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    Highlights—May 14, 2005
  • RTE News (Ireland): IBM workers offered redundancy package. Full excerpt: IBM workers who opt to take voluntary redundancy will be paid five weeks' pay for every year of service. The company is closing down its Microelectronics division at Mulhuddart in Dublin, which employs about 400. All staff who opt to stay with the company will be redeployed, as reported last week.The IDA has said the restructuring would have no significant impact on Irish operations, which employ 3,700.
  • LawMemo.com: Legalese torpedoes waiver of ADEA claims. Excerpts: When IBM terminated folks in a RIF, they asked Dale Thomforde to sign a form called "General Release and Covenant Not to Sue." Although the form was drafted as a general release of all claims, Thomforde noticed some language in the form about suing IBM under the ADEA. He asked his supervisor if that language would allow him to sue IBM if the case was limited to the ADEA. The supervisor asked the legal department and then told Thomforde that the company's attorney was "not comfortable providing an interpretation for you and suggested you consult with your own attorney." IBM's drafters set the form up as both a release of all claims and a covenant not to sue. They created an exception to the covenant (but not to the release) for ADEA suits. Why? To allow a suit challenging the validity of the waiver, but not to allow suits on the merits of the ADEA.
    The Older Workers Benefits Protection Act (OWBPA) requires waivers of ADEA rights to be "written in a manner calculated to be understood by such individual, or by the average individual eligible to participate." In Thomforde v. IBM (8th Cir 05/03/2005) the 3rd Circuit said the difference between a release and a covenant not to sue "may not be readily apparent to a lay reader." (Chuckle. A lot of lawyers are equally clueless. That's no criticism of lawyers, just something IBM might have thought of when they were drafting.) "Once IBM chose to use the legal terms of art ..., IBM had a duty to carefully explain the provisions." The form also used the terms release and covenant in a way that suggested they were interchangeable.
  • Poughkeepsie Journal: Court cancels IBM no-sue waiver. Decision may renew action over age bias. By Craig Wolf. Excerpts: A federal appeals court hearing an age-bias lawsuit against IBM Corp. has ruled invalid a waiver of the right to sue that a laid-off employee had to sign to collect his severance. This may have opened the doors for several hundred other laid-off IBMers to revive a similar lawsuit alleging IBM hit older workers harder in layoffs, say leaders of that suit, many of whose plaintiffs are from the mid-Hudson. [...] The three-judge panel held that the waiver, or "release and covenant not to sue," that IBM made Thomforde sign was not binding. The panel reversed a judge's ruling, concluding the waiver did not satisfy the law's requirement for a "plain language" statement that limits "technical jargon." The judges noted IBM argued there was a difference between a "release" and a "covenant not to sue." The judges held that the difference isn't readily apparent to a lay reader. "Once IBM chose to use the legal terms of art in the agreement, IBM had a duty to carefully explain the provision," they wrote. Jeff Young, attorney for Rivera and others, said the decision will help his case, which now involves "several hundred" ex-IBMers. Many are from the mid-Hudson; others are from Burlington, Vt., and others are from around the country.
  • Yahoo! message board: Update On Vermont and New York IBM Age Discrimination Meetings with Attorneys. Excerpts: Attorney(s)Pat McTeague and Jeff Young plan to meet with Poughkeepsie, NY area. Plaintiffs and interested individuals on Friday 5/20 at 7:00 PM EDT at a conference room in the Best Western Inn, 2170 South Road, Route 9, Poughkeepsie, NY. [...] The location has changed for Burlington, VT. Due to local graduation ceremonies, the Best Western Windjammer was fully booked. The meeting will now take place on Saturday 5/21 at 4:00 PM EDT at a conference room in the Sheraton Burlington Hotel, 870 Williston Road, Burlington, VT. [...] Any questions, please email or call. Sue Turner, Paralegal for Jeffrey Young. McTeague, Higbee, Case, Cohen, Whitney & Toker, P.A.; Four Union Park; P.O. Box 5000; Topsham, ME 04086-5000; Telephone 207.725.5581 or 800.482.0958; Fax 207.725.1090; email: outofblue@me-law.com; Web site: www.me-law.com
  • Reuters: IBM shares dip, investors ignore job plan. By Eric Auchard. Excerpts: Investors reacted coolly on Thursday to IBM plans to eliminate up to 13,000 jobs, sending shares down 2 percent as the cost-cutting move underscored concerns of slow growth at the world's largest computer maker. BM announced the widely expected cuts, up to 4 percent of the workforce, late on Wednesday, and on Thursday it said it could save $300 million to $500 million this year and still meet earnings targets for the second half thanks to the cost cuts. But many International Business Machines investors are focused on revenue, the top line of an income statement. "IBM is going to have to demonstrate, not just describe, significant top line growth in order for investors to run back into the stock," said Mark Stahlman, an analyst with Caris & Co., who rates IBM's investment potential as "above average." [...]
    Noting that most employee cuts in Europe are expected to be voluntary, Stahlman said IBM may be being prevented from making more aggressive moves to cut jobs by stringent European labor rules that require advance notice and hefty payout packages. "It's plausible they have run into European labor restrictions and maybe have not been able to go as far as they'd like to in cutting costs," Stahlman said.
  • TechNewsWorld: IBM Cuts 13,000, but Maybe It Should Have Laid Off One. Excerpts: The CEOs preceding Louis Gerstner, in order to hit quarterly numbers, divested IBM of key capital assets that had assured IBM's long-term health. A very accurate metaphor was that they consistently sold the geese that were laying the golden eggs, and when they ran out of geese the firm started to collapse. Louis Gerstner came in and stopped that practice while Jerry York, the CFO who had just come from turning Chrysler around with Lee Iacocca, did much of the really heavy lifting by fixing IBM's internal processes. [...]
    Now, you may ask yourself, what does putting 13,000 people out of work (last week's news) have to do with fixing that problem? The answer is nothing, but IBM had to show it was doing something to address the problem and, unfortunately for labor, the market seems to like layoffs Latest News about layoffs. IBM's excessive bureaucracy goes back to the 80s, yet that is what is seen as the reason for this layoff. People are actually a small part of the problem created by errant practices that the spun-off units immediately know to get rid of. This is something the IBM executive staff simply doesn't seem to see or understand. [...]
    When IBM was great, under its founders, it protected its employees first and its executive management remained engaged with all levels of the company. At that time anti-competitive policies not only didn't proliferate they were aggressively eliminated. Perhaps it is time IBM's board looked back into the company's history and recaptured some of those practices, and put someone in charge that could fix IBM without turning it into a place where good people "used to" work, selling the "golden geese," or creating, in Lenovo, yet another Dell-like competitor.
  • Yahoo! message board: Janet Krueger debunks the myths spread by proponents of cash balance pension plans. Full excerpt: Younger employees like the new plan, because they can take the pension with them, and they don't have to work 30 years at a single company to see the full benefit of retirement. You're repeating myths. The media outlets like you to do this, because eventually you might believe them. Most workers don't even think about retirement until their kids start moving out of the house. Younger workers don't care about the new plan because they aren't thinking about retirement. They don't care about the old plan either. Why do you THINK retirement information is buried so deeply in IBM's job information that you can't even find it? Because younger workers don't care! If IBM had truly thought younger workers care when they did the conversion in 1999, they would have included it in their recruiting information -- they did not -- what does that tell you? If IBM truly thought younger workers care about retirement plans, they wouldn't have terminated the plan completely in 2005... THINK! Don't just repeat propaganda and myths.
    Since many employees like to move around anyways, and know they can be fired for any little reason; the younger employee prefers knowing they can collect all 30 years of retirement by working at multiple workplaces that offers the pension plans. Another myth! Younger workers don't LIKE to move around, at least not after they start their families. Companies may not give them much choice, but let's not pretend companies are merely fulfilling the younger worker's desires when they lay them off just short of the 5 year vesting mark. This isn't about what younger workers like -- it is about what saves the company the most money!! If younger workers, who as you claim know they can be fired at will, cared about their retirement, they wouldn't choose to work at places with a full 5 year vesting retirement!!! Also, go back and look at all the charts and analyses we posted on www.cashpensions.org -- the cross over point for when the older, more traditional plan is more valuable is at just 8 years of service. IBM's cash balance plan was only better for workers who managed to stay at IBM into their 6th year of service, but who then left in their 8th year. The cash balance plan was designed to save IBM money, and to encourage older workers to leave sooner rather than later, but had nothing to do with motivating younger workers to join the company at all!
    Also all employees know that the old plan can be altered after you retired from the company and there is little anyone can do under the current laws. This isn't even a myth -- it is a LIE. The old plan cannot be altered after workers retire unless/until IBM goes bankrupt and the PBGC takes it over. Until then, retired workers are protected. Are you confusing the complete lack of legal protection for retiree health care with pension information???
    IBM has demonstrated that they can freeze the raise in the pension and can start charging the retirees a monthly premium that is deducted from their paychecks. Again, you are CONFUSED. COLAs were never protected by law, nor have they ever been documented in the IBM plan documentation. They cannot be frozen, because they do not exist. What IBM can do, and has done, is charge more and more for retiree health care. That has absolutely nothing to do with the benefits of a traditional defined benefit plan and a cash balance defined benefit plan.
  • Yahoo! message board: "Re: Why is IBM down again today?" by "respectfortheindividual". Full excerpt: I am not looking for a handout. I am looking for the deferred compensation that I earned. Back in the "old days" IBM was not among the highest payers. In order to attract and retain the best and brightest they promised one of the best deferred compensation plans in the industry. It included a good pension and FREE healthcare. That was the deal. I only expect IBM to keep their end of the bargain. I realize today is different. You mercenaries want it all now so IBm raised salaries and started stock options with no regard for the future. That is fine if that is what you want but that was not the deal they had with their employees for my 31 years.
  • Los Angeles Times: GOP, Like Companies, Wants Workers to Carry the Safety Net. By Ronald Brownstein. Excerpts: In an era when employers are retreating from the guaranteed benefits that once defined the American social safety net, should government accelerate or resist the trend? That's a critical question surrounding not only President Bush's proposal to restructure Social Security but also Republican plans to rethink the way the nation provides healthcare to the elderly (through Medicare) and the poor (through Medicaid). Across all these fronts, Bush and other Republicans are looking to limit government's financial exposure and shift more of the risk for ensuring pension and healthcare security to workers and retirees in the name of increasing choice. That's exactly what employers have done for a generation, replacing plans that guaranteed workers a fixed monthly pension with systems that obligate employers to make only a monthly contribution to investment accounts workers manage themselves. On healthcare as well, employers are replacing programs that provided workers a defined benefit with alternatives that promise only a defined contribution. Bush and other Republicans want to realign the public safety net along the same principles, while Democrats want to maintain, as much as possible, the defined benefits guaranteed by Social Security, Medicare and Medicaid. As the baby boom generation retires, this argument looms as one of the new century's defining political struggles.
  • Forbes: Judge clears United Airlines pension takeover. Excerpt: As United Airlines went before the bankruptcy judge, a handful of Democrats in Washington sided with the company's flight attendants and mechanics in their bid to stop the airline from terminating its pension plans. Representatives George Miller, Jan Schakowsky, Pete Stark, and Senator Ted Kennedy, have proposed a bill that would more closely link executive retirement plans to those of their workers so that nobody can dodge the impact of a bankruptcy. The Pension Fairness and Full Disclosure Act would also make public more details about executive payout.
  • New York Times: United's Pension Debacle. Excerpts: Sadly, it's too late to offer relief to the burned United employees. But their plight should compel Congress to learn the right lessons and take the necessary steps to protect Americans' pensions. There are, for instance, loopholes in the law that is supposed to penalize companies for underfunding their pensions. Currently, the government estimates that, at most, 20 percent of a total of $450 billion in underfunding is due to financial distress at companies. The rest is occurring at businesses that are financially healthy and are simply dodging their responsibility to put the proper resources into their pensions. [...] The United debacle also holds a broader lesson about retirement security. The level of risk that exists in pensions and other retirement savings plans has no place in the core tier of retirement savings, Social Security. If lawmakers and policy makers are not yet convinced of that, they should talk to the people at United.
  • New York Times: Drug Makers Reap Benefits of Tax Break. By Alex Berenson. Excerpts: A new tax break for corporations is allowing the biggest American drug makers to return as much as $75 billion in profits from international havens to the United States while paying a fraction of the normal tax rate. The break is part of the American Jobs Creation Act, signed into law by President Bush in October, which allows companies a one-year window to return foreign profits to the United States at a 5.25 percent tax rate, compared with the standard 35 percent rate. [...] Though the companies stand behind their accounting, financial analysts and tax lawyers say that the drug makers' claim defies reality and that their profits come mostly from sales in the United States. But the I.R.S. lacks the resources to challenge the companies effectively, the analysts and lawyers say. As a result, the six major companies - Pfizer, Johnson & Johnson, Merck, Bristol-Myers Squibb, Wyeth and Lilly - collectively pay a federal tax rate of less than 15 percent on their worldwide profits, with some companies paying much less. [...]
    Lawmakers have said their main intention for the law was to encourage American companies to build new operations and hire workers. Congress passed the law in response to pressure from the European Union to resolve a long-running trade dispute. Although the act is intended to create jobs, Pfizer said last month that it would cut its annual costs by $4 billion over the next three years. Pfizer, which will repatriate at least $28 billion under the act, did not say how many jobs it planned to eliminate, but analysts expect the company to shrink its work force by thousands of people. Mr. Senyek said the law would create an insignificant number of jobs because companies can easily work around provisions in the law meant to stop them from using the money for dividends to shareholders rather than new hiring.
  • Washington Post: ...But big companies now must pay their share of health care. Excerpts: The Fair Share Health Care measure recently approved by the Maryland General Assembly requires companies with more than 10,000 employees to spend at least 8 percent of their payroll on health care for their workers. This law, sponsored by Sen. Gloria G. Lawlah (D-Prince George's) and Del. Anne Healey (D-Prince George's), stipulates that companies that don't spend that amount must pay the difference between what they do spend and the 8 percent into a fund for the state Medicaid program. As businessmen, we agree with the 78 percent of Marylanders in a recent poll who said that this is a good idea. Maryland law mandates that the premiums of those who pay for health insurance be used to cover hospitalization of the uninsured, so it makes sense to adjust this mandate to require that all large businesses pay their fair share of health care costs. In addition, as taxpayers, we all subsidize a company that does not do its part. People who do not get health care through their employers often go into the state's Medicaid program. [...]
    The Fair Share Health Care law is not intended to apply to only one business. Its goal is to make sure that no large business can spend less than a fair minimum on health care for its employees. At present, three private Maryland companies are large enough to meet the 10,000-worker threshold: Giant Food, Northrop Grumman and Wal-Mart. And one of these -- Wal-Mart -- may be under the 8 percent minimum. Wal-Mart earned $10 billion last year, so surely it can afford to pay its share for health care if it is not doing so already.
  • Philadelphia Inquirer: Why are we staying in jobs longer? Health insurance. The cost of coverage, especially for individuals, is prohibitive for early retirees. Firms have increasingly dropped retiree health care. By Josh Goldstein. Excerpt: David Godshall, 55, like many people his age, is analyzing his financial ability to retire early. He thinks he has saved enough to provide a comfortable income for himself and his wife. But Godshall, who will not be eligible for Medicare for 10 years, is worried that the cost of health insurance could force him to work longer than he would like."I was hoping to retire in about five years, but that leaves that gap" before he has health coverage under Medicare, said Godshall, of Hatfield, Montgomery County. "I haven't set aside money for that. I don't know what to expect." What he can expect, said Jeff Gavlick, a senior consultant with Mercer Human Resource Consulting in Princeton, is to pay $10,000 a year or more for health insurance for himself and his wife. In a survey last year of employer-sponsored health plans, Mercer found that the average cost to employers who provided coverage to pre-Medicare-eligible retirees was nearly $8,250. The cost would be even higher for an individual seeking coverage on his own and would increase even more if a spouse was added to the plan. "You are talking five-figure costs for that individual every year until they get to age 65," Gavlick said.
  • New York Times: The Young and the Jobless. By Bob Herbert. Excerpts: The squeeze on the younger generation of workers is so tight that in many cases the young men and women of today are faring less well than their parents' generation did at a similar age. Professor Sum has been comparing the standard of living of contemporary families with that of comparable families three decades ago. "Two-thirds of this generation are not living up to their parents' standard of living," he said. [...] It shouldn't be surprising that the standard of living of large segments of the population is sinking when employers have all the clout, including the powerful and unwavering support of the federal government. Workers can't even get a modest increase in the national minimum wage. Globalization was supposed to be great for everyone. Nafta was supposed to be a boon. Increased productivity was supposed to be the ultimate tool - the sine qua non - for raising the standard of living for all. Instead, wealth and power in the United States has become ever more dangerously concentrated, leaving an entire generation of essentially powerless workers largely at the mercy of employers. A remark by Louis Brandeis comes to mind: "We can have democracy in this country, or we can have great wealth concentrated in the hands of a few. But we can't have both."
  • AccountingWeb: Under Scrutiny, Companies Revamp Executive Pay. Excerpts: Chief executive officers at the 100 largest public companies in New England enjoyed particularly generous compensation packages in 2004, a survey by DolmatConnell & Partners, Inc. revealed. Total compensation for those CEOs increased by 44.8 percent in 2004, which is twice the return the companies provided to shareholders, a Business Wire report stated.
  • New York Times: Always Low Wages. Always. By Paul Krugman. Excerpts: Standard and Poor's downgraded GM and Ford sooner rather than later because it believes that the public is losing interest in S.U.V.'s. But the companies were vulnerable because they still pay decent wages and offer good benefits, in an age when taking care of employees has gone out of style. In particular, they are weighed down by health care costs for current and retired workers, which run to about $1,500 per vehicle at G.M. So the downgrade was a reminder of how far we have come from the days when hard-working Americans could count on a reasonable degree of economic security. In 1968, when General Motors was a widely emulated icon of American business, many of its workers were lifetime employees. On average, they earned about $29,000 a year in today's dollars, a solidly middle-class income at the time. They also had generous health and retirement benefits.
    Since then, America has grown much richer, but American workers have become far less secure. Today, Wal-Mart is America's largest corporation. Like G.M. in its prime, it has become a widely emulated business icon. But there the resemblance ends. The average full-time Wal-Mart employee is paid only about $17,000 a year. The company's health care plan covers fewer than half of its workers.
    True, not everyone is badly paid. In 1968, the head of General Motors received about $4 million in today's dollars - and that was considered extravagant. But last year Scott Lee Jr., Wal-Mart's chief executive, was paid $17.5 million. That is, every two weeks Mr. Lee was paid about as much as his average employee will earn in a lifetime. [...]
    The question is whether the public's desire for a stronger safety net will finally be seconded by corporations that haven't yet adopted the Wal-Mart model of minimal benefits and always low wages. Last year Richard Wagoner Jr., G.M.'s chief executive, gave a speech about the costs of America's "Kafkaesque" health care system that sounded a lot like my recent columns. And his company has made it clear that it likes Canada's system: in 2002 the president of General Motors of Canada and the head of the Canadian Auto Workers signed a joint letter declaring that "it is vitally important that the publicly funded health care system be preserved and renewed." But according to The Journal Register News Service, which covered Mr. Wagoner's speech, he "stressed later to reporters that he was not proposing a national health care plan." Why not?
  • New York Times: Attention: Deficit Disorder. By Robert E. Rubin. Excerpts: The tough decisions needed on both spending and revenues will probably require some process whereby the president and leaders of the Senate and the House of Representatives and both parties assume joint responsibility for painful political choices. Tax revenues are approximately 16.5 percent of gross domestic product, the lowest level since 1960, and spending is roughly 20 percent. We must have serious spending discipline and entitlement reform - though any entitlement reforms likely to be proposed would have little immediate effect.
    But, as BusinessWeek, not an advocate of activist government, said in a recent editorial, "the deficit morass is due as much to a revenue shortfall as to excessive spending." (The 2001 and 2003 tax cuts, for example, are estimated to have a 75-year cost of $11 trillion, almost three times the entire Social Security deficit.) And that shortfall is especially pressing given the rapid increases in entitlement costs and the need to finance national security, investments in education and infrastructure and other critical programs. At the same time, revenue-increasing measures must reverse the recent trend of disproportionately favoring upper-income taxpayers. [...]
    For example, if the tax cuts for those earning above $200,000 were repealed and the inheritance tax as reformed were continued rather than eliminated, the 10-year projected deficit would be reduced by roughly $1.1 trillion, or almost 25 percent, and the 75-year fiscal reduction would be roughly $3.9 trillion, or approximately equal to the Social Security shortfall. This course of action would be similar to the income tax increases that were combined with spending cuts in the 1993 deficit reduction program, which some predicted would lead to recession but which, instead, was followed by the longest economic expansion in our nation's history.
  • Molly Ivins: Our New Pluto-Theocracy. Excerpts: The Economic Policy Institute reports the economic well-being of middle-class families has declined between 2000 and 2003 for three reasons: the generally lousy economy, the Bush tax policies and the cost of health care. The Tax Justice Network recently reported the world's richest individuals have placed $11.5 trillion in assets in offshore tax havens to avoid paying taxes, a sum 10 times the GDP of Great Britain. The ratio of CEO pay to average worker pay reached 301 to one in 2003. The average worker takes home $517 a week, while the average CEO earns $155,796, according to BusinessWeek. In 1982, the ratio was 42 to one. [...]
    "The data show that the share of real income growth that has gone to wages and salaries has been smaller than during any other comparable post-World War II recovery period, while the share of real income growth that has gone to corporate profits has been larger than during all other comparable post-World War II recoveries." In previous recoveries, workers got an average of 49 percent of the national income gains, while corporate profits got 18 percent. This time, the workers are getting 23 percent and the corporations are getting 44 percent — about one half as much as the share that has gone to corporate profits. None of that apply to you? Good. Go listen to Tom DeLay give another lecture on moral values.
  • Wall Street Journal: As Rich-Poor Gap Widens in the U.S., Class Mobility Stalls. Those in Bottom Rung Enjoy Better Odds in Europe; How Parents Confer an Edge Immigrants See Fast Advance. By David Wessel. Excerpts: The notion that the U.S is a special place where any child can grow up to be president, a meritocracy where smarts and ambition matter more than parenthood and class, dates to Benjamin Franklin. The 15th child of a candle-and-soap maker, Franklin started out as a penniless printer's apprentice and rose to wealth so great that he retired to a life of politics and diplomacy at age 42. The promise that a child born in poverty isn't trapped there remains a staple of America's self-portrait. President Bush, though a riches-to-riches story himself, revels in the humble origins of some in his cabinet. He says his attorney general "grew up in a two-bedroom house," the son of "migrant workers who never finished elementary school." He notes that his Cuban-born commerce secretary's first job for Kellogg Corp. was driving a truck; his last was chief executive. [...]
    But over the last 10 years, better data and more number-crunching have led economists and sociologists to a new consensus: The escalators of mobility move much more slowly. A substantial body of research finds that at least 45% of parents' advantage in income is passed along to their children, and perhaps as much as 60%. With the higher estimate, it's not only how much money your parents have that matters -- even your great-great grandfather's wealth might give you a noticeable edge today. [...]
    Despite the widespread belief that the U.S. remains a more mobile society than Europe, economists and sociologists say that in recent decades the typical child starting out in poverty in continental Europe (or in Canada) has had a better chance at prosperity. Miles Corak, an economist for Canada's national statistical agency who edited a recent Cambridge University Press book on mobility in Europe and North America, tweaked dozens of studies of the U.S., Canada and European countries to make them comparable. "The U.S. and Britain appear to stand out as the least mobile societies among the rich countries studied," he finds. France and Germany are somewhat more mobile than the U.S.; Canada and the Nordic countries are much more so.

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • MS-NBC: Sleepless in Silicon Valley. Globalization, ‘offshoring’ lead to interminable workday. Excerpts: Silicon Valley workers grumble that communicating with colleagues overseas requires midnight teleconferences, 6 a.m. video meetings and the annoying “pling” of instant messages and twittering cell phones all night long. Although many techies swapped social lives for 80-hour weeks during the ephemeral dot-com boom, the 24-hour business cycle seems even more stressful than the caffeinated ’90s: Today’s long hours are less likely to result in windfall bonuses or stock options, and there’s no end in sight. [...] Some worry that the extra hours and unrelenting pace could have dire consequences — namely, widespread fatigue and brain drain in the technology and financial services industries, the most aggressive exporters of white-collar jobs. Steep turnover among sleep-deprived managers could eventually lead senior executives to re-evaluate the benefits of offshoring, said Peter Morici, an international business professor at Robert H. Smith School of Business at University of Maryland. “You simply can’t keep working a full day, put the kids to bed, take a call from Malaysia, then go back fresh the next morning — it’s one thing to do it for a couple weeks, but it’s another to put up with this pain in the neck permanently,” Morici said. “When executives talk about the efficiencies of offshoring, they’re often not factoring in the long-term human toll on management.”

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.
  • "not so secret" by "Pwcc-Kat". Full excerpt: I agree with the fact that you are very happy when ur cell phone doesn't ring at the middle of night and look for ur support, but if ur project manager wants ur cell phone number, the secrecy is lost. The fact is IBM does not what people on the road have to endure. One of the reasons for me leaving IBM is the expense policy, which keeps changing as the manager wishes. I used to spend 4 days on the road, first they said no to my cell phone expenses, then to my broadband even as i was working one day from home one day of the week. My project manager question my meals expenses ($8 for a lunch in NY) and I said good bye. For people, leaving their families and spending their life on the road, these constant change in policies and cheap nagging by managers are not worth it.
  • "Managers" by "Dose of reality". Excerpt: There are too many managers who have been given that title, but have had absolutely no training in management. Not only that, but those that are above them in the pyramid actually encourage them to be tyrannical and petty, and IBM policy sets a no-flexibility tone. The middle management class can do a lot in the way of damage control against bad policy and bad strategy, but few do, since they are not sensitive to the real give and take of their relationships with their subordinates. Save a few dollars on meals (which has no direct impact on profits, since it is pass through anyway), add a baseline prickly and contentious relationship (which in and of itself does nothing good for profitability), and you get layers of staff who get fed up and walk away (which cost tens of thousands in recruiting and opportunity cost. The days when a tyrannical manager can be effective are long gone.
  • "Insane travel policy becomes more strictly enforced" by "ibmigs". Full excerpt: This policy will be enforced, so please read and be aware. In the past, there have been numerous exceptions submitted on expense reports across the practice. These reports will be impacted by this new policy (only allowable amounts will be approved) and will impact you if the amounts are beyond the allowable guidelines. Please read:
    IBMers who incur business-related expenses are expected to understand and comply with IBM's expense policies and reimbursement guidelines, which help us to manage these costs on behalf of both our clients and ourselves. These guidelines are appropriate and competitive, based on regular benchmarking of the travel industry, competitive practices and tax regulations within each country.
    For expenses submitted on/after June 1, IBM will pay the costs of hotels, meals and other related expenses up to but not exceeding IBM expense guidelines; employees will be responsible for the excess. Expenses that exceed the guidelines will be eligible for reimbursement on an exception-only basis. Exceptions will be granted sparingly and only after appeal by the individual who incurs the noncompliant expense. Exceptions on these and all other expenses (such as airfare) will be monitored on a regular basis, and appropriate management teams will be notified of results.
    This policy adjustment is occurring now because we are experiencing a large amount of expenses that exceed guidelines. Upon review, the vast majority of these expenses appear to lack the clear business rationale to justify the added cost. This is not in keeping with IBM's best practices around travel and business-related expenses. I want you to be aware of this issue, and the policy enforcement plan that is occurring as a result. Please make sure your teams are aware as well by forwarding this e-mail to them no later than Thursday, May 12.
    More detailed information will be posted on the Manager Portal and local Travel websites. Randy MacDonald Senior Vice President, Human Resources.
    • "This is IBM in a NUTshell" by "no_longer_blue_or_bitter". Full excerpt: I love seeing these e-mails and policies from IBM because they are so reflective of the culture. They also magnify how little the consulting side tries to understand and work with clients and employees. In many cases, the contract negotiated with the client is a percentage of total fees. So the Engagement Manager has discretion for exceptions to travel policy. Depending upon the contract, the IBM policy is much stricter than the client's contract. As long as the Engagement Manager manages to the contract, the client will reimburse the expenses. Why should IBM care? Again, this is very reflective of how poorly IBM thinks through issues and applies them appropriately.
    • "If the client will pay the expense Why does IBM care..." by "howard stern". Full excerpt: This once again shows that IBM is run by a bunch of internal, cost center morons who have NO IDEA what consultants do... HR Dip-Shi& - If the client will pay the expense why is it any of IBM's concern? Just typical IBM lunacy!
    • "Simple Answer" by "Dose of reality". Full excerpt: IBM no longer has the will, inclination, or the capability to implement different policies for different groups. Therefore, the answer is to always play down to the least common denominator. In the case of travel, that is the occasional non-reimbursable internal band 6 who travels twice a year on the company's dime. It's just another example of our corporate socialism.

Coverage on Social Security Privatization
  • New York Times: The Final Insult. By Paul Krugman. Excerpts: Let's consider the Bush tax cuts and the Bush benefit cuts as a package. Who gains? Who loses? Suppose you're a full-time Wal-Mart employee, earning $17,000 a year. You probably didn't get any tax cut. But Mr. Bush says, generously, that he won't cut your Social Security benefits. Suppose you're earning $60,000 a year. On average, Mr. Bush cut taxes for workers like you by about $1,000 per year. But by 2045 the Bush Social Security plan would cut benefits for workers like you by about $6,500 per year. Not a very good deal. Suppose, finally, that you're making $1 million a year. You received a tax cut worth about $50,000 per year. By 2045 the Bush plan would reduce benefits for people like you by about $9,400 per year. We have a winner!
    I'm not being unfair. In fact, I've weighted the scales heavily in Mr. Bush's favor, because the tax cuts will cost much more than the benefit cuts would save. Repealing Mr. Bush's tax cuts would yield enough revenue to call off his proposed benefit cuts, and still leave $8 trillion in change. The point is that the privatizers consider four years of policies that relentlessly favored the wealthy a fait accompli, not subject to reconsideration. Now that tax cuts have busted the budget, they want us to accept large cuts in Social Security benefits as inevitable. But they demand that we praise Mr. Bush's sense of social justice, because he proposes bigger benefit cuts for the middle class than for the poor. Sorry, but no. Mr. Bush likes to play dress-up, but his Robin Hood costume just doesn't fit.
  • BusinessWeek: "I Want My Safety Net". Why so many Americans aren't buying into Bush's Ownership Society. Excerpts: George Silli, a 66-year-old waiter from suburban Philadelphia, had a brush with President Bush's Ownership Society, and it was an experience he'll not soon forget. Silli's psyche and his wallet still bear the scorch marks of the 2000 market meltdown. He saw the value of his mutual funds drop by 60% and is convinced that opening Social Security to individual investing would produce similar results on a massive scale. "If people are left to their own devices, we'll become top-heavy with poor people," Silli says. [...]
    Stretched Thin. Safety netters' fear of social unraveling comes amid some disquieting trends. Big swings in family income, according to studies by Yale University political scientist Jacob S. Hacker, have increased markedly over the past two decades as the finances of two-earner households have been stretched thin. Even houses -- most Americans' entrée to the Ownership Society -- are increasingly in hock: In the past 15 years, mortgage and home-equity borrowing has risen from 35.1% of home values to 43.9%. That has made families, especially those with unskilled workers, more vulnerable to a catastrophic jolt such as job loss or serious illness. Personal bankruptcies increased fivefold from 1980 to 2002, with many filers citing a layoff or medical emergency as the tipping point.
    As income volatility has grown, government -- prodded by free-market Republicans out to reverse the New Deal -- has been offloading ever more responsibility onto individuals. The financial pressure has become much more acute because of another squeeze occurring in the private sector. Corporations vying to compete globally have steadily shifted costs and responsibility for pensions and health care to their employees as part of the restructuring wave that began in the 1970s.
  • Bloomberg News: Bush May Destroy Social Security, Not Fix It: John M. Berry. Excerpts: When the House Ways and Means Committee reopens hearings on the future of Social Security this week, two ideas members should bury are those offered by President George W. Bush. The sweeping changes Bush has proposed for Social Security, creation of private accounts and progressive indexing of benefits, are far more likely to destroy the program than to fix it. Together, these proposals would so reduce the value of regular benefits that Social Security would become much less important as a source of retirement income for average workers and virtually irrelevant for those with relatively high incomes. Over time, that would undermine Social Security's broad public support by turning it into essentially a welfare program. Of course, that's probably the whole point. Several of the individuals and organizations that have been pushing the idea of private accounts have made no bones that their ultimate goal is to get rid of Social Security and make everyone responsible for financing their own retirement.
  • The Century Foundation: Understanding the Proposed Cuts to Social Security Benefits. [PDF--4 pages] By Greg Anrig, Jr. Excerpts: President George W. Bush endorsed deep reductions in Social Security benefits for most future retirees at an April 28 press conference. In combination with the president’s previously announced proposals for diverting Social Security payroll taxes to private investment accounts, the benefit cuts would significantly shift the risks of financing a secure retirement from the government to individual Americans. Over time, Social Security would transform from an insurance program in which benefits are tied to each worker’s past incomes to a welfare system that provides only a minimal baseline payment to everyone regardless of their career earnings. [...]
    The newly proposed cuts in guaranteed benefits would not reduce the huge amount of federal debt required to finance the previously announced plans for private accounts. Paying for the new accounts would still require $4.9 trillion in additional federal borrowing over the first 20 years of the plan, while depleting Social Security’s trust funds more than 10 years sooner than would be the case without private accounts. The proposed benefit reductions would not change those projections.
    Middle-class workers would receive substantially less from Social Security. [...] The cut in guaranteed benefits to middle-class workers who elect to open private accounts would be even more severe. [...] Workers who earn more than the average income would face even deeper reductions in guaranteed benefits. [...] Far less severe cuts in guaranteed benefits, without the added costs of private accounts, could eliminate Social Security’s projected shortfall decades from now. [...] Despite claims about protecting future retirees from poverty, the benefit reductions would leave far greater numbers of Americans closer to the poverty level or below it. [...] The rationale for the benefit reductions breaks a promise made years ago to working Americans.
  • The Century Foundation: Fixing Social Security. Changes Do Need to be Made, But the Choices Aren't Hard Nor the Measures Painful. [PDF--4 pages]. By Robert M. Ball. Excerpts: President George W. Bush has said that the administration’s first task in the Social Security reform debate is to demonstrate to the American people that Social Security has a big financial problem—a crisis requiring action now. In trying to make this case, those speaking for the administration have done everything they can think of to make the long-range shortfall in Social Security seem as big as possible. They have greatly exaggerated the problem in three different ways.
    The first is to present the drop in the workers-to-beneficiary ratio as very large and unplanned for. They point out that in 1950 there were 16 workers paying into the system for each beneficiary taking out, and that the ratio has gone way down so that now the ratio is only 3.3 workers to each beneficiary and in the long run it will be only 2 to 1 or even 1.9 to 1. They ignore the fact that in 1950 only about 15 percent of the elderly were eligible for benefits and that it was expected by all who were acquainted with the program that the ratio would, of course, change dramatically as a greater proportion of the elderly became beneficiaries.
    Instead, the impression is left that the program was sound only when 16 paid in for every one taking out. Thus, of course, when the ratio changed to 3.3 to 1, the program became “unsustainable.” What in fact happened is that when just about all the elderly first became eligible for Social Security benefits, about 1975, the ratio was 3.3 contributors to each beneficiary and the ratio has stayed that way for the past 30 years. As the baby boom reaches retirement age, as the administration says, the ratio is expected to drop for the long run to 2.0 or 1.9 workers to each retiree. But that is the size of the problem—a drop from 3.3 to 2 workers pre retiree. The much used 16 to 1 figure is simply a reflection of the immaturity of the system back in 1950 when very few of the elderly had worked under the program long enough to be eligible for benefits.
  • The American Prospect: Chile Con Economy? This Latin American country privatized pensions 24 years ago. Now it wants to go back to Social Security–style pensions. We're not surprised. By Bernard Wasow. Excerpts: In the early days of the U.S. debate about Social Security privatization, advocates would regularly trot out Latin America, Chile in particular, as the region that did it right, the model that the United States should learn from. Recently, though, this dog and pony have remained backstage, in spite of the Bush administration’s current tour to promote private accounts. Unfortunately for the privatizers, the World Bank, one of the primary drivers of pension reform in Latin America, has backed away from its earlier enthusiasm. In a remarkable, if carefully guarded, retreat, the bank published a report in late 2004 that owns up to deep problems in the reforms that it pushed for a decade earlier.
  • Center on Budget and Policy Priorities: New White House Document Shows Many Low-Income Beneficiaries Would Face Social Security Benefit Cuts Under President's Plan. By Jason Furman. Excerpt: The President’s Social Security proposals have been widely reported as protecting benefits for the bottom 30 percent of the population, people earning less than $20,000 today. A document that the White House gave reporters in a press briefing on May 4, however, contains charts showing the bottom 20 percent of beneficiaries losing benefits, on average, under its plan.
  • Los Angeles Times: Experts Are at a Loss on Investing. Nobel winners and top academics fumble the sorts of decisions Bush's Social Security overhaul plan would ask average Americans to make. By Peter G. Gosselin. Excerpts: As President Bush crisscrosses the country promoting his plan to overhaul Social Security, he argues that Americans are ready to trade in a portion of their traditional benefits for ownership and control over their own investment accounts. People have grown so comfortable with stocks and bonds, he asserts, that they can invest their way to more prosperous retirements by watching their quarterly statements, adjusting their portfolios and looking out for themselves. But a growing body of research shows that millions of Americans fail to get even the most elementary investment decisions right. [...] In committing investment errors such as these, ordinary Americans turn out to be in good company. Even some winners of the Nobel Prize in economics admit to making similar mistakes, either by failing to pay attention to their own retirement arrangements or by making faulty decisions when they do. "I think very little about my retirement savings, because I know that thinking could make me poorer or more miserable or both," quipped 2002 Nobel Prize winner Daniel Kahneman of Princeton University. "I would rather spend my time enjoying my income than bothering about investments," said Clive W.J. Granger, an emeritus professor at UC San Diego and a 2003 Nobel Prize winner. [...] That Nobelists and other highly educated professionals get tripped up by retirement is hardly proof that people can't handle their own retirement investments. But it does suggest that few are terribly good at the job, and fewer have the time or inclination to get better quickly.

New on the Alliance@IBM Site:
  • Alliance@IBM: Attention IBM employees: IBM is blocking e-mail to and from the Alliance@IBM e-mail address endicottalliance@stny.rr.com from inside the company. Please send your job cut information and other correspondence from your home e-mail. You can also contact us the following ways: Phone 607 658 9285 or Fax 607 658 9283.
  • Press Release: Legal Decision Opens the Doors for Age Discrimination Claims Against IBM. Excerpt: Although Tuesday's decision applies only immediately to Thomforde, whom IBM fired in 2001 as part of a reduction in force, the decision may have ramifications for a collective action currently pending against IBM in California. Jeffrey Neil Young, an attorney with the Topsham, Maine law firm of McTeague, Higbee & Case, represents several hundred former IBM employees in a pending class action against the company. According to Young, "the Eighth Circuit decision ultimately could permit as many as 20,000 former IBM employees let go since 2001 to sue the computer giant for age discrimination."
  • Job Cuts Status & Comments Page. Excerpts: Job cuts are coming. Information needed: What is Your location? How many job cuts at your location? What locations are cutting jobs? Name of Division and Business Unit? Some sample submissions follow:
    • UK - On Monday several executives stated the UK IGS numbers in an employee meeting at the UK HQ (though they were confusing). This was the first time numbers had been disclosed, despite the question being asked via the "Employee Consultation Committee". Many questions to management remain unanswered and the deadline for expressing interest in a voluntary package has passed. 1,000 (from a total of 12,000) IGS employees in the UK will go (Project Quantum). This is in addition to (up to) 650 (from approximately 2,000) UK staff that work in pan-EMEA roles (Project Atlantic). Also mentioned was a figure of 50 for the Netherlands. It is hoped these will be voluntary following the announcement on 14 April for expressions of interest (which the first post here details). As has been stated already decisions will be communicated from May 17, employee acceptance by June 6, and a leave date of June 16. Much work is being transferred to low-cost labour locations such as Bangalore (India), China, and South Africa. IDC (Integrated Delivery Centres) are to be located in some of these locations.
    • 411 people were laid off on the America Express account. The year 2002 when IBM took over it was reduced down from 3,000 people to 2,500 people plus all of the 5,000 programmers were let go. The last lay off numbers were 1,100 people down to 968 so that brings us down to 557 running all of American Express systems around the world. Our functional team known as the Professional Technical Services was reduced by 111 people leaving only 18 people left with database/os expert knowledge. American Express is nervous and I have heard rumors they are going to pull the contract. This information was from Financial Services of American Express. They stated how is it possible IBM will be able to work this contract's service level agreements and follow the sarbanes oxley law at the same time.
    • I just wanted to let you know that precious little information is available, even to current IBM employees. My manager asked me to call him last Thursday morning. He told me that a Resource Action was in process, and that our organization was hit. When I asked him if anyone in our department was affected, he responded "I'm not at liberty to say", which I took to mean that at least one person was affected. Here it is almost a week later, and I still don't know anything.
    • IBM currently is laying off people in Belgium, at the same time it is denying in the press there is a restructuring going on. My own internal sources indicated at least 30 people were affected, but when I handed in my company car (most senior consultants and managers have company cars in Belgium as a tax friendly form of compensation), the person at the garage told me 53 IBM cars were brought back during the last weeks... I have also heard more layoffs will be implemented during the next months. There clearly is a difference in what IBM says and reality.

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