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    Highlights—July 23, 2005

Action Alert from Kathi Cooper:
This is Kathi Cooper of Cooper v. IBM. I need your help immediately or Congress may RETROACTIVELY legalize Cash Balance Plans.
The Senate Finance Committee is working on their version of the Boehner bill (HR2830). Next week Senators Orrin Hatch (R-Utah) and Blanche Lincoln (D-Arkansas) will offer an amendment to make the bill RETROACTIVE. THIS MUST STOP NOW!!! They have the support of Finance Committee Chairman Senator Chuck Grassley (R-Iowa) and Ranking Democratic Member Senator Max Baucus (D-Montana).
If passed RETROACTIVELY, this legislation would legalize IBM's actions. We would lose most everything. It would allow IBM to convert everyone from the old plan to Cash Balance and, potentially, IBM could even cash out retirees that are currently collecting pension checks.
THIS MUST STOP NOW!!!
Please contact your friends, family, and co-workers in UTAH, ARKANSAS, IOWA, or MONTANA beginning today and ask them to...
  1. CONTACT their Senators and tell them NO to any Cash Balance Pension Plan bills, specifically NO TO MAKING THEM RETROACTIVE and that legalization of corporate pension theft must stop.
  2. Forward the petition to your friends and ask them to sign, with their city and state included on the comment line: http://www.petitiononline.com/rrs01/petition.html
  3. If they want more background, refer them to Marie Cocco's editorial at http://www.postwritersgroup.com/archives/cocc0712.htm. (Editor's note: Ms. Cocco's editorial is reproduced in full in last week's edition of these highlights).
WE NEED YOUR HELP NOW. Thank you. This is critical, very critical.Pass this note to your family, friends, and co-workers.
Here are the Senators to flood with calls or email: Tell them NO to Cash Balance Plans and NO to RETROACTIVITY.
Kathi Cooper, Bethalto, IL
  • In a Yahoo! message board post Kathi Cooper replies to this question from Hugh Harwood of Aiken, SC (Full excerpt): Hi Kathi, I called all of the people in your append and in addition my 2 senators in South Carolina. Do you happen to know the senate bill number or the amendment? It would help to note these in any future correspondence. Ms. Cooper replies: Thanks Hugh! It was HR2830 before the House marked it up. After markup, it became HR2031. The generic name of the bill is the 'Pension Protection Bill of 2005'. All indications are that the Senate will give birth to their version on Tuesday. As of last check, I see that we need more calls going to Arkansas Senator Blanche Lincoln. Seems ERIC (not our friend) is smooth talking her a little too much. Perhaps explaining the truth to her will help. I love those Razorbacks, but we need to convince Senator Lincoln to NOT endorse retroactivity on this bill and to steer clear of ERIC.
  • Yahoo! message board post by Kathi Cooper: Here is the durn letter from ERIC to the Senate. Full excerpt: Here is the durn letter from ERIC (not our friend) directed to the Senate. As you can see, it is ONLY about Cooper v. IBM. They are desperate to make the bill retroactive to kill Cooper v. IBM. There is so much spin in that letter, I'm getting sick! http://www.eric.org/forms/uploadFiles/3B0200000012.filename.ltr_to_sen_07222005.doc
  • In a Yahoo! message board post, Janet Krueger comments on pending legislation to legalize cash balance pensions. (Note: Text in italics are questions asked by another message board poster. Janet's text and replies are in a normal typeface.) Full excerpt: I'm sorry if I misled anyone. What I have been trying to get across is that anyone who cares about their pension benefits, whether they are retired, fully vested but still working at IBM because they like it, or just hoping to work long enough to start collecting a good pension some time in the future, ANYONE, should call their two senators and their congressman in Washington immediately.
    Tell them you care about pension benefits, and you believe Corporations should be forced, by federal law, to keep all promises they make. Congresses who choose to break those promises should NOT be rewarded with tax subsidies -- instead, employees and retirees should be enabled to prosecute those companies in federal courts, with the ability of getting huge fines assessed, not just getting whatever little pieces that can be clearly attributed to age discrimination illegal.
    Tell them Cash Balance plans are BAD public policy and should not be legalized. Instead, Congress should make it possible for employees impacted by these plans should be given away to get back what the corporate executives are stealing.
    Tell them employees should have a pension advocate in Washington, so they don't have to hire a private attorney if they discover their pension has been miscalculated. I just recently talked to an IBM retiree who was told by Fidelity that IBM miscalculated the cash portion of his pension, and that he now owes IBM a back payment of over $30,000 -- this is outrageous, but he has found no one in Washington willing or able to look into the problem on his behalf.
    While you're on the phone, tell them promised retirement healthcare is also critically important to you, and needs to be protected by federal law as well. Why are they making it easier for corporations to steal pensions instead of focusing their time on figuring out why companies are reneging on health care promises???
    CALL THEM TODAY!!! Our phone calls need to outnumber the knocks from the corporate lobbyists who are camped out on their doorsteps...
    Leaving IBM now will NOT protect your pension if Congress decides to grant corporations the freedom to downsize their pension promises whenever they discover their pension plans are underfunded...
    The only way you can protect your pension is to make sure your representatives hear a message loud and clear that their jobs will be in jeopardy at the next election if they have the gall to legalize pension theft!!!
    BTW, while the house version of the bill is not currently retroactive, I heard yesterday that the Senate Finance committee decided retroactivity would be a great way to protect companies who already cut employee pensions with cash balance conversions, so they put it back in. CALL TODAY and let them know just how outrageous this is!!!
    If I write the plan administrator and ask if any pension changes are forthcoming, would that give me some time to make a decision? Would the plan administrator actually tell the truth? Should IBM choose to make further pension benefit changes, do you think they'd give people under the old plan a chance to get out beforehand?
    The plan administrator is currently required by federal law to tell you the truth, in writing, if you ask. It is hard to predict just how far IBM might go in the next pension reduction, or whose pension they might impact, if Congress decides to legalize and simplify pension theft. That is why you need to tell Congress, loud and clear, not to!!! By all means, write to the plan administrator as well. Just remember if they honestly tell you there is not currently a plan change in the works, that doesn't mean there won't be a plan change in the works next month...
    As I recall, when they announced the cash balance plan, it was before the effective date. Any help in understanding my options would be greatly appreciated.
    Under current federal law, IBM would have to give you 45 days advance notice before changing the pension plan. But who knows what Congress might consider if we don't let them know that we care about pension protection, and will base our votes on this matter.
    BTW, one more thing you can do, in addition to CALLing Congress, is sign our online petition at: http://www.petitiononline.com/rrs01/petition.html. After you sign, send it to your friends, neighbors, relatives, and co-workers and ask them to sign it, too.
    That way we have amunition, in the form of a measurable list of people who care, for the next staffer who meekly tells us "but you're the only person who has called..." Thanks for listening, and then for taking ACTion!
  • Financial Times: Shake-up after head of leading IBM unit quits. By Simon London and Richard Waters. Excerpts: The head of IBM's information technology services unit is leaving the company, prompting a management restructuring of the group's largest division. John Joyce, appointed last year to run IBM Global Services, quit to join Silver Lake Partners, a private equity group. Following his departure, the services division, which accounts for more than half of IBM's revenue, will be run by a triumvirate of executives reporting directly to Sam Palmisano, chairman and chief executive. [...]
    Under the new management structure, basic IT services such as outsourcing will be run by Mike Daniels, formerly head of IBM's US sales operation. Higher-value services, such as business process outsourcing and consulting, will be run by Ginni Rometty, until now head of IBM's consulting business. Bob Moffatt, responsible in recent years for IBM's supply chain, will take charge of “services delivery”, organising the workforce and technology in order to remain competitive. [...]
    Analysts said Mr Joyce's decision to leave IBM was not a surprise after his name was linked with a number of high-profile CEO jobs in the technology industry, including Hewlett-Packard. The 51-year-old executive is just two years younger than Mr Palmisano and had been with IBM for 30 years.
  • Wall Street Journal: IBM Overhauls Its Services Arm, Splits Top Duties. By Charles Forelle. Excerpts: International Business Machines Corp. restructured its giant services arm after the unit's head, John Joyce, quit to join a private-equity firm. IBM split Mr. Joyce's old role in two, while elevating several executives to prominent new roles. The moves come as Big Blue tries to coax sustained growth out of the services behemoth, which spans from fixing computer hardware to traditional business consulting. [...]
    Under the reorganization detailed to IBM employees yesterday and effective immediately, responsibility for the services division's two major arms now lies with Mike Daniels and Ginni Rometty, both promoted to senior vice president. Mr. Daniels, 51 years old, is now responsible for information-technology services, such as outsourcing. Ms. Rometty, 48, is now in charge of IBM's consulting operations and broader business-performance services. Also given new responsibility is Bob Moffat, 49, a senior vice president who ran IBM's internal supply-chain operations. He will be senior vice president of integrated operations, with a focus on services. All three executives will report to IBM chief Samuel J. Palmisano, and IBM will begin reporting financial details about the two services groups separately in 2006.
  • Businessweek: IBM: A Work in Progress. While Big Blue beat Wall Street expectations, it's too early to tell if the relative weakness in services is fading. Excerpts: For proof that IBM is a company in transition, look no further than the computing giant's second-quarter earnings. The numbers it reported after the market close July 18 beat analysts' expectations through a combination of special charges and gains, and through business-unit results that ranged wildly from good to bad to mediocre.
  • Businessweek: Two Pillars Of IBM's Growth Look Shaky. A better second quarter hides challenges in mainframes and services. Excerpts: When IBM announced earnings on July 18, investors breathed a sigh of relief. With revenues up a relatively healthy 6%, to $21.7 billion, and the first increase in its services backlog in six quarters, it looked as if IBM had recovered nicely from a disappointing first quarter. Well, maybe not. The strongest gains came from software and server computers. Services landed where they were in the first quarter: a 6% revenue gain -- tepid for Big Blue. And mainframes plunged 24%, after a 16% drop in the first quarter. That's bad news because mainframes and tech services have been two of the key pillars of IBM's success. The former has helped drive profits; the latter has helped generate sales. But now, as IBM navigates a huge transition in how it does business, both pillars are looking a bit wobbly. "I don't see a resurgence in mainframes, and they have long-term challenges in services," says A.M. Sacconaghi Jr. of Bernstein Research.
    That helps explain why, the day after earnings came out, Big Blue announced a shakeup of its $45 billion global services business. Division head John R. Joyce is leaving for private-equity firm Silver Lake Partners, and the business is being split three ways. In a staff memo, CEO Samuel J. Palmisano said the moves are designed to "better focus our services growth strategy and enhance our marketplace performance." And on July 26, IBM will announce its new mainframe, called Danu. With it, IBM hopes to make the mainframe once again the hub of big corporations' computing systems.
  • Motley Fool: Your Incredible Vanishing Pension. Years ago, you entered into a contract with your employers. You'd work for them until retirement; they'd take care of you for the rest of your life. You've held up your end of the bargain, but will they hold up theirs? By Rich Smith. Excerpt: What all these companies have in common, of course, is that they date from the era of the old social contract: You give your employer the best years of your life, and in return for your loyalty, and for taking a lower wage than you could have earned elsewhere, your employer will provide you a decent pension in your golden years. As the wife of one Bethlehem Steel employee put it: "We devoted our entire lives to this moment" when she and her husband could retire. And there's the rub. Just when the workers thought they were about to retire, Bethlehem reneged on its end of the deal. Workers who were just a few years, months, or even weeks away from their 30th anniversary found that the PBGC had shifted the goalposts.
  • PlanSponsor: Energy Firm Workers Challenge Cash Balance Conversion. Excerpts: The latest battle over a cash balance conversion has popped up in a Los Angeles court as two Southern California Gas Co. workers claimed in a lawsuit that their firm’s 1998 pension conversion illegally discriminated against older employees. The federal court lawsuit alleges that older workers suffered a "disparate impact," under both state and federal laws, when the company, a unit of Sempra Energy Co., San Diego, changed its pension calculations for salaried employees, according to a Wall Street Journal report. [...] A federal district court judge in 2003 ruled that International Business Machines Corp. discriminated against older workers when it converted to a cash-balance plan in 1999. IBM settled a portion of the case for $320 million, and is expected to appeal the age-discrimination claim later this year.
  • Wall Street Journal: Obstacle Course. Retiree Runaround: Trying to Challenge A Benefits Decision For Fred Loewy, Years of Calls And Letters to Motorola Brought Scant Response. The Plan-Document Catch-22. By Ellen E. Schultz. Excerpts: Fred Loewy wanted to leave his wife financially secure when he died, so he delayed his retirement at Motorola Inc. till he was almost 73. Not only would the delay mean bigger Social Security checks someday, he figured, but he'd earn a bigger pension from his employer too. But when his company pension didn't turn out to be as large as he expected, Mr. Loewy learned a fact of retiree life he hadn't reckoned on: the complexity, sometimes exasperating, of trying to appeal a benefits calculation.
    Mr. Loewy, now 80, embarked on an epic quest through the deep thickets of pension law and administration. Starting in 1998, he spent years sending letters and making phone calls that Motorola generally didn't respond to. Motorola says it cooperated exhaustively with Mr. Loewy but it didn't dispute most details of his account in an eventual court case.
    Mr. Loewy ran into a giant Catch-22: Federal law says any retiree who disagrees with a company's benefits decision has a right both to appeal it and to see the benefit-plan documents it is based on. But not knowing what provisions lie behind a decision, retirees don't know what documents to ask for. Essentially, they're at the mercy of former employers to tell them which relevant materials exist and to provide access to those materials.
    Editor's note: This is a must-read article in that it illustrates how the legal system in the United States is stacked in favor of corporate interests at the expense of the middle class. Mr. Loewy was tenacious. His battle against Motorola makes for fascinating, yet depressing reading. Thanks once more to Ellen Schultz for exposing corporate misbehavior surrounding pension issues. If link is broken, view Adobe Acrobat version [PDF--65 KB].
  • The Register: Emperor Hurd decimates HP. HP today bowed to the will of Wall Street and revealed plans to decimate its workforce by 14,500 people - a figure no doubt thought more palatable than 15,000. Excerpts: In the US, HP will begin offering voluntary early retirement packages to qualified staff. Starting next year, it will also curtail pension and retiree medical-program benefits for workers who do not meet more restrictive age and years of service requirements. On the plus side, HP will up its 401k plan matching from 4 per cent to 6 per cent. [...] At no point did Hurd address the human cost of these decisions. His predecessor Carly Fiorina learned well how hard motivating a beaten down army can be. Many workers must question the motives and intelligence of the job cuts. Does Hurd know HP well enough to make such reductions? Will he please investors at the expense of customers?
  • Associated Press: HP Struggling With Pension Costs. Excerpts: When Hewlett-Packard Co. announced Tuesday that its massive restructuring would include an overhaul of its retirement plans, the technology giant joined a long line of companies trying to cut costly pension obligations that originated in another era. The traditional "defined-benefit" pension plan, in which a company invests a pool of money that is used to dole out checks to retired employees based on their final salaries, long has been waning. In 1979, 61 percent of employees with pensions were on a defined-benefit plan, but by the late 1990s that had dropped to 13 percent, according to an analysis by the Center for Retirement Research at Boston College. [...]
    HP spokesman Ryan Donovan said the company analyzed the benefits packages of its competitors and businesses in other industries and determined "pension plans are kind of a thing of the past." Indeed, Hewlett-Packard's main rival, International Business Machines Corp., decided last year to exclude new workers from its cash-balance plan and offer them only a 401(k). The cash-balance plan had been the subject of a federal lawsuit -- settled for up to $1.4 billion -- by employees who contended that IBM committed age discrimination in the way it deployed the plan.
    • In a Yahoo! message board post, "chz_whiz" comments regarding "...the technology giant joined a long line of companies trying to cut costly pension obligations that originated in another era." Full excerpt: I'd like to cut the cost of my mortgage that originated in another era. For some reason, the mortgage company expects me to pay what was agreed on.
  • San Jose Mercury-News, courtesy of the Sarasota Herald: Gutting of pensions a sad sight. By Mike Langberg. Excerpts: If you're lucky enough to still have a pension plan, it's an endangered species after Tuesday's move by Hewlett-Packard. Buried in the details of a restructuring program cutting 14,500 jobs was a small reference to a decision by HP essentially dismantling its pension program to save $300 million a year. New employees won't get any pension, and many current employees will see their benefits shriveled by the time they reach retirement. HP CEO Mark Hurd, to pardon the obvious pun, is only running with the herd here. Big employers nationwide are axing pension plans, shifting to programs such as 401(k)s where employees have to fund their own retirement.
    It's hard to argue with HP's urge to cut retirement costs. Intel and Dell, for example, don't offer any kind of pension plan. In December, IBM announced a cutback similar to HP, closing its pension plan to all new workers. In a message to employees, Hurd sought to justify the move: "Our U.S. retirement programs are very expensive and the costs significantly exceed those of our competitors... This is a structural cost that HP must address now."
    But I'm still sad to see how far HP has fallen. The lamented and long-gone "HP Way" set a precedent for treating employees with respect and delivering the best possible benefits -- not seeking to blend into the middle of the pack. But perhaps it's now the Hurd Way rather than the HP Way. Hurd, HP's chief executive since April, stuck closely to a playbook he wrote last year while running NCR in Dayton, Ohio.
  • Baltimore Sun: Retiring is a time for hefty rewards. Pensions: Pay, bonuses are readily visible but retirement plans have been called "stealth compensation." By M. William Salganik and Eileen Ambrose. Excerpts: With their seven-figure salaries and even larger bonuses, CEOs can buy some of the finer things in life, and put away a tidy sum for retirement. Often, however, they don't have to. Executive perks in Maryland, according to company filings, include morsels from a buffet that includes country club fees, disability insurance, personal use of corporate jets - even the taxes due when the CEO cashes in on stock options.
    While lower-level workers are finding their health care costs increasing, some companies pick up executives' premiums, deductibles and co-payments and foot the bill for pricey physicals at elite institutions.
    The big money, however, is in special executive retirement programs. Nolan D. Archibald, the boss at Black & Decker Corp., will find his retirement cushioned by more than $2.5 million in annual pension payments. And Vance D. Coffman eased out of Lockheed Martin Corp. after 37 years with two lump-sum payments of $31.5 million and $31.6 million. [...]
    About 83 percent of Fortune 1000 companies provided supplemental pension plans to executives last year, according to an annual survey by Clark Consulting. In contrast, government figures report that just 21 percent of workers in private industry were covered by a pension plan last year. Critics say it's ironic that executives demand safe, traditional pension benefits for themselves while pushing workers into riskier 401(k)s, where the ultimate payout depends on investment decisions and performance.
    "If anything, you would think that executives are in a better position to bear the risks of investment performance than regular employees that have less of a cushion," said Lucian A. Bebchuk, director of Harvard's program on corporate governance and co-author of the pension study. "What's happened is that companies have transferred the risk of retirement to their workers," said Brandon Rees, a research analyst with the AFL-CIO Office of Investment, which tracks executive compensation."In contrast," Rees observed, "executives have negotiated guaranteed retirement benefits for themselves." [...]
    Also, Hodgson said, top executives often get a better deal on health coverage than ordinary workers, although the medical benefits are seldom clearly spelled out in public filings. Some insurance policies for executive pick up the cost of deductibles and co-payments that other workers pay. For example, Jefferson Pilot Financial Insurance Co., of Omaha, Neb., offers a package called Exec-U-Care, that pays up to $100,000 in out-of-pocket charges a year. In addition, some top managers get "executive physicals," that cost about $2,000 each.
  • Wall Street Journal: To Rein In CEOs' Pay, Why Not Consider Outsourcing the Post? By Carol Hymowitz. Excerpts: For several years now, chief executives of U.S. companies have been telling lots of employees that they have gotten too expensive. Since it is possible to find qualified but cheaper workers to write software and perform other labor in India, China, Turkey and dozens of other countries, it makes competitive sense, they say, to outsource jobs. Perhaps it is time for American CEOs to include themselves in this strategy. Certainly the directors who determine their compensation should take a close, hard look at the colossal sums they are offering and do some global-labor cost analysis. [...]
    The median salary plus cash bonus for U.S. CEOs in office for at least a year totaled $2.3 million in 2004, according to an analysis of 421 large companies by Boardex, of London. That compares with $1.2 million for the heads of the 304 United Kingdom companies surveyed, $857,000 at 104 French companies and $386,000 at 95 Swedish concerns. The pay gap between U.S. and Asian business leaders is even larger. According to an analysis by Mercer Human Resource Consulting, the heads of the 248 Indian companies surveyed earned a median salary and bonus of $88,117 as of July 2004, compared with $317,864 for the heads of 187 Japanese companies, $302,078 at 174 Hong Kong companies and $263,301 at 394 Singapore concerns.
    None of this means U.S. directors should disregard American management talent when filling CEO spots -- and pay fairly for it. What is galling is how rarely, even in a time of heightened governance sensitivity, compensation is linked to performance. Newly named CEOs are guaranteed a trough of money before they've done any work. When they fail and are dismissed, they are handed even more money. That is the case at Morgan Stanley, where ex-CEO Phil Purcell received a severance and retirement package estimated at $106 million, including a new $44 million cash bonus for being shown the door. Former Co-President Steve Crawford is walking away with two years of severance estimated at $32 million after 3½ months on that job. [...]
    Meanwhile, the gap between CEO pay and just about everyone else except investment bankers and hedge-fund managers keeps growing. Last year, the median salary and bonus for CEOs rose 14.5%, while paychecks of nonunion salaried staffers rose 3.4%, according to Mercer. In 1960, CEOs earned an average of two times as much as the president of the U.S.; today they earn an average 62 times as much as the president, notes Rakesh Khurana, a Harvard Business School professor. "It's been three years since Sarbanes-Oxley, the broad governance reform law, took effect, so directors no longer have the excuse of saying 'well we negotiated this before we recognized the problems,' " he says.
  • Communications Workers of America: Healthcare Voices: CWA Members Speak Out On Healthcare. Excerpt: At HealthCareVoices.org, CWA members speak out about our country's healthcare crisis. Skyrocketing costs of care endanger working families, frustrate contract negotiations and leave millions of our fellow Americans without insurance. CWA has long endorsed five key principles for national health care reform: universal coverage, comprehensive benefits, affordability, fair financing, and quality care delivery. We have worked toward these goals in three key arenas: at the bargaining table, in legislative arenas and in our communities. Through this website, CWA members share -- in their own words -- their views on this crisis. Together, we can unite our voices, create a solid, powerful message and inspire our leaders to take action. CWA members will not allow our leaders to ignore this growing problem any longer -- the health of our families, the labor movement and our country is too important.
  • Computerworld: IT wages tick up on tight labor market. A stronger economy may have also led to a moderate increase in pay. Excerpt: A strengthening economy that is fueling higher IT spending and a tight labor market for U.S. IT workers is creating moderate pay gains for technical workers such as application developers and database administrators, according to new research and interviews with IT executives and analysts. "There is a noticeable wage increase" for technical skills, said David Myers, director of project management at Solo Cup Co. in Highland Park, Ill. Myers believes that the gains are the result of a general rise in IT spending, which has led to the launch of more IT projects; a decreasing supply of available domestic IT labor; and the maturation of IT offshore outsourcing, where foreign labor costs are rising.
  • Yahoo! message board post by "prometheanclay": IBM Employee Services Center Rep. Full excerpt: I'm a rep at the IBM Employee services center in Raleigh NC. I stumbled upon this site while trying to find info on a local retiree club for a caller. Specifically I deal with Health and Welfare and can answer most questions you might have about the IBM Medical, Dental, Vision insurance plans as well as provide information on many of the additional benefits. I don't have any information on the pension plan as that is outside of my area of expertise. Feel free to ask me any questions, if I cannot answer the question off the top of my head i can attempt to follow-up while I'm at work. Due to my contract I don't think i can really provide onions on whether one plan is better or worse than another, i can just go over the facts. I'm just answering these questions in my free time, but I saw the site and thought I might be a helpful resource for people.
  • Economic Policy Institute: Shifting risk. Workers today near retirement more vulnerable and with lower pensions. By Lee Price. Excerpt: Twenty years ago, most employees approaching retirement could look forward to a traditional pension. Their pension benefits rose according to years of service and how far they had moved up the job ladder, but not according to changes in a fickle stock market. For decades prior to 1980, most large employers had steadily increased contributions to these traditional retirement plans and had borne the market risks—both up and down. Things have changed dramatically since then: employers have slashed contributions for their employees' retirement income, and just as dramatically, they have transferred most market risk from themselves to their employees.
    There is a legitimate public demand for a retirement system that rewards work—years of service and job advancement—with guaranteed benefit levels without market risk. The Social Security system responds to that demand, but only on a modest scale. With the precipitous decline in jobs with traditional pensions, the federal government should be creating a robust, portable public pension system with benefits based on work and insulation from the vagaries of financial markets.
    Instead, Congress is considering changes that would expose most workers to even greater risks in their retirement income, not just by privatizing the Social Security system, but also by adding more subsidies for 401(k)s and other private retirement accounts. This would compound the trend in private pensions by exposing lower- and middle-income Americans to the risks of a down market for stocks, bonds, or with annuities when they retire, or of high inflation that erodes the value of their savings.
  • New York Times: America's Truth Deficit. By William Greider. Excerpts: DURING the cold war, as the Soviet economic system slowly unraveled, internal reform was impossible because highly placed officials who recognized the systemic disorders could not talk about them honestly. The United States is now in an equivalent predicament. Its weakening position in the global trading system is obvious and ominous, yet leaders in politics, business, finance and the news media are not willing to discuss candidly what is happening and why. Instead, they recycle the usual bromides about the benefits of free trade and assurances that everything will work out for the best.
    Much like Soviet leaders, the American establishment is enthralled by utopian convictions - the market orthodoxy of free trade globalization. The United States is heading for yet another record trade deficit in 2005, possibly 25 percent larger than last year's. Our economy's international debt position - accumulated from many years of tolerating larger and larger trade deficits - began compounding ferociously in the last five years. Our net foreign indebtedness is now more than 25 percent of gross domestic product and at the current pace will reach 50 percent in four or five years. [...]
    An authentic debate might start by asking heretical questions: Why is the United States one of the few advanced economies that suffers from perennial trade deficits? Why do new trade agreements, despite official promises, always leave the United States with a deeper deficit hole, with another wave of jobs moving overseas? How do the authorities explain the 30-year stagnation of working-class wages that is peculiar to America? Are we supposed to believe that everyone else is simply more competitive or slyly breaking the rules? In the last three decades, American policymakers have succeeded in closing the trade gap with only one event - a recession. [...]
    But on the crucial question of how policy makers define "national interest," Washington stands alone. Western Europe, whatever its problems, manages economic policy to maintain modest trade surpluses. Japan manages to insure far larger surpluses in recessions (its export income subsidizes inefficient domestic employers). China strives to acquire a larger, more advanced industrial base at the expense of worker incomes and bank profits. Germany and Japan, despite vast differences, both manage to keep advanced manufacturing sectors anchored at home and to defend domestic wage levels and social guarantees. When they do disperse production and jobs overseas, as they must, they do so strategically.
    By contrast, Washington defines "national interest" primarily in terms of advancing the global reach of our multinational enterprises. Elites are persuaded by the reigning orthodoxy that subsidiary domestic interests will ultimately benefit too. The distinctive power of America's globalized companies is reflected in trade patterns. Nearly half of American exports and imports are not traded in open markets - the price auction idealized by neoclassical economics - but within the companies themselves, moving materials and components back and forth among their far-flung factories. A trade deficit does not show on the company's balance sheet, only on the nation's. In recent years, much of the trade deficit has reflected the value-added production and jobs that companies moved elsewhere.
    The United States is thus especially vulnerable to the downward pressures on working-class wages that exist on both ends of the global system. American producers are generally free - and even encouraged by Washington - to shift production to low-wage locations. Companies regularly use this cost-cutting technique as a competitive weapon without regard to the domestic consequences. The practice works for companies and investors, but not so well for a nation.
  • New York Times: How Costco Became the Anti-Wal-Mart. Excerpts: Combining high quality with stunningly low prices, the shirts appeal to upscale customers - and epitomize why some retail analysts say Mr. Sinegal just might be America's shrewdest merchant since Sam Walton. But not everyone is happy with Costco's business strategy. Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco's customers but to its workers as well.
    Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder." Mr. Sinegal begs to differ. He rejects Wall Street's assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street's profit demands.
    Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. And Costco's customers, who are more affluent than other warehouse store shoppers, stay loyal because they like that low prices do not come at the workers' expense. "This is not altruistic," he said. "This is good business." [...]
    Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. "On Wall Street, they're in the business of making money between now and next Thursday," he said. "I don't say that with any bitterness, but we can't take that view. We want to build a company that will still be here 50 and 60 years from now." IF shareholders mind Mr. Sinegal's philosophy, it is not obvious: Costco's stock price has risen more than 10 percent in the last 12 months, while Wal-Mart's has slipped 5 percent. Costco shares sell for almost 23 times expected earnings; at Wal-Mart the multiple is about 19. Mr. Dreher said Costco's share price was so high because so many people love the company. "It's a cult stock," he said.
    Emme Kozloff, an analyst at Sanford C. Bernstein & Company, faulted Mr. Sinegal as being too generous to employees, noting that when analysts complained that Costco's workers were paying just 4 percent toward their health costs, he raised that percentage only to 8 percent, when the retail average is 25 percent. "He has been too benevolent," she said. "He's right that a happy employee is a productive long-term employee, but he could force employees to pick up a little more of the burden." [...]
    Despite Costco's impressive record, Mr. Sinegal's salary is just $350,000, although he also received a $200,000 bonus last year. That puts him at less than 10 percent of many other chief executives, though Costco ranks 29th in revenue among all American companies. "I've been very well rewarded," said Mr. Sinegal, who is worth more than $150 million thanks to his Costco stock holdings. "I just think that if you're going to try to run an organization that's very cost-conscious, then you can't have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong." [...]
    This knack for seeing things in a new way also explains Costco's approach to retaining employees as well as shoppers. Besides paying considerably more than competitors, for example, Costco contributes generously to its workers' 401(k) plans, starting with 3 percent of salary the second year and rising to 9 percent after 25 years. Its insurance plans absorb most dental expenses, and part-time workers are eligible for health insurance after just six months on the job, compared with two years at Wal-Mart. Eighty-five percent of Costco's workers have health insurance, compared with less than half at Wal-Mart and Target.
    Costco also has not shut out unions, as some of its rivals have. The Teamsters union, for example, represents 14,000 of Costco's 113,000 employees. "They gave us the best agreement of any retailer in the country," said Rome Aloise, the union's chief negotiator with Costco. The contract guarantees employees at least 25 hours of work a week, he said, and requires that at least half of a store's workers be full time. Workers seem enthusiastic. Beth Wagner, 36, used to manage a Rite Aid drugstore, where she made $24,000 a year and paid nearly $4,000 a year for health coverage. She quit five years ago to work at Costco, taking a cut in pay. She started at $10.50 an hour - $22,000 a year - but now makes $18 an hour as a receiving clerk. With annual bonuses, her income is about $40,000. "I want to retire here," she said. "I love it here."

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.
  • "The exception or the rule?" By "Dose of reality". Excerpts: The oft-stated unfavorable policies and resource actions (raises, bonuses, targets etc…) are not isolated incidents perpetrated by maverick bad guys – they are at the core of BCS management and are imposed across all of BCS. If you want to use the cancer analogy, we are in the 4th or 5th stage of brain cancer, and it has spread to most of the vital organs as well as a few appendages.
    Bad leaders are supported by bad managers and the MO for years has been career defense at all costs. It is all part of a well-orchestrated selection process that ensures manager continuity. The only thing that will turn this around is a regime change and a tectonic shift in management policies and go-to-market strategy, followed by some major house cleaning of those that refuse to adapt. In short, we need a brain transplant!

New on the Alliance@IBM Site:
  • Editorial: Cheers at IBM Headquarters—Tears at Homes of 14,500 IBMers. Excerpts: The 2nd quarter financial results are in and there are cheers in Armonk. Analysts and the media report that 'Big Blue' is back. But lost in the reporting and analysis are those that are the heart and soul of Big Blue-the employees. For the 14500 IBM employees worldwide who are being cut from the company there is no celebration. For those still employed the fear that they might be cut next, temper any kind of elation in the 2nd quarter results. In the CFO's webcast, Mr. Loughridge at one point called the IBMers being cut 'resources', not people or employees. What a slap in the face to countless employees who worked to make IBM successful only to be caught in the latest purge and labeled 'resource'. [...]
    Meanwhile employment in IBM India will increase by 14,000 and those who have been with IBM 5 years or less make up 49% of the employee population. The work lives of IBM employees continue to decline as stress levels increase. The job prospects for the newly terminated are bleak, and the retirement benefits so many relied on evaporate. IBM employees, retirees and all citizens need to unite and pushback. Tell IBM and Corporate America that we will not let you push us down and out of the American Dream. Let your voice be heard!
  • 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.
  • IBM Pension Lawsuit FAQ about Cooper v IBM, Updated 6-21-05. Excerpt: Below is a list of frequently asked questions about the class action lawsuit against IBM's 1995 and 1999 pension plans. The answers are my personal opinions, have not been verified with either IBM or plaintiffs’ counsel, and should not be construed as legal advice. On July 31, 2003, a federal district court judge ruled in favor of the employees in this case. IBM will appeal portions of the ruling. On September 28, 2004, IBM and the legal team on Cooper v IBM announced that an agreement had been negotiated that settles some of the claims and set the amount of damages that IBM will pay to the class if IBM's appeal of the district court's age discrimination rulings is unsuccessful. Click on any question to jump to the answer. Or scroll down and read them all.
  • 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:
    • Comment 07/19/05: Bravo Bravo!!! to IBM for making their shareholders happy by getting 8 cents a share more by shattering the family lives of 10-15,000 people. How silly are the wall street reports, praising IBM's recovery. Shows you how useless those expert analysis are. I've seen IBM do this the past 3 years, its just a cycle of one down and one up quarter that is falsely padded, sooner or later it will catch up. -Anonymous-
    • Comment 07/19/05: It looks like the sacrifice of 13,000 jobs will increase the stock price and save Sam's job for another quarter (during which he'll make another $3.5M). -Anonymous- Editor's Note: We agree. If you want to make it better for IBM Employees, help us organize. Sign-up with Alliance@IBM. It's something you can do, yourself; for yourself and your co-workers.
    • Comment 07/19/05: IBM is reorganizing its network services. Network support teams are split and reorganized "along competency segments", meaning each member of the same team will report to a different manager and their current managers will be just profile holders. A "discovery team" will take over and determine what jobs must stay on site and what can be done remotely. So far it seems teams in the US and Canada are all told that they will pick up more work and it's not a resource action. Managers are already in denial about the upcoming layoffs. The mood is strangely cynical: people are laughing and not believing a word. We all are sure that most of our jobs will go to low wage countries. -Anonymous-
    • Comment 07/19/05: HELP, I need an IBM employee current or otherwise to help me do a newspaper story in the RTP area on Leave of Absence processing. We need to get the word out to newer hires to stay away from IBM's Work-Life Balance Programs. Please see below....Comment 07/12/05: Critical Request: Any employees who have taken a personal Leave of Absence, Educational Leave, pregnancy leave and you were fired or demoted when you returned from leave, I would like to hear your story. Especially in the RTP area, The Editors at the Alliance will forward your name, number or email address to me, so I can make contact. Please send a note to endicottalliance@stny.rr.com. -Anonymous-
    • Comment 07/20/05: I am in the process of training my Brazilian replacements. It is interesting to note that our team was reduced by 50% a year ago and we were told that we had to "do whatever it takes" to keep the account running.That meant working 50-60 hour weeks regularly and being on call 24/7. Now IBM is replacing us with Brazilians and increasing the team by 50%. Why? Because they're union and the laws in their country will not allow the kind of employee abuse that goes on in the U.S. IBM recently laid off a friend of mine that had 21 years of service and was very knowledgeable. They have destroyed their institutional memory and they just don't care. They are shipping sensitive data offshore at an alarming rate to countries that really don't care much for the U.S. They have promised us other jobs but I believe they are lying as we haven't received any information on these new jobs. I am at a point now where I think I really don't want to continue working for IBM anyway. Over the last five years they have become totally untrustworthy and despite their constant propaganda are rapidly becoming a second rate company. -Anonymous-
    • Comment 07/20/05: Actions and Warnings -- I am recently terminated from IBM. In 'off the record conversations' that I had with managers in the last few weeks, there are two things current employees should be aware of -- during the SWG resource action, HR adjusted the lists of selected employees sometimes removing a future candidate for Minimized Separation from the list. No reason for the adjustment was given to the selecting manager. At least one such manager says they will have to go back once this resource action is over, and then perform a minimized separation of the employee (minimized separation = performance based separation with a much reduced separation package than what is in the resource action). Second item: Employees that had been served minimized separation notices prior to the resource action , and had successfully completed the Performance Improvement Plan test, managers still selected these employees for separation via resource action. Moral of the story - just because you are able to prove to your manager that they made a mistake and you are more than capable of doing your job, this does not mean you are safe from a subsequent separation. You will be identified as one of the employees to get rid of anyway. -Anonymous-
    • Comment 07/21/05: I was resourced from SWG effective July 11th. Imagine my relief upon hearing IBM's 2nd quarter results. It's comforting to know that IBM's executive corps are going to make their performance bonuses! This is a case of placing a frog in a pot of water and heating it slowly. Because it happens so gradually, the frog dies. The same is happening to dedicated and talented IBM employees. We go the extra mile, work onerous hours, accept the option to purchase IBM stock at a 5% discount (down from 15%), pay more for benefits and receive nominal or no pay increases. Wake up and smell the coffee, we're the frogs! It's time to take action and get the word out. If we don't, more lives will be disrupted, destroyed or thrown into chaos! If you care, now is the time to spring into action! -Anonymous-
    • Comment 07/21/05: Why is IBM RTP looking for a Sr. Recruiter with all this going on? Also the position seems to flip from perm to Co-Op on a regular basis today its perm before it was Co-Op. Position: 007065 -Anonymous-

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