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    Highlights—November 12, 2005

  • Jim Hightower: A message from corporate America. Full excerpt: The internal memo is dated April 2005 and tagged: "IBM Confidential." The reason for the hush-hush treatment is that this document is written confirmation of corporate America's intention to send America's middle-class future abroad -- shipping out the jobs in engineering and other sciences that require advanced degrees and pay top wages.
    The International Business Machines Corp. has become the leading practitioner of shopping the globe for the cheapest high-tech workers and knocking down the wage floor to the lowest common denominator. Because of the wrenching economic, social, and political impacts this will have on U.S. society, IBM has not wanted to concede publicly that undermining middle-class opportunities is a corporate goal.
    Yet this leaked memo confirms that while the top honchos are cutting 13,000 of these high-tech jobs in America and Europe this year, IBM will add 14,000 in the low-wage tech centers of India. Experienced software programmers in our country earn maybe $75,000 a year, creating a sound middle-class base for our economy and communities. But the hell with such democratic notions of the common good, say the profiteers; we can replace American programmers with ones from India who'll do the work for an annual $15,000.
    That's $60,000 per job, per year, that the corporate and investor elites can take out of the middle class and put in their own pockets.
    Adding insult to injury, Robert Moffat, an IBM senior vice president, says that the corporate rush to India is not merely a chase for the cheapest workers:
    "It's mostly about skills." He then lectures America's high-tech workers: "You are no longer competing just with the guy down the street, but also with people around the world."
    And there you have a sparkling-clear statement of what corporate America thinks of you, and what it has in store for you. How does it think it will hold society together when it knocks all of our wages down to $15,000 a year?
  • Courtesy of Janet Krueger in a Yahoo! message board post, an action alert from the Pension Rights Center: House Committee on Ways and Means Passes Pension Reform Legislation. Full excerpt: Yesterday, the House Committee on Ways and Means approved H.R. 2830, the Pension Protection Act of 2005. The bill is largely the same as the bill passed by the House Committee on Education and the Workforce. It includes complex provisions on underfunding; it legalizes cash balance plans prospectively without protections for workers; and it would allow multiemployer plans to eliminate legally protected early retirement benefits earned by tens of thousands of workers. In addition, the bill includes some IRA and 401(k) provisions. From what we can see, the bill overall is not good for workers' pension security. Since the legislation has passed both Committees, it will move to the floor of the House of Representatives, as early as next week, where it will be voted on by all the members of the House.
    As we mentioned in our last message, Representative Stephanie Tubbs Jones (D-OH) introduced an amendment that would have legalized cash balance plans without providing adequate protections for workers. Luckily, the amendment was dropped. However, we hear that, under pressure from the business community, she will likely introduce the amendment as a freestanding piece of legislation. We will keep you informed if she does introduce this bill. The Pension Rights Center will organize, with other organizations, a visit to her office to talk about why her bill is the wrong approach.
    In the meantime, you should call or write to your Member of Congress and tell him or her to oppose H.R. 2830 when it comes to the floor next week. To find the contact information for your Representatives in Congress, go to http://www.house.gov/ and enter your zip code.
    We have also heard that the Senate bill could possibly also come up for a floor vote next week. We will keep you posted if it does because this is a bill that, while far from perfect, generally deserves the support of employees and retirees. We will keep you posted as we hear about new developments with this legislation. Thanks for your hard work.
    Joellen and Karen Pension Rights Center
    1350 Connecticut Avenue, NW, Suite 206
    Washington, DC 20036
    Phone: (202) 296-3776
    Fax: (202) 296-1571
    www.pensionrights.org
  • House Committee on Ways and Means: Committee Passes Pension Reform Bill Bill Would Enhance Retirement Security for Millions of Americans. Excerpts: Today, the Ways and Means Committee approved H.R. 2830, the Pension Protection Act of 2005, as amended, by a vote of 23 – 17. This bill, which has already been approved by the Committee on Education and the Workforce, will now move to the full House of Representatives for a vote. [...] "Provides legal certainty to hybrid pension plans, such as cash balance plans, to protect more than seven million workers who currently depend on these plans for retirement security."
  • Pension Rights Center: Legislative Update: House Committee on Ways and Means Passes Pension Reform Legislation. Yesterday, the House Committee on Ways and Means approved H.R. 2830, the Pension Protection Act of 2005. The bill is largely the same as the bill passed by the House Committee on Education and the Workforce. It includes complex provisions on underfunding; it legalizes cash balance plans prospectively without protections for workers; and it would allow multiemployer plans to eliminate legally protected early retirement benefits earned by tens of thousands of workers. In addition, the bill includes some IRA and 401(k) provisions. From what we can see, the bill overall is not good for workers’ pension security. Since the legislation has passed both Committees, it will move to the floor of the House of Representatives, as early as next week, where it will be voted on by all the members of the House.
    As we mentioned in our last message, Representative Stephanie Tubbs Jones (D-OH) introduced an amendment that would have legalized cash balance plans without providing adequate protections for workers. Luckily, the amendment was dropped. However, we hear that, under pressure from the business community, she will likely introduce the amendment as a freestanding piece of legislation. We will keep you informed if she does introduce this bill. The Pension Rights Center will organize, with other organizations, a visit to her office to talk about why her bill is the wrong approach.
    In the meantime, you should call or write to your Member of Congress and tell him or her to oppose H.R. 2830 when it comes to the floor next week. To find the contact information for your Representatives in Congress, go to http://www.house.gov/ and enter your zip code.
    We have also heard that the Senate bill could possibly also come up for a floor vote next week. We will keep you posted if it does because this is a bill that, while far from perfect, generally deserves the support of employees and retirees. We will keep you posted as we hear about new developments with this legislation.
  • Yahoo! message board post by Janet Krueger: New GAO study on cash balance plans. Full excerpt: I just uploaded a new GAO study focused on cash balance plans to the FILES area of this board named gao0642.pdf. (Editor's note: As a service for our readers that are not members of Yahoo!'s message boards, we have hosted the GAO study on our server [PDF--973 KB]). Gosh, how surprising -- they discovered ALL workers end up damaged by most cash balance conversions! At least they are generating news coverage; I'll upload some of the articles they triggered... This would provide a good excuse for writing another letter to your representative and senators in Washington telling them these conversions should NOT be legalized!
  • Associated Press, courtesy of the Seattle Post-Intelligencer: GAO: Pension plan switch hurts employees. By Marcy Gordon. Excerpts: The GAO auditors, who examined 31 large company pension plans and 102 smaller ones, found that when employers switch from defined-benefit pension plans to cash balance plans, "most workers, regardless of age, would have received greater benefits under the (defined-benefit) plan." Also, unless older employees are given the right to remain in the traditional plan, they "experience a greater loss of expected benefits than younger workers," the report says. It estimates the median loss in retirement benefits each month for a 30-year-old employee to be $59, rising to $188 for a 40-year-old worker and $238 for a 50-year-old. [...]
    The GAO study "is further proof of the need to stop companies from slashing the pension benefits of older workers through cash balance schemes," Rep. Bernie Sanders, I-Vt., said Friday in a statement. Business groups have urged lawmakers to mandate that companies already using cash balance plans cannot be challenged. Companies that have converted to the plans are mainly in manufacturing, health care and finance.
  • Wall Street Journal: New Pensions May Hurt Young Professionals. By Ellen E. Schultz. Excerpts: But compensating for this, they say, is that the plans are better for a younger, more-mobile work force. "Cash-balance designs offer significant advantages" to those "who move in and out of the work force," says the Erisa Industry Committee, a group of employers, law firms and actuarial consultants. Such employees "are more likely to accrue a significant and secure retirement benefit under cash-balance plans than under many other plan designs," its legislative bulletin says. At one company that has changed its pension to the new format, Casual Corner Group, a spokesman says: "With a young work force with high turnover, the cash-balance plan provides a significantly bigger benefit for younger associates." There's just one problem with this pitch. Many younger workers are no more likely to collect a benefit from these new-fangled plans than they are from traditional pensions. And when they do collect, they often fare only a little better under a cash-balance system. [...]
    He wasn't vested. For all their supposed advantages for the young and mobile, cash-balance plans don't vest any sooner than traditional pension plans. That's five years. "They say it's good for young, mobile people," Mr. Gilroy notes, "but if you're there four years, 364 days, you get nothing." For younger employees, even that long would show staying power. The median job tenure for workers aged 25 to 34 is just 2.7 years, Labor Department data show. Another factoid from the Labor Department: By age 32, the average U.S. worker has had nine full- or part-time jobs.
  • Cincinnati Enquirer: Be an activist to ensure your pension stays safe. Employees should request essential documentation yearly. By Alexander Coolidge. Excerpt: Johnson said collecting a few key documents each year keeps you on top of the status of your pension plan and signals to your employer that you are watching out for your interests. Start with getting copies of the personal annual benefits statement that provides an individual employee's financial snapshot under their pension as well as the summary benefits statement, which generally explains how benefits are determined.
  • John Boehner (R-OH), Chairman of the House Education & the Workforce Committee. Fact Sheet: Independent Research Findings Confirm Benefits of Cash Balance Pension Plans. (July 7, 2004). Excerpts: Despite press accounts that have misstated basic facts, cash balance pension plans actually provide more generous benefits for the majority of workers than do traditional plans. As a result, cash balance conversions over the past two decades have actually benefited employees. These conclusions emerge from a growing body of independent research by economists and academics at some of the nation’s most respected institutions, including the Federal Reserve Board, the Urban Institute, the Brooking Institution, and the Wharton School . This independent research confirms the following facts...
  • Dow Jones, courtesy of MorningStar: New Study Says Young Workers Hit In US Cash Balance Plans. By Rob Wells. Excerpts: A new study released Friday said younger workers as well as older workers could face pension benefit cuts if their employers converted their traditional pension plans into new "cash balance" plans. [...] The finding is significant since advocates of cash balance plans have said these pensions would benefit younger workers. Critics have charged cash balance pension conversions result in age discrimination as older workers receive reduced benefits. [...]
    "Workers have made career and financial decisions based upon these benefit promises, and they should not have their retirement plans dashed at the whims of the companies they've loyally served," said Miller, senior Democrat on the House Education and Workforce Committee. Rep. Bernard Sanders, I-Vt., and Sen. Tom Harkin, D-Iowa, also requested the study. [...]
    In July 2003, the U.S. District Court in Southern Illinois ruled in a case involving IBM that cash balance formulas inherently violate federal pension laws against age discrimination.
  • John Boehner (R-OH), Chairman of the House Education & the Workforce Committee. Fact Sheet: Myth vs. FACT: Cash Balance Pension Plans. Excerpts: MYTH: Workers receive less benefits overall in a cash balance plan. FACT: More workers receive higher benefits from their cash balance plan than benefits earned under a traditional defined benefit plan: Benefits are earned more evenly over a career span, not just at the end of a worker's career. This can result in greater retirement savings for employees who do not remain with the same employer for their entire working careers. Therefore, a broader group of employees – including lower-income workers and women – earn greater benefits with shorter service under a cash balance plan than under a traditional plan.
  • Yahoo! message board post by Kathi Cooper (of Cooper v IBM): GAO Study, Truth about Cash Balance Plans. Full excerpt: I issued the following statement to the press yesterday. It was not printed in any media so I am posting it here...
    "This GAO Report annihilates employer claims that converting traditional pensions to cash balance plans is beneficial to younger workers. Previously, companies have argued that any harm to older workers may be justified by the need to attract and retain quality younger workers in a more mobile workforce.
    "According to the report, 30-year old workers lose an average of $59 dollars per month in benefits, 40 year old workers lose $188 per month, and 50 year old workers lose $238 per month when a company converts to a cash balance plan from a defined benefit plan.
    "The study is a call to action. Congress needs to enact pension reform that protects workers. The Senate pension bill (S. 1783) will stop companies from robbing employee pensions using accounting gimmicks that just don't hold up under scrutiny."
  • Yahoo! message board post by Janet Krueger. Full excerpt: For those of you who need examples to follow, below is a letter one of the members of this board wrote to his representative; nice job!
    The Honorable xxx xxxxx
    home address
    RE: Pending pension legislation
    Ms. xxxxx:
    Thank you for your recent letter to me on the topic of pension legislation (copy of that letter attached)!
    The aging boomers sincerely appreciate your support. Many of the corporate cash-balance pension conversion proposals would reduce pension benefits to dedicated employees that have made life plans built in part on the assumption that the corporations for which they worked were "as good as their word". Alas this is turning out not to be the case, even for companies that are on sound financial footing (case in point, my employer of 23 years IBM).
    I am writing today to alert you to the release of a highly relevant report by the GAO, in the event you have not seen it. The title is "Private Pensions - Information on Cash Balance Pension Plans" GAO-06-42. Briefly, the report concludes that the typical cash balance conversion results in a loss of pension benefits to most or all workers regardless of age. This is confirmation from a recognized and impartial authority of the danger of these conversions. I have enclosed a copy of the one page executive summary of the report for your review. Thank you for your support!
  • New York Times: Court Nominee Has Paper Trail Businesses Like. By Stephen Labaton. Excerpts: Judge Samuel A. Alito Jr. has reliably favored big-business litigants as he has pushed the federal appeals court in Philadelphia in a conservative direction. His extensive paper trail of 15 years of opinions reveals a jurist deeply skeptical of claims against large corporations. A review of dozens of business cases in which Judge Alito has written majority or dissenting opinions or cast the decisive vote shows that, with few exceptions, he has sided with employers over employees in discrimination lawsuits and in favor of corporations over investors in securities fraud cases. [...]
    It is such business cases, which arise far more often than privacy and abortion cases, that are the bread and butter of the appeals courts and the Supreme Court. And, according to his supporters and detractors, it is where Judge Alito has left his mark in the United States Court of Appeals for the Third Circuit. Judge Alito's record in business cases presents some political strengths and weaknesses as he heads into his confirmation hearing, scheduled to begin Jan. 9. Major business groups are preparing to spend millions of dollars to lobby on his behalf, and may help him with pivotal Democrats. Liberal groups, meanwhile, have begun to cite his record to make the case that he is insensitive to the plight of minorities and the environment.
    The judge's reputation over the last 15 years was such that corporate lawyers relished the prospect of his participation in cases, while plaintiff's lawyers hoped to avoid him. ''We're always happy to see Judge Alito on the panel,'' said Robert C. Heim, the head of the litigation department at Dechert, a large law firm based in Philadelphia that represents some of the nation's largest corporations, typically facing accusations of antitrust, securities or corporate law violations. ''He's generally a good judge for the cases we argue because we generally argue that the state of law does not favor the case that the plaintiffs are making and he's generally very receptive to that. He doesn't give an expansive reading to antitrust laws or securities laws.''
  • In a Yahoo! message board post, Kathi Cooper answers another poster's three questions. Full excerpt: In the begriming of your employment, 1) Did your employer told you (specifically up front) that this company has pension plan? 2) Did your employer ever told you that the corporation can cancel or make significant changes in their pension plan at any time of their employment with their company? 3) Did your employer ever told you (sic) that if company layoff before you be vested then you get no or very little pension benefits?
    Kathi responds: Pensions are not part of contract law. Pensions fall under ERISA federal law. Under ERISA law, pensions ARE LEGALLY DEFINED AS deferred compensation. Under ERISA law, our company can cancel their DB plan at anytime, which they did when they closed it to new hires. Under ERISA law, they can also make significant changes as long as we are notified (204h notification of significant reduction in pension) and as long as it is legal.
    Our company didn't do the legal thing when they switched to their Cash Balance Plan so thousands of employees got money under a termination clause which we won in federal court. Our company has told us that we vest on day one of year six (5 full years of service). It worked for a while until our company got busted for illegal termination of benefits. Under ERISA law, they have to give us a SPD (Summary Plan Description) of our pension plan, which is about 500 pages long at this time. It makes for good reading in the lavatory.
    People that know about pensions know about ERISA. Seems you might want to read up on ERISA and Cooper v. IBM. Very interesting to see what IBM did and how they got caught.
  • Yahoo! message board post by Janet Krueger. Full excerpt: I just uploaded a new spreadsheet to the 5500 directory of the FILES area of this board named: IBM Personal Pension Account Balance January 1 2003.xls We believe it is the average Personal Pension Account balances for each age group. This is interesting in two respects. First, it gives an idea of what the average balance is for each age group (shockingly low at some age levels), plus it also makes it easier to determine who is left over on the older 95 plan. Comments, anyone??? (Editor's note: For the benefit of readers that do not belong to the Yahoo! message board and are thus unable to access its "Files" area, the subject spreadsheet may be downloaded [XLS--16 KB] from the www.ibmemployee.com server).
  • New York Times: A Pension Rule, Sometimes Murky, Is Under Pressure. By Mary Williams Walsh. Excerpts: When Lucent issues its results each year, it factors in assumptions about its pension fund - assumptions that have padded its earnings. In 2004, for instance, Lucent said it earned $1.2 billion from operations, but $1.1 billion of that actually resulted from pension calculations. This week, the Financial Accounting Standards Board, which writes the accounting rules for American business, will decide whether to go ahead with plans to change the way pension accounting is done. The board's current rule is 20 years old and has drawn fire from retirees and investors for many of the same reasons that disturb Mr. Zydney, who has made his concerns about his Lucent pension into something of a crusade. "Right now, the stuff isn't transparent," Mr. Zydney said. "There's no accuracy. No consistency. And everybody's trying to play some financial game to make things look better." [...]
    Billions of dollars are at stake. And no one expects companies to readily give up a tool that can enhance earnings - the bottom line that determines, among other things, their executive bonuses.
    The biggest complaint about the current rule is that it directs companies, at the beginning of each year, to make an educated guess about their pension funds' investment returns, and then, at the end of the year, factor that assumption into corporate profits, no matter what the year's actual returns turned out to be. "If you need to manufacture profits, this is just an incredibly convenient technology," said Mihir A. Desai, an associate professor of finance at the Harvard Business School. Professor Desai based his assertion on a study of the behavior of more than 3,000 companies over 11 years, which he conducted with Daniel B. Bergstresser of the Harvard Business School and Joshua D. Rauh of the Massachusetts Institute of Technology.
    The researchers found that companies tended to ratchet up their assumptions of pension fund returns, padding their profits just before certain corporate events, like acquisitions, secondary stock offerings or the exercise of stock options by executives - all times when a higher stock price is desirable. The study is to be published in The Quarterly Journal of Economics. [...]
    Mr. Zion also looked at the cumulative effect of pension smoothing from 1999 through 2003, and found that it had inflated the total profit of the companies in the Standard & Poor's 500-stock index by about 15 percent. Most affected was I.B.M., he found; its reported earnings for those five years fell to $21 billion, from $36 billion, once the pension effect was removed.
  • In a Yahoo! message board post, Kathi Cooper answers this question from another poster: Does anyone know how the "prepaid pension asset" of over $20 billion shown on IBM's Balance Sheet was arrived at? Ms. Cooper's answer: You take the surplus (aka vapor profit), add to that other phony money items such as reversed unrecognized actuarial gains, add service costs credits, and then you end up with a phony (off-balance sheet) number of $20B that IBM can play with. IBM uses the phony money to 'smooth' their pension numbers year-to-year.
    For those that are not bean counters, all you need to realize is that it is all funny accounting gimmick money that IBM uses to manipulate their pension numbers. It is at its highest peak since I have been tracking their ill-gotten gains (and I have the nums back to 1993). You and I can't take it to the bank or buy a cup of coffee with it. However, you can boost EPS and executive bonuses quite well with it. And I hear those executives do drink rather expensive coffee.
  • Wall Street Journal: Pension Inquiry Shines Spotlight On Assumptions. Small Changes in Calculations At Companies Have a Big Effect On Retiree Liability -- and Profit. By Deborah Solomon and Lee Hawkins Jr. Excerpts: Labor unions and the government's Pension Benefit Guaranty Corp. want to make sure big companies' pension funds are healthy enough to pay promised benefits to current and future retirees. The Securities and Exchange Commission, on the other hand, is grappling with another question: Did the companies tweak key financial assumptions of these plans to make the companies themselves look more flush? The SEC, which refers internally to any such maneuvers as "reverse engineering," is probing whether companies had an eye on their shareholders, not their retirees, when they changed some financial assumptions in recent years, according to people familiar with the matter.
  • New York Times: Halliburton violated pension laws. By Mary Williams Walsh. Excerpts: A U.S. investigation of Halliburton's pension plans has uncovered three violations of the law, including charging some costs of Halliburton's executive pension and bonus plans to the workers' pension fund, correspondence from the U.S. Labor Department shows. The Labor Department concluded that Halliburton's actions violated U.S. pension law prohibitions against self-dealing and using pension money for the benefit of the company, as well as the requirement to handle pension money with "care, skill, prudence and diligence." [...] Halliburton used pension money to pay the legal, actuarial and other costs of its executive pension and bonus programs from June 1, 1999, through January 1, 2004, spending about $2.6 million in total. In August 2004, it put the $2.6 million back into the pension plan and paid a penalty to the Internal Revenue Service, the U.S. tax authority, for what is known as a "prohibited transaction."
  • Chicago Sun-Times: Bush administration's moral compass is lost. By Cathleen Falsani, Religion Writer. Excerpts: We've known each other since we were teenagers, and the subject of faith -- the peculiarity of my born-again-ness and the absence of her faith in any religious way -- had been a perennial topic of discussion. I respect her deeply and care about what she thinks, particularly about spiritual matters. "Help!" was the title of Amanda's e-mail. "I'm sad and angry today," she began. "Given your profession and your personal belief system, I am genuinely hoping you have something to say on this: How can people who claim to be voting on religious and moral values vote for a man who . . ." Then she listed what she believed were President Bush's offenses. [...]
    And this week, as Republican leaders try to force a monstrous $50 billion budget cut designed allegedly to offset the mounting costs (currently in excess of $62 billion) of hurricane-related aid through Congress, it is clear that its moral compass also has been lost. The proposed budget cuts, part of the so-called "budget reconciliation," would have devastating effects on the poorest, most vulnerable Americans, while allowing tax relief for the rich. [...]
    The massive budget reductions would include billions of dollars from pension protection and student loan programs, Medicaid and child support enforcement, as well as millions from the food stamp program, Supplemental Security Income (read: senior citizens and the disabled) and foster care. Also attached to the "reconciliation" proposal is a plan that would allow oil drilling in Alaska's pristine Arctic National Wildlife Refuge. [...]
    A travesty For example, all 65 synod bishops of the Evangelical Lutheran Church in America have signed a letter to members of Congress vehemently opposing the proposed budget cuts, saying in part, "The Biblical record is clear. The scriptural witness on which our faith tradition stands speaks dramatically to God's concern for and solidarity with the poor and oppressed communities while speaking firmly in opposition to governments whose policies place narrow economic interests driven by greed above the common good." Evangelical Christian theologian and leader Jim Wallis, founder of Sojourners, a national network of "progressive Christian" peace-and-justice activists, led an ecumenical gathering of religious leaders in a protest at the Capitol building Thursday, calling the proposed cuts "a moral travesty." "Instead of wearing bracelets that ask, 'What would Jesus do?' perhaps some Republicans should ponder, 'What would Jesus cut?' " Wallis said.
  • Computerworld: U.S. Senate approves H-1B visa increase. An additional 30,000 visas will be available if the U.S. House goes along. Excerpt: Technology worker organizations, including the Institute of Electrical and Electronics Engineers-USA (IEEE-USA), have opposed increases in H-1B limits. U.S. IT and electrotechnology professionals saw a 1.5% decrease in their salaries in 2003, the first decrease since the IEEE-USA began surveying members in 1972, the group said in December. The ITAA continues to "undercut U.S. software workers" by calling for more H-1B visas, said Ron Hira, chairman of the IEEE-USA's research and development policy committee. Hira compared the hiring of H-1B workers to the practice of companies "dumping" products into another country by charging less than they do in their home country. A recent study, "The Bottom of the Pay Scale: Wages for H-1B Computer Programmers -- F.Y. 2004," by Programmers Guild board member John Miano, found that H-1B workers in computer jobs were paid an average of $13,000 less than U.S. workers in the same jobs.
  • New York Times: Pride, Prejudice, Insurance. By Paul Krugman. Employment-based health insurance is the only serious source of coverage for Americans too young to receive Medicare and insufficiently destitute to receive Medicaid, but it's an institution in decline. Between 2000 and 2004 the number of Americans under 65 rose by 10 million. Yet the number of nonelderly Americans covered by employment-based insurance fell by 4.9 million. The funny thing is that the solution - national health insurance, available to everyone - is obvious. But to see the obvious we'll have to overcome pride - the unwarranted belief that America has nothing to learn from other countries - and prejudice - the equally unwarranted belief, driven by ideology, that private insurance is more efficient than public insurance.
    Let's start with the fact that America's health care system spends more, for worse results, than that of any other advanced country. In 2002 the United States spent $5,267 per person on health care. Canada spent $2,931; Germany spent $2,817; Britain spent only $2,160. Yet the United States has lower life expectancy and higher infant mortality than any of these countries. [...]
    But don't people in other countries sometimes find it hard to get medical treatment? Yes, sometimes - but so do Americans. No, Virginia, many Americans can't count on ready access to high-quality medical care. The journal Health Affairs recently published the results of a survey of the medical experience of "sicker adults" in six countries, including Canada, Britain, Germany and the United States. The responses don't support claims about superior service from the U.S. system. It's true that Americans generally have shorter waits for elective surgery than Canadians or Britons, although German waits are even shorter. But Americans do worse by some important measures: we find it harder than citizens of other advanced countries to see a doctor when we need one, and our system is more, not less, rife with medical errors. [...]
    The U.S. system is much more bureaucratic, with much higher administrative costs, than those of other countries, because private insurers and other players work hard at trying not to pay for medical care. And our fragmented system is unable to bargain with drug companies and other suppliers for lower prices. Taiwan, which moved 10 years ago from a U.S.-style system to a Canadian-style single-payer system, offers an object lesson in the economic advantages of universal coverage. In 1995 less than 60 percent of Taiwan's residents had health insurance; by 2001 the number was 97 percent. Yet according to a careful study published in Health Affairs two years ago, this huge expansion in coverage came virtually free: it led to little if any increase in overall health care spending beyond normal growth due to rising population and incomes.
  • New York Times: The Deadly Doughnut. By Paul Krugman. Excerpts: Registration for Medicare's new prescription drug benefit starts next week. Soon millions of Americans will learn that doughnuts are bad for your health. And if we're lucky, Americans will also learn a bigger lesson: politicians who don't believe in a positive role for government shouldn't be allowed to design new government programs. [...]
    Once you recognize that the drug benefit is a purely political exercise that wasn't supposed to serve its ostensible purpose, the absurdities in the program make sense. For example, the bill offers generous coverage to people with low drug costs, who have the least need for help, so lots of people will get small checks in the mail and think they're being treated well. Meanwhile, the people who are actually likely to need a lot of help paying their drug expenses were deliberately offered a very poor benefit. According to a report issued along with the final version of the bill, people are prohibited from buying supplemental insurance to cover the doughnut hole to keep beneficiaries from becoming "insensitive to costs" - that is, buying too much medicine because they don't pay the price.
  • CNET News: IBM to analyze digital scuttlebutt. By Martin LaMonica. Excerpt: IBM said it is developing an application to analyze how discussions on blogs and other Web sites are affecting a given corporation's image. The computing giant on Monday described a service, called the Public Image Monitoring Solution, that searches through reams of blogs, news stories and other material to distill useful information for companies. [...]
    "Organizations are struggling to understand what people are saying about them in public," said Andrews. "That ends up having an impact on opinion and buying decisions."
  • CNET News: Research money crunch in the U.S. By Marguerite Reardon. Excerpt: An outspoken group of information and communications technology innovators is worried that the United States is falling behind the rest of the world in technological innovation because fewer dollars are being allocated to long-term research. [...] "I think we are in trouble," said Leonard Kleinrock, professor of computer science at the University of California at Los Angeles and creator of the basic principle of packet switching. "Years ago, people took a long-range view to research. There was high-risk research with the potential for big payoffs. That's no longer the case." [...]
    For much of the 20th century, major breakthroughs in technology came from large research laboratories like AT&T's Bell Laboratories, Xerox's Palo Alto Research Center (PARC) , and IBM's Watson Research Center. These research facilities operated much like national laboratories, making their discoveries and innovations available to anyone for modest license fees. Many of the inventions and discoveries at Bell Labs, for example, were first used commercially outside the Bell system and benefited the nation as a whole. The labs are still around, but some experts say the labs conduct basic research on a much smaller scale than they used to.

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 following are a few sample posts:
  • "Idealistic" by "CandorSense". Full excerpt: Valkiria. I have written plenty and to all the sources you name. Problem is that the little people like us don't stand a chance when you have people like Bill Gates lobbying for a larger quota. It has always seemed to me that the USA, in its drive for "open" markets, drives for "free" trade but doesn't follow through to make sure both sides are truly practicing free trade. My approach would be toward "fair" trade which carries with it the burden of bi-lateral cooperation. Of course with the visa scam, it isn't a question of free or fair.
    The word is slowly getting out. This week on Lou Dobbs, they highlighted a study that showed that 85% of H1 visa holders were being paid below the prevailing wage rate; a clear violation of the law. So perhaps people speaking up has helped or maybe the quota cap would have been raised this week by more than 100,000 (as India demanded) instead of the 35,000 approved by Congress.
  • "Rebuttal" by "Dose of reality". Excerpts: BCS is no more than a Trojan Horse sales force for the rest of IBM. We do very little in the way of clinical management consulting. Our bread and butter is system integration work, and if you are an accounting/finance grad, you will be converted into an application configuration specialist. Before you know it you will have morphed into an IT professional. Whatever strategy work we do is intended to steer clients into outsourcing or expensive development projects. We do very little of the kind of industry-based strategic think tank kind of work that Mck or BCG do.
    The disadvantages of a career with IBM have been discussed quite a bit. They include a culture that encourages mediocrity (not rewarding performance), inadequate training, expectations of extremely high utilization (number of hours billed) which means you will be thrown on whatever project needs you regardless of career or geographic fit, preponderance of troubled projects (which means you will get a lot of $h1+ flowing downhill), and minimal raises. The advantages are that you can stay here as long as you like, you will get a chance to travel, it is a cheap and easy way to develop some basic consulting skills, and your friends that are not in the industry will be impressed.
  • "The process vs technology tango - Who leads?" by "Dose of reality". Full excerpt: No offense, but your specific hypothetical is a microcosm for what is wrong with how IBM goes to market. Business-savvy clients shouldn't ever ask "how should I think about technology XYZ". When the technology becomes the starting point or focal point for business planning, bad things happen. Getting the latest toys is acceptable behavior for adolescents looking for the latest video game technology, but keeping up with the Jones' is no way to run a business.
    The right question is "I have a problem doing X - help me evaluate the issue and come up with a solution". Let the process drive the technology not the other way around. How many billions were spent on the ERP bandwagon with limited, or in some cases negative value? IBM just goes around with a cart full of technology wares looking for impressionable adolescents, desperate soundbite hungry executives, and resume feathering IT managers that we can foist them on. BCS are the street-level pimps. So my answer to C-man would be figure out what business problem you are trying to solve, and then let's talk.
  • "The top ten list" by "Dose of reality". Excerpts: I guess they haven't gotten around to BCS yet. Then again maybe they have, and the “cut comp 10% strategy” was how they funded themselves the first year. Some other credits we may be able to attribute to them:
    1. Selling the PC business to Lenovo
    2. Billion dollar tax fraud
    3. Multi-billion dollar pension plan conversion rip-off
    4. Bleach blond front office
    5. One little, two little, 50,000 little Indians
    6. Dog-track profit target strategy - you know that stuffed rabbit that goes around and around and is always out of reach of the desperate dogs.
    7. On ^&&(...... On %^&((.... On Demand. Whew! I almost couldn't get it out.
    8. Utilization Calculus. If Johnny has to charge 1900 hours, take 120 hours vacation, spend 100 hours on administrative tasks, spend 150 hours on proposal work, 80 hours vacation, 40 hours in training, and 400 hours traveling, how many hours can you get in a 2,080 hour bag?
    9. The short list of airline and hotel vendors which is the same for the unreimbursed occasional internal traveler and the fully reimbursed consultant road warrior. Not to mention the kickbacks that IBM gets from the vendors on client paid expenses
    10. The help desk.
  • "From a semi-educated insider" by "Dose of reality". Excerpts: While I don't work with that practice, I thought some inside, educated, anecdotal evidence might be of benefit. In that vain, let me add some deductive analysis on top. Internal consulting is a zero sum P&L game. Externally, we get billing rates that are 300 - 400% markups above fully loaded staff cost. Even with those markups, very little flows down to front line consultants. Would you reasonably expect compensation and reward to be better or worse for a pure cost center like internal consulting?!
    In light of that, what do you suppose the self-selection pattern will be? In other words, who will choose to work in internal consulting where the revenue is capped, the career paths have less "equity" upside, and you are working with IBM employees as clients? While travel may be lower, don't presume that you will be local. The only positive is that you won't have to work as hard to find projects. You have a captive audience. Then there are the results of their work. Our processes are antiquated, our strategy is dated, and the various components of the organization don't work well together. How good can they be? Their mission is cost containment, not growth. It's not a lot of fun consulting for people when you have to put RIF bullseyes on their foreheads, or best case tell management that they are on the wrong track. You will be very unpopular. It's a lot like working for the IRS.
    We get a lot of questions about whether this group or that group is better than the baseline. All I can tell you is that at IBM standardization rules. The policies that make this place unpleasant are centrally managed and controlled by finance and HR. As someone who has been fighting to mitigate against them for over three years, let me tell you that there isn’t much that anyone can do to make the career opportunities competitive. The standard deviation is not nearly high enough to expect that a particular practice will be relatively appealing. Of course, it cuts both ways – it can’t be much worse either, but hopefully for your sake your standards are higher!

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.
  • IBM Pension Lawsuit FAQ about Cooper v IBM. Updated 10-22-05. By Janet Krueger. 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. 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. On August 16, 2005, after the August 8 fairness hearing, Judge Murphy issued an order finalizing the settlement agreement. On August 30, 2005, IBM began the appeals process by issuing their notice of appeal.
  • From the Visitor's comment page and the Job Cuts Status & Comments page.
    • Comment 11/07/05: Unless things have changed, when you get your salary pay statement in May, June, whatever each year, that should have on it your band's pay range min and max, and you can see where you are in your band. If you ask, you manager will also tell you your "market pay penetration" which is IBM-speak for relative salary compared with other companies. From this, you can see where you are in the band, and where IBM thinks you are (or at least tells you) relative to your job in the industry. I've not gotten a raise in 3 years because while I'm only around 50% of my band, they say I'm at 113% market pay, which means they're telling me I get 113% of what people in the industry, with my experience and job type get. What does this all tell you? NOTHING! It's a set of figures IBM can use to justify not giving you raises. Oh, you're 113% of market pay penetration. Or oh, we had to give those who are at 45% of their band an equalizer. It all means nothing, so don't fret over it. My advice? Concentrate on your life, the job is just that. A job. If you can make more and get better security and satisfaction elsewhere and enjoy your life? Do it. If not, stay with IBM, it's not all that bad considering, and make sure you have a life.... Signed, - Been around long enough -
    • Comment 11/08/05: The salary bands for your particular job family are on the total cash summary that you receive from your manager every year. I was dismayed to learn that it is indeed possible to have a salary that is lower than the stated lowest salary in your pay range. For years, I made less than what I was being told was the lowest allowable salary for my job family. When I took it up with HR, they told me that my situation was rare but not unheard of, and that there was a broader salary range for each band that the employees are not privy to; and that my low salary did still fall into that wider salary range. My managers continue to give stock excuses about "not enough money in the bucket for everyone" and "there are other people getting even less than you this year". The point is that IBM gives the managers a lot of outs when it comes to why they aren't paying you fairly-----there are many bureaucratic excuses for the managers to choose from; so don't get your hopes up,.... unless you have a personal relationship with your manager. Hand-in-hand with IBM's tendency to either give poor raises or no raises at all is the ever-present expectation of total loyalty to the company, at whatever cost to your personal life. We are now supposed to accept as normal working late every day, working on weekends, and leaving most of our vacation unused at the end of the year. I'm supposed to care about IBM's future success; but I have no idea what my motivation is supposed to be. There is no correlation between hard work and fair pay, so pay is not a motivating factor. The only motivator is the desire to not be unemployed; but I'm starting to think that getting laid off from this company might be a blessing. Working hard for IBM is like baking cupcakes for the schoolyard bully. -Just getting old at IBM-
    • Comment 11/12/05: Have heard that contractors at IBM are being told that they will cut back to a 4 day work week for the rest of 2005, with a corresponding cut in hours, now down to 32hrs per week max. This is creating lots of hate and discontent from the contractors and Regs. Also a freeze on hiring new contractors until next year is on. -Anonymous-

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