kidney is deteriorating and he faces the need for another or, perhaps, dialysis. Neither of which, the Marqueses say, they could afford on their own without selling their home. "We know we face that possibility," Anita says. Anita and John have been unable to find jobs with the benefits they need. She is 48; he is 46. He now works for a temp agency; she will start working as a contract consultant soon. These are not regular, steady, secure jobs with benefits. They do, however, provide enough income to pay premiums for reduced protection plans -- and to keep their home. In a few days, John will lose the last of his medical benefits. The cost to him for his own plan -- in the unlikely chance he could get one -- could cost him more than the medications he needs. "We simply can't afford it," he says. "We don't have the income."
  • Los Angeles Times: At what cost? To keep health coverage, more workers are cutting back on food, heat and other necessities. Still, many of them eventually will lose the battle. Excerpts: Terri MATTHEWS, a teacher's aide in East Palo Alto, spends $613 a month for her family's health insurance — 24% of her take-home pay. Rather than go without coverage, she skimps on other needs; her heat has been turned off twice in the last year and she recently had to drop her car insurance. Peggy McPhee, a 52-year-old bridal dressmaker in Santa Rosa, spends more than a quarter of her salary on health insurance. She's recently given up her cellphone, buys clothing only at garage sales and no longer turns on her heat in the winter. [...] Such sacrifices for health insurance are far from rare. As employees continue to absorb more of their healthcare costs, an increasing number of people — even healthy ones — are drastically altering their lives simply to hold on to their insurance. They are delaying homeownership, putting off saving for their children's education, or otherwise sacrificing their financial security to guard against a catastrophic medical bill. Many people, especially lower- and middle-class workers and the chronically ill, are beginning to spend a once-unimaginable share of their income on health coverage. In some cases, health costs have become the single biggest expense in family budgets. Between 2000 and 2004, the number of people spending more than 25% of their earnings on healthcare — a figure normally associated with homeownership — rose by nearly a fourth to 14.3 million people, according to Washington, D.C.-based Families USA, a healthcare advocacy group.
  • BenefitNews Connect: EEOC seeks to overturn court ruling. Excerpt: The Equal Employment Opportunity Commission will ask Justice Department lawyers to appeal a federal judge's ruling that prevented it from allowing companies to provide younger retirees with better health care benefits than they give to older ones who qualify for Medicare.
  • PBS Now: Broken Promises—Retiree Health Benefits. Excerpts: DAVID BRANCACCIO: NOW on PBS: How would you define "lifetime medical benefits?" Something to do with the rest of your life? More and more people are finding out otherwise. BASIL CHAPMAN: Never thought of it until I retired. And I really-- I really got a surprise when it hit home. BRANCACCIO: Companies think they have a solution for rising health care costs — cutting the benefits of retirees. ELLEN SCHULTZ: They keep saying, isn't there a law? How could this be legal that they just promise something, give it to us in writing, then take it away?
    ELLEN SCHULTZ: It doesn't matter what you promised verbally, what the HR person told you. What matters is whether the company put this language in their document. It doesn't matter that the retirees never saw the document. That they don't know the document exists, that they can't get it sometimes even if they ask for it. What mattered was that the companies said we wrote in our plan documents a specific sentence. We said we reserved the right to change the benefits. MARY ELLEN SIGNORILLE: Retirees are always shocked to find that basically a promise that was made to them can be broken just because there's certain language hidden in the plan document somewhere. [...]
    MARY ELLEN SIGNORILLE: Back in the 70s, when retiree health benefits were given to employees, they were part of the social contract-- part of the promise that employers made to employees. And, during the 70s, it was a relatively inexpensive employee benefit. Health care costs weren't that high, and if you looked at the demographics, people weren't living as long as they are living now. So, for the employer, it was a relatively inexpensive and great way to keep morale among employees. BRANCACCIO: A morale booster, perhaps. But many unions paid for those benefits by giving up other compensation. When Basil Chapman was at the contract bargaining table, he says, his union accepted lower starting wages in return for these lifetime benefits. DAVID BRANCACCIO: So, when a company says things like, "The healthcare benefits was a freebie. This is something we give the retirees," what would your reaction be to that? BASIL CHAPMAN: No. Nothing's a freebie. You pay for it. And, that's money per hour that you spent in that plant every day. And now, they're tryin' to take it back. DAVID BRANCACCIO: You talk to some retirees and they say, "Look, this wasn't just a company giving us some benefits. But, in fact, the employees paid for it in some sense." It was part of a negotiation. JAMES KLEIN: That does not necessarily correspond to say that until the-- for the rest of that person's life that there was never going to be a change made in the cost sharing between the employer and the retiree to provide that benefit. BRANCACCIO: Klein is using an argument many companies make, characterizing the benefits as a perk that they have the right to rescind. But Schultz says it was actually part of an economic calculation that helped keep wages down in exchange for future benefits. ELLEN SCHULTZ: It was a large IOU from the company. It benefited the companies because they could save the cash. And pay it later. Use the cash in the short term to grow the company. And it was good for the employees as well. Because they could look forward to protection in their old age. Then, of course, when they retire, this huge IOU is coming due. You have millions of corporate retirees. Now the companies are-- are saying we can't afford to pay that.
  • New York Times: Majority Sure of Comfortable Retirement. Excerpts: A majority of American workers continue to believe they'll have enough money for a comfortable retirement, but few have saved enough to ensure that will happen, a new study shows.The annual Retirement Confidence Survey, released Tuesday by the nonprofit Employee Benefit Research Institute in Washington, D.C., found that 65 percent of workers are "very confident" or "somewhat confident" of funding their retirements. That's down slightly from 68 percent last year, despite the improving economy. Although the overall confidence reading remains high, workers acknowledge that they haven't saved as much as they should. In fact, most haven't saved much at all. The study found that 52 percent of those surveyed have less than $25,000 set aside for retirement; 13 percent have $25,000 to $49,999, and 11 percent have $50,000 to $99,999. Just 21 percent have $100,000 or more, and most of those are workers 45 and older.
  • New York Times: A Bad Year for the Chief (but Not for the Bonus). By Eric Dash. Excerpts: It's hard to find three chief executives who had a tougher year than Carleton S. Fiorina, Raymond V. Gilmartin and Michael D. Eisner. But you would never guess that from the size of their annual bonuses. At Hewlett-Packard, Ms. Fiorina was forced to step down after directors concluded that her strategy wasn't working. But the board reinstated part of her bonus after a strong fourth quarter, so she still managed to pocket $1.57 million. At Merck, Mr. Gilmartin collected a $1.38 million bonus for 2004, despite the fact that Vioxx, its top-selling pain medicine, was pulled from the shelves late last year; investors pulled out of the company's stock even faster. At Disney, Mr. Eisner was the subject of a shareholder revolt. Recently, he announced that he would retire this September, a year earlier than he had planned. No matter. He received a $7.25 million bonus for the company's "greatly improved" fiscal performance in 2004, according to Disney's proxy statement. The fact that all three made out so well underscores a trend in executive pay last year: the big bonus is back. Over all, the median bonus of chief executives was worth over $1.9 million, up more than 38 percent from the previous year, according to data from Pearl Meyer & Partners for 179 large companies.
  • New York Times: An Early Advocate of Stock Options Debunks Himself. By Claudia H. Deutsch. Excerpts: Fifteen years ago, Michael C. Jensen, a professor at the Harvard Business School, wrote a paper with Kevin J. Murphy, then a professor at the University of Rochester, that trumpeted some pretty radical ideas for the time. Compensation systems, they posited, prompted chief executives to add revenue, not to increase profit, pay dividends or otherwise reward long-suffering shareholders. Their suggestion was to make stock options a big component of top management's pay, ensuring that they do well only if shareholders do well. "It seemed a way to tie managers tighter to the mast," Professor Jensen recalled recently. Of course, it turned out to be anything but. In far too many cases, stock options tempted managers to pick strategies, schedule deals and investments, even juggle the numbers, so that the company looked best when it came time to exercise those options.
  • New York Times: The New Executive Bonanza: Retirement. By Eric Dash. Excerpts: Everyone knows that chief executives are paid huge amounts of money while they are working. Less known is just how much they make in retirement. At many of America's biggest corporations, it is not uncommon for retired executives who were paid tens or even hundreds of millions of dollars during their tenures to receive $1 million or more in pension benefits every year - for as long as they live. [...] At a time when millions of American workers have seen their pension plans pared back or shut down, and millions more are being asked to bear the risk of managing their own retirement savings, departing chief executives are making out better than ever. A total of 113 chief executives can anticipate retirement benefits worth more than $1 million a year; at least 31 may get twice that amount, or more. [...] Based on the latest available proxy information, at least eight executives are eligible to retire with annual benefits worth $3 million or more. They include Reuben Mark of Colgate-Palmolive, Robert L. Nardelli of Home Depot, Samuel J. Palmisano of I.B.M. and Kenneth D. Lewis of Bank of America. I.B.M. and Bank of America have recently been sued by workers over changes to their employee pension plans.
  • "Layoff rumors flying again" by "rufus2002d". Excerpts: IGS has been informing people for the last two weeks that they are part of a "resource action". My department lost two people today. I do not know the scope of the layoff (ooh,,gee,,,did I say "layoff"?). I personally know 3 of the people that got axed. Two of them have over 28 years of service. One thing I do know...the folks I work with are nervous wrecks. It is getting extremely hard to deal with the constant shadow of an axe hanging over your head. And in my group, there are no more "slackers" left. So, now they are nailing the folks that make this company tick. I laugh when I read about people's "plans" to retire after 30-40 years of service. How many do you actually think will be around that long?
  • "Questions for the IBM Annual Meeting" by Janet Krueger. Excerpt: Even if you are not planning to attend the shareholder meeting in Charleston, you can still submit questions for the Q&A period. See: http://www.ibm.com/investor/services/meetings.phtml. IBM's Annual Meeting of Stockholders will be held on April 26, 2005, in the Charleston Area Convention Center, North Charleston, S.C. IBM is offering stockholders the opportunity to submit questions for the Q&A period of the Annual Meeting. If time permits, we will select e-mailed questions to address at the meeting and after the meeting we will post on the IBM Investor Relations site any questions selected and the answers. You can submit a question by using the form below. This page will remain active until 5pm New York time on April 22, 2005. Maybe if every IBM retiree, employee, and ex-employee who still owns stock submits questions about our rapidly vanishing benefits or IBM's employee-unfriendly employment practises such as out-sourcing, IBM will get the message and be forced to provide an answer on the investor relations site! Just a suggestion... As you all know, IBM no longer provides us with very many opportunities for feedback -- when the gates are open, we should all leverage the opportunity!
  • "Re: Questions for the IBM Annual Meeting" by "alwaysontheroad4bigblue". Excerpt: Very interesting, but I see a problem. What is the point of submitting a question when you will never know how IBM answered it? During Mr. Gerstner's tour of duty, he moved the question and answer period to after the formal close of the meeting, meaning their is no transcript or other public record of the Q&A period. The *only* way to know what questions are asked and the answers provided by IBM senior executives is to be in the room. (Trust me...it's worth the price of a plane ticket and hotel room to be in the room!). How will people that e-mail questions get their answers delivered? My guess is that the real story is that this is a ploy on IBM's part to avoid questions from the floor...questions that in recent years have been very embarrassing for the company.
  • Business Ethics Magazine: 100 Best Corporate Citizens for 2005. Excerpts: The 100 Best Corporate Citizens List is designed to recognize Russell 1000 firms that perform to a higher standard, serving a variety of stakeholders with excellence and integrity. [...] The aim of this listing is to identify firms that excel at serving a variety of stakeholders with excellence and integrity. The 2005 list marks its sixth anniversary. Over that time, KLD Research & Analytics in Boston has been the consistent source of social data, while methodology has evolved slightly. Initially, the list was drawn from 650 firms used in the socially screened Domini Index: the S&P 500, plus 150 other firms selected for industry balance and social excellence. In 2003 we expanded to cover the Russell 1000, the 1,000 largest publicly traded U.S. firms (for consistency we included the 150 Domini firms). We also switched in 2003 from three-year average scores to one-year scores. Last year ratings involved seven stakeholder groups: shareholders, community, minorities and women, employees, environment, human rights, and customers. For 2005, we added an eighth category, governance, a new rating now offered by KLD. In each category, KLD notes where companies have “strengths” and “concerns.” In the employee category, a firm might hypothetically get three strengths for profit sharing, retirement benefits, and employee involvement, plus two concerns for union relations and workforce reductions. To arrive at a net score in this category, we take three strengths and subtract two concerns. The same is done in each category. Environmental strengths might include beneficial products, pollution prevention, and recycling, while concerns would include emissions, climate change, and regulatory problems. Governance strengths include paying a CEO less than $500,000, while concerns include SEC actions and excessive CEO pay.
  • "best corporate citizen" by Lee Conrad. Full Excerpt: In 2002 IBM was number 1 in the Business Ethics list. In 2003 it was number 5. In 2004 number 12. Now? Not even on the list. The lack of respect towards employees and retirees takes its toll.
  • "best corporate citizen" by Linda Guyer. Full excerpt: All those cards and letters really worked! Thanks to everyone who wrote Business Ethics magazine about IBM. BTW I would have no problem with IBM being on the 100 list if they truly deserved the recognition, but I don't believe they do. Not only does treatment of employees and retirees not qualify them for the recognition, but their environmental record and offshoring of jobs were I'm sure factors in the consideration.
  • Fun Stuff! As you've probably heard, Google Maps has integrated satellite pictures into their Google Maps Web site. Do a Google Maps search and then click on the "Satellite" link in the upper right corner. Lots of people are looking at these pictures, and a blog at http://www.shreddies.org/gmaps/ has been devoted to capturing interesting/unusual/pretty sat pics from Google Maps. Current entries here include The Gateway Arch, Mt. Rushmore, the Uffington White Horse (neat!) and Niagra Falls. Check it out!

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • Washington Mutual Faces Criticism from Outsourced Indian Call Center Workers. By Michael Cooke. Excerpts: It was with this keen business sense that WaMu, like many of its peers, made an agreement in early 2004 to offshore some of its IT call center work. The idea was that about 35 outsourced staff could help troubleshoot WaMu’s IT problems from the New Delhi offices of leading Indian outsourcer Wipro Spectramind. However, according to former staff working on the contract, WaMu’s mission statement to ”ensure that every human interaction is caring, courteous and respectful” was not often in evidence in the Wipro’s New Delhi offices, particularly to Wipro’s employees working on the WaMu account. Wipro Spectramind makes few bones about forcing staff to take on Western names. According to chief operating officer, Devashish Ghosh, employees working on several processes [contracts] are required to take on Western aliases. Singling out finance companies as particularly insistent on the practice, Ghosh says: “Here you are working for a customer. The customer prefers that there is a name given which comforts their customer. And if that is the need of the process, the need of the customer…one will have to do it. And these people [staff] are sensitized to it. [They are told they] will have to work under a different name and let’s be clear it’s the requirement of the customer.” But it is not only names. Wipro Spectramind also often strives for the “Americanization” of U.S. business processes, including intensive linguistic training designed to obliterate all traces of local accent. Indeed, some experienced call workers have such strong American accents, it is difficult to believe they have never been out of India. [...]
    According to his former Wipro colleague Gagan Sameer, who also worked on the WaMu account, there was constant dialogue between offshore Indian staff and WaMu’s U.S. staff even as the jobs were transferred, an indication of how closely decisions on one continent impact the other. He says, “Every time we got three new people, three people would get fired in the Seattle office. We were always updated. [U.S. colleagues] used to tell us in advance: 'You know you are getting three new guys today.' Initially our reaction was ‘How do you know?’ And the U.S. colleague would say, ‘You just let me know when these new guys come and I’ll tell you why.’ And when the new guys would come, I would say to the Seattle office, ‘Yes they are here; how did you know?’ And he [U.S. WaMu employee] would say, ‘Because three guys [here] lost their jobs today.’”
  • Wall Street Journal: Even Tech Execs Can't Get Kids to Be Engineers. By Ann Grimes. Excerpts: Vinod Dham is among a growing number of technology executives warning that the U.S. faces an engineer shortage. To stay globally competitive, he says, the nation must do better at steering its youth toward engineering careers. Mr. Dham knows how hard that is: He can't persuade his own kids to go into engineering. The 54-year-old Mr. Dham would seem to be a prime role model. His engineering degree lifted him from his humble origins in India into a 16-year career at Intel Corp., where he became well-known for helping create the Pentium chip. His older son, 22-year-old Ankush, is studying economics, and that's fine with Mr. Dham, who says he couldn't get him interested enough to develop the rigor required for engineering. But ever since his younger son, 19-year-old Rajeev, was a boy, Mr. Dham has been urging him to pursue engineering -- and he, too, is going into economics. Rajeev "doesn't want to do electrical engineering," the elder Mr. Dham laments. "He tells me the job will be outsourced." [...]
    But some of the nation's tech elite -- including many immigrants who benefited greatly from engineering careers -- are finding even their own children shun engineering. One oft-cited reason: concern that dad and his contemporaries will ship such jobs overseas. Venture capitalist Promod Haque, for example, is in an ironic bind when it comes to advising his own kids. Like many other Silicon Valley financiers, Mr. Haque has recently begun funding tech start-ups in India and urging U.S. tech entrepreneurs to outsource from the start by forming companies that split operations between the U.S. and India. Mr. Haque chuckles about a recent dinner conversation with his college-age daughter, who he hoped would go into engineering just as he did. "She said, 'Dad, I'm not going to take any more computer-science classes,' " he recalls. "I asked her why. She looked at me straight and said, 'I don't want to go to India to get a job.' "

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.
  • "The real reasons" by "Dose of reality". Excerpts: Now, let’s get on to the subject of your green card. I have a real problem with a company that uses green card sponsorship as an enticement for an employee. It is a cheap exploitation of a legal loophole that gives an unfair advantage to foreigners. The written intent of the H1 law was to close skill gaps in US resource pools. However, the law is now used to import cheaper foreign labor, by lowering salary offers below the U.S. equilibrium price and claiming that they can’t find local applicants to fill the jobs. The result is that segments of the local applicant pool find themselves having to change careers, the overall demand for US applicants across the whole economy decreases, and wage rates decrease. For coder level jobs, there is probably minimal drop-off in effectiveness. However, for client relationship level jobs, we are truly compromising service delivery. Those companies that can’t distinguish this will suffer the consequences. The bottom line is that US citizens lose, some companies gain & some lose, foreigners universally gain. As far as the overall economy is concerned, the impact depends on whether applicants are truly suitable for the jobs they are assigned. An immigration policy that produces this kind of result would not be sanctioned by many citizens in any country.
  • "Some facts for you" by "Dose of reality". Excerpts: Let’s look at some facts for BCS:
    • Fewer than 10% are ALLOWED to be 1 rated, and there is a forced distribution by practice. Therefore, in many cases performance that warrants a 1 in one area will generate a 2 in another.
    • Over half of the people in my practice met their utilization targets for the year, as well as all of their other soft objectives. Fewer than 10% received a 1 rating, and most received bonuses of less than 3%. With this performance in previous years, salary increases have been virtually zero.
    • Contrast this with 40% of performers that had utilization significantly less than target, and received almost the same results. The incremental profit to BCS on an additional 20% in utilization is approximately $100k – see my "motivation algebra" post in the bonus thread. While there may be no law that requires any pass through of this relative windfall, this lack of opportunity and reward is an exploitation vis a vis the expectations (published bonus targets), economic benchmarks (the competition), and more to the point rational compensation policy (if I have to explain that then we really have no common ground)
    • Relative reward for comparable talent, effort, and value are lower than the rest of IBM. We continue to chase profit targets that are unachievable, since the revenue producing capability of BCS has been severely undermined, yet the mandates presume they haven’t been. Staff get the short end of the stick.
    • We get virtually no reward for the revenue drop through to other divisions that comes from BCS leads and contracts.

    I am really happy for you that you don’t feel exploited. But then again, neither did Boxer in Animal Farm, the goldfish in my daughter’s fishbowl, or the illegal immigrant that cuts my acre of lawn for $15 per week. The former was just proud to be able to contribute, the middle never knew any other life, and the latter is making five times more than he ever did before in his life. Which one are you?

Coverage on Social Security Privatization
  • New York Times: Shameless Photo-Op. Excerpts: Imagine this: On his next trip to Japan, President Bush visits the vault at the Bank of Japan, where that country's $712 billion in United States government bonds is stored. There, as the cameras roll, he announces that the bonds, backed by the full faith and credit of the United States, are, in fact, worthless i.o.u.'s. He does the same thing when he visits China and so on around the world, until he has personally repudiated the entire $2 trillion of United States debt held by foreigners. Mr. Bush rehearsed just that act on Tuesday, when he visited the office of the federal Bureau of Public Debt in Parkersburg, W.Va. He posed next to a file cabinet that holds the $1.7 trillion in Treasury securities that make up the Social Security trust fund. He tossed off a comment to the effect that the bonds were not "real assets." Later, in a speech at a nearby university, he said: "There is no trust fund. Just i.o.u.'s that I saw firsthand." [...]
    In his speech, Mr. Bush went on to acknowledge that future generations would have to make good on the debt. But the intended meaning of the photo-op was clear. In the hope of persuading people to privatize Social Security - a move that would only add to the growing debt burden for future generations - Mr. Bush wants Americans to believe that the trust fund is a joke. But if the trust fund is a joke, so is the full faith and credit of the United States.
  • Molly Ivins: The $200 million disinformation campaign. Social Security privatization cabal will break the bank to convince you to break yourself. Excerpts: Among those still interested in fiscal sanity, and that includes quite a few Republicans, I bring your attention to two tax cuts that should be repealed right now for the sound reason that they are perfectly nuts. A whopping 54 percent of the two cuts goes to the two-tenths of one percent of Americans who make more than $1 million a year. And 97 percent of the cuts goes to the 4 percent of the population with incomes over $200,000. (All figures from the Center on Budget and Policy Priorities and the Joint Committee on Taxation.) [...]
    The center's report says, "If these two tax cuts were to be cancelled ... Congress and the president could avert cuts in areas like health care, child care, housing assistance and food stamp assistance for low-income working families." It is a rather clear choice of moral values. Also of note is what appears to be a new dimension in how monied special interests buy legislation through Congress. We are all familiar with both corporate lobbyists and the system of legalized bribery known as "campaign finance." But now comes an unholy tsunami of corporate money aimed not at politicians but at ourselves. Over $200 million will be spent to convince us that we should privatize Social Security and change the rules of class-action lawsuits. In other words, they want to make us in favor of our own screwing by corporate special interests.

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.

  • Forbes: What Kills Billionaires. By Vanessa Gisquet. Excerpts: Think trophy wives, boating accidents and feckless dependents are the primary causes of death for billionaires? Think again. Billionaires are killed by the same unglamorous things that kill the rest of us: diseases such as cancer, heart attacks, kidney failure and others. The only difference is they may live a little longer.

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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