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Highlights—November 26, 2005
- MSN Money: The
real outrage: pensions, not petrol. Forget all the hoopla about oil
price gouging; markets set oil prices. For real cases of rich execs cheating real
people, study what they're doing to corporate pension plans. By Bill Fleckenstein.
Excerpts: If the Senate and TV commentators want to be outraged, why not look into
the real abuses occurring in the somewhat obscure pension-accounting arena? It essentially
impacts only a few dozen large corporations, but it affects hundreds of thousands
of lives. What prompts this discussion: three well-written articles in last week's
New York Times and Wall Street Journal that point out:
- The potential problems for the folks counting on the past promises of these
- How the corporate chieftains running them can jigger their pension assumptions
to make their companies' earnings look good.
Of course, the two groups don't have their interests aligned.
Those running the show have an entirely different agenda -- to boost the stock
they hold options on, and probably their bonuses -- even if it puts all these hundreds
of thousands of people at risk. It's a classic case of greed and broken promises.
IBM was a serial abuser of those same variables.
The Times story noted that the company's reported earnings for 1999 to 2003 would
have been reduced from $36 billion to $21 billion, "once the pension effect was removed." The
article also pointed out that by putting more money in riskier assets, the plan sponsors
can thereby justify higher assumed rates of return, thereby making the current levels
of funding look better, thereby raising earnings and helping the bosses' narrow self-interests.
In the end, these strategies almost certainly place all the people in the plan at greater
risk. But by then, the executives will be long gone -- and living large on the money
they "earned" while pulling these levers.
- New York Times: For
a G.M. Family, the American Dream Vanishes.
By Danny Hakim and Jeremy W. Peters. Excerpts: Buoyed by such prosperity, the auto
industry was the pioneer in advancing what became the American model for the social
contract between workers and their employees -- from the $5 a day Henry Ford offered
workers in 1914 to the all-inclusive health care and pension benefits that became
a mainstay of the vast expansion of the middle class in the second half of the 20th
century. In many ways, it was not the government but Detroit and other major industries,
at the prodding of their unions, that created the American-style social safety net,
and helped foster the shared prosperity that is now fracturing.
- San Francisco Chronicle: Taking
pension in a lump sum can be short-sighted in the long run. By Kathleen Pender. Excerpts: Most financial advisers urge their
clients to take the lump sum. But they're hardly unbiased, since they stand to make
money managing or investing your lump sum. Many also believe they can beat the Treasury
bond return and inflation -- a feat that is easier said than done. [...] Most retirement
experts without a vested interest -- such as those with universities and nonprofits
-- say retirees should take the annuity unless they are rich, terminally ill or have
a huge pension. [...]
A pension annuity can also be an especially good deal if the
company subsidizes early retirement. Some companies let employees retire before normal
retirement age (usually 65) with full benefits or with benefits that are only partially
reduced. This subsidy, however, might not be available if an employee takes a lump sum,
says Tracy Witter, an actuary and principal with Mercer Human Resources Consulting.
New rules being phased in require companies to disclose whether the lump sum is less
valuable than the annuity. If you're not sure, ask.
message board post by Janet Krueger. Full excerpt: Bear in mind
that both the article and your analysis are based on the premise that the annuity
and the lump sum are equal in value. If you are retiring from IBM at any age younger
than 65, this is NOT the case. The annuity includes a substantial early retirement
subsidy. The lump sum does not. Someone retiring at age 50, for example, loses
over 40% of the value by accepting a lump sum. That means that if you manage to
up the return to about 10 percent, you will only have lost over 30% of your lost
annuity payments. NOT a good deal!!!!
The papers you get from IBM will not disclose this difference,
but you can discover it by looking up the value of the annuity yourself...
One premise of the article is correct -- most people retiring
don't have financial skills and are easily blinded by a large lump sum. Then they are
led further astray by talking to so-called financial analysts whose investment advice
is colored by the assumption that they will earn investment fees by managing the lump
The only people truly coming out ahead in this scam are the
CEOs and some of the analysts. Moral: Do your homework and look up the numbers yourself...
- Mercer Human Resource Consulting: Longest-tenured
workers feel slighted by their bosses, organizations. Mercer survey finds many veteran employees think
loyalty is a one-way street. Excerpts: Only 53% of workers on the job 15 years or
more told Mercer they agreed that “employees in my organization are treated with
dignity and respect regardless of their position and background.” In contrast,
75% of the newer workers agreed with the statement. Slightly less than half (49%)
of the longest-tenured workers agree with the statement: “Managers in my organization
demonstrate concern for the well-being of employees.” That compares with 66%
for employees who have been on the job two years or less.
According to Rod Fralicx, PhD, a principal in Mercer’s
St. Louis office, a “satisfaction gap” did not always exist between veteran
staffers and the newer workers. “In the past, employee satisfaction levels would
tend to start strong, drop steadily until about the 10- to 12-year marker, and
then climb until they reached the level of the most recent hires. That’s no longer
the case, and that shift has implications for many organizations.” [...]
According to Dr. Fralicx, companies with unhappy longer-term
employees risk being branded as organizations where loyalty does not matter. “These
employees have paid their dues and now may feel slighted by their boss and by upper
management. And a lot of these people are wondering just how committed the company is
to them, and in return, how committed they still are to the company.” “There
are implications for employers when workers no longer feel respected and may even feel
betrayed,” Dr. Fralicx explains. “Companies need the long-tenured employees
to be ambassadors to the rest of the population. They need them to stay productive,
engaged, and committed to the organization.”
- Christian Science Monitor: Will
retirement be golden for boomers? By David R. Francis. Excerpts: But many boomer retirees may feel poorer compared
with those who are still working. Those retiring nowadays have an income of about 86
percent of their income before retirement. That "median replacement rate" will
drop to 80 percent for late boomers, those born after 1956, the study finds. And 46
percent will have less than three-quarters of their preretirement income, compared
with 42 percent today.
- San Francisco Chronicle: Who
Will Pay for Retirement Benefits Defined-benefit pensions still guarantee security. By Karen Friedman. Excerpts: Is there cause for
panic? The answer is no. The private pension system is indeed facing challenges,
brought on by global economic pressures, demographic shifts and changes in corporate
attitudes toward employee benefits. American workers should certainly not be panicked
about a breakdown of the PBGC, however. The agency ensures that if companies go belly-up
and cannot meet their pension obligations, then it will protect most or all of their
benefits. The PBGC has enough money, even after assuming pension liabilities of recent
bankrupted corporate giants such as United Airlines, to pay benefits for years to
come. Its deficit would only be an immediate problem if the agency were to close
its doors tomorrow and have to pay promised benefits all at once. This is not going
to happen. [...]
The best way to protect both workers' retirement security and
the PBGC is to encourage companies to preserve and establish defined-benefit plans.
While it is fashionable to predict that traditional plans will soon go the way of the
dinosaur, it is in the nation's best interest to buck this trend. Defined-benefit plans
are employer-paid and provide a guaranteed stream of income to employees throughout
their retirement -- so people have reliable assets they cannot outlive. These plans
are the most effective way of providing adequate retirement income to workers of all
But employers are increasingly dropping, freezing and terminating
defined-benefit plans in favor of 401(k) plans. While these do-it-yourself savings plans
are useful tools for accumulating supplemental savings, there is increasing evidence
that, as free-standing retirement plans, they are not producing adequate income for
a majority of workers. According to the Congressional Research Service, the median account
balance for workers between ages 55 and 65 in 401(k)-type plans totals $23,000, and
that amount is not sufficient to supplement yearly Social Security payments -- averaging
$11,500 a year for the typical retiree. Unlike defined-benefit plans, 401(k) plans are
not insured so workers can lose everything in Enron-type situations.
- Computerworld: Labor
group publicizes U.S. job export data online.
Job Tracker 2 offers information
about 60,000 corporations. Excerpts: A labor union offshoot group is bringing hard-to-find
government data to the Internet to highlight companies that are exporting American
jobs, report corporate track records on worker health and safety issues, and publicize
executive salary information. Working America, an affiliate of the AFL-CIO labor
union, last week unveiled Job Tracker 2, an update of its online database of information
about some 60,000 U.S. corporations. “The
whole idea of the project is to pull back the sheets on corporate America and workers’ rights,” said
Robert Fox, deputy director of Washington-based Working America. [...]
When Working America asked for the data, it was provided by
the U.S. Occupational Safety and Health Administration (OSHA) on old data tapes written
in Cobol, meaning a specialist had to be found who could read and transfer the data
into a usable database. “That’s what OSHA calls public access,” Fox
said. “Workers have no chance to get this data. That’s what they call releasing
data.” Some 500,000 records are available for searching on the Web site, which
runs on an Oracle database. Included are listings of OSHA safety and health violation
records, outsourcing data and National Labor Relations Board rulings and information.
The database took months of work to create, he said.
- Computerworld: Seeing
the Light on H-1B Visas. By Gerard A. Alphonse.
Excerpts: To help ensure America's continuing technological leadership and competitiveness,
IEEE-USA has long favored the permanent immigration of skilled foreign-born engineers
and scientists as a much better solution than using temporary H-1B visas. Some in
Congress finally seem to be listening. My career illustrates how permanent immigration
is a far superior way to keep the U.S. competitive than relying on temporary admissions
programs. I was born in Haiti and came to the U.S. for college. Following training
in one of the world's most prestigious research laboratories, I became a permanent
resident and then a naturalized U.S. citizen. Full citizenship contributed greatly
to my ability to reach technical achievements I had never dreamed of and to become
a top leader in the IEEE, the world's largest technical professional society. [...]
The H-1B program, however, is plagued by myth and abuse. One
myth is that the law requires U.S. employers to seek H-1B applicants only when qualified
Americans can't be found. But it wasn't a scarcity of talented Americans that led U.S.
companies to max out the 65,000 H-1B visa cap for fiscal 2006; it was because H-1B workers
have largely become a first option, not a last resort.
U.S. Department of Labor statistics show a decline of 221,000
employed U.S. technical workers in six major computer and engineering job classifications
from 2000 to 2004. Surely many of these skilled workers could qualify for positions
filled by H-1Bs.Many H-1B visas -- including the 20,000 for advanced-degree graduates
of U.S. institutions \ are used by companies that offer lower-cost technical services
by non-U.S. citizens. This leads to wage suppression. The 2003 IEEE-USA salary survey
reflected this with the first decline in median income for U.S. IEEE members in 31 years.
This is not surprising, considering the wages the Labor Department
lets U.S. companies pay H-1B workers. A review of the Labor Condition Application database
for the first quarter of fiscal 2005 reveals that an H-1B electrical engineer makes
$10 an hour, a Web site translator $8 per hour and a secondary school math teacher just
$16,034 a year. The law requires that H-1B employees be paid the prevailing wage for
their occupations, but the implementation of these regulations can be, and is, easily
- WashTech: Cingular
Organizing Drive a Success! By Jeff Nachtigal.
Excerpts: French said he wanted to organize for two reasons: outsourcing and a “general
trend in American management to roll back to where we were several decades ago.” “I
see a real anti-employee attitude on part of American management,” French said
about the current conditions for U.S. workers. It didn’t take long for the workers
to realize they were in a good position to organize without fear of losing their jobs. “It
came from 'hide in the corner and talk behind your hand,' to 'let’s be out in
the open in the lunchroom and talk about this with management.' This was a big change;
employees didn’t realize they really had a choice,” French said, describing
the early effort to educate workers about the union.
“They know what their wages will be, they know they'll
have health care benefits, they know they'll have good vacation and sick leave,
and they know they can't be fired without just cause. And happy employees make
good employees.” [...]
Tollefson said that with the union, there will be three wage
increases a year, an annual cost of living increase of 1.2 percent, and overall improvement
for benefits, including “much more affordable and full health care.” "In
the past policies all came from above, whether they made sense or not, and were implemented.
Now policies need to meet the approval of the workers and management through negotiations,” Tollefson
|Vault Message Board Posts
the Pump" by "Dose of Reality". Excerpts: At the band 6 - 9 levels, there
is no funnel issue, but there are a few things that serve to keep promotions at a
- Development. The rate at which staff develop can be significantly impacted by
the presence or absence of an actively supported skill/career development plan.
We have none. Project assignment decisions are made based strictly on need. The
utilization targets do not allow the luxury of waiting for the right project to
come along. There is no action plan or budget for soft or hard skill gap closure.
Staff are expected to self-teach, and in many cases their superiors are only concerned
about project needs, and don't have the mentoring skills or any interest in development
for development sake
- Motivation. The pace at which staff are able to develop, is strongly correlated
to the amount of effort that they put into project work, practice development,
and self-improvement. If there are no tangible, credible rewards, effort will
be mediocre. The possibility of a promotion in three years is not sufficient
motivation to elicit extraordinary effort. It takes a combination of short and
long term rewards to really charge someone up. After one or two pay cycles of
seeing leeches and coasters getting the same evaluation, raise and bonus as you
do, any initial interest in excelling just disappears
- Vesting. We don’t want anyone to be here long enough to vest. The whole
system is set up to chew you up and spit you out in 3 – 4 years. As a result,
the thresholds for promotion are set too high. We don’t want to grow superstars – we
prefer to hire them externally.
- Specialization. We ride whatever wave we see until it crests and crashes. We
staff up with the skills du jour, exploit them as long as we can, and discard
them when they are no longer relevant. It is planned obsolescence. We provide
very few opportunities for staff to broaden their skill sets.
- Commodity Focus. In order for someone to move up from band 8, you need to have
sales skills. It is really hard to develop them, when all of your project work
is limited to mundane service delivery. In order to sell, you need to be able
to translate a client business problem into a marketable value proposition. It
is like trying to convert an automobile assembly line production worker into a
district salesman. Customers aren’t going to want to hear about the quality
metrics on chassis assembly – they want to know how well the car is going
to perform for them.
There is no reason why we should have to continue to hire so many band 7 - 9 from the outside.
There are lots of potentially qualified candidates on the inside.
We just don't do anything to help them succeed.
Offshore Option" by "Dose of reality". Full excerpt:
I hear that the yet-to-be-hired lead partner has already been blamed for the
weakness in the pipeline and was written up for it. In response, he said "But
I haven't been hired yet". HR then put an addendum in his file - "Not
a team player", "Resists authority". "On notice" Rumor
has it that they are going to replace his position with 10 H1 Visa holders
from India, supported by an offshore team of 100 telemarketers. The hiring
manager said "It's pretty much a wash on a cost basis, and at least we
know exactly what we are getting with the Indians".
Telemarketing scripts have been leaked out:
TM: “Hello my name is Sanjeev Singh, may I have your
name and ID number please?”
Target: “I’m sorry – who is it you wish to speak with?”
TM: “I have an emerging market that I wish to sell to
you. Can I please tell you about it?”
Target: “I don’t know what you are talking about”
TM: “OK sir, I would be happy to help you with that.
May I put you on hold for a minute?”
TM: “Do you mind if I take control of your PC for a
minute? Now go to start, run…..”
Target: “Who do you work for?”
TM: “I work for IBM”
Target: “Oh – that explains everything!” (click)
TM: …Note to self: Very promising lead…follow-up
with Target in one week…Rude Americans!!
- "Recommendation" by "Dose of reality". Excerpts:
At IBM, Operations and Strategy really is a misnomer for the kind of work that
we do. The mission of BCS in general is to infiltrate clients with "meat and
work, implement packaged technical solutions, and steer clients toward IBM
outsourcing services, where all the big money is made. There is little in the
way of clinical management consulting or professional integrity. Thought leadership
is nonexistent, and most of the consultants morph into technical resources.
Most of the industry and process/solutions capabilities that were acquired from
PwC have long since walked out the door due to the IBM HR and compensation policies.
Highlights of these policies include:
- Across the board salary cuts two years running
- Raises in the 0 – 3% range with most closer to 0
- Bonuses TARGETS at 10 – 15%, but never paid out since they are contingent
on practices meeting their overall profit targets which are always inflated
well beyond what is realistically achievable. But somehow, the front office
always gets their bonuses, since they always sandbag their targets
- Promotions are rare, and the thresholds are set artificially high so as to
keep staff running on a treadmill in futile hopes of getting one. Then again,
there is no material bump in salary with a change in title
- Utilization targets (the % of your working capacity that you are expected
to be chargeable to a client) are set so high so as to leave no time for you
to be trained, take vacation, do practice development, administrative tasks
- A philosophy of putting you on any project where we may need you, regardless
of career fit or geographic location
- Restrictive travel policies that mean you may have long layovers, multiple
connections and cheap hotels.
- A bureaucracy that would put the government to shame.
- Oversold projects that put undue stress on staff. Many project managers that
can do nothing more than blame staff for failure.
get clear on the bands" by "wonderaboutibm". Full excerpt:
Hey folks, wake up and smell the coffee. The IBM bands are VERY wide in salary range
and VERY MUCH overlap. (A few years ago the range for b9 was something like 50K to
150K.) Many b6s will make more than many b7s. However, remember that IBM basically
uses the Hays salary admin concept of keeping everybody at or below the band salary
midpoint. So from the salary raise perspective, whatever pathetic raise is given will
go to the b7 under the b7 midpoint rather than to the b6 over b6 midpoint, even if
the b7 were to make more in the first place. If the b6 and b7 have the same salary,
better to be a b7.
This salary admin is also the reason for salary compression.
Those that get raises are below the midpoint and the raise pushes them to the
midpoint. Those at the midpoint get no raise, UNLESS they get the walk-on-water "1" rating,
in which case their raise pushes them that much more over the midpoint and
therefore no future raises unless they continue to walk on water. (Normally that does
not happen.) So you can get a "promotion" (by definition a band jump) and
still not much of any reward for it. What a system.
on the Alliance@IBM Site:
- Alliance@IBM: Attention IBM employees:
IBM is blocking e-mail to and from the Alliance@IBM e-mail address firstname.lastname@example.org 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.
- On Monday, November 21, the City Council in Burlington, Vermont
passed an outsourcing ordinance with a unanimous vote of the 11 City Councilors
in attendance. The stated policy of the ordinance reads "It is the policy
of the City of Burlington to let service contracts to contractors, subcontractors
and vendors who perform work in the United States". The City has taken
a significant move to support working people by acknowledging that public funds
should not be used to pay for public services that will be performed by workers
outside the country unless no alternative is available. The ordinance is the
end result of a concerted effort on the part of Vermont Alliance@IBM activists,
the Champlain Valley Central Labor Council, the Vermont State AFL-CIO and City
Councilor Philip Fiermonte, who works as a key aid to Congressman Bernie Sanders.
- From the Visitor's
comment page and the Job
Cuts Status & Comments page.
- Comment 11/19/05: Those planning to retire at the end of the year need
to redo their Netbenefits retirement calculations. The interest rate used
for retiring after November 2005 are the rates for 2006. In my case it
reduced some of the payoff amounts. Most highly impacted was the combination "Lump
Sum + Annuity". The lump sum went up about 8 percent, but the annuity
portion dropped over 30 percent. The other standard payments increased
for the initial payment amounts, but decreased for the beneficiaries or
the payment after income averaging versus the same numbers for retiring
at the end of November. These changes were much less, but did exist. Remember,
that you cannot retire in November, after December has arrived. *** I had
received the so called "official package" from the IBM HR - Retirement
Group and only found out when I ran the calculations myself the week of
11/18. It was a shocker, but nobody seemed to give a hoot, until I told
them because of the changes in calculated values, I was retiring the end
of November. -Anonymous-
- Comment 11/20/05: Bands have no meaning in IBM. I have
seen people joining IBM at band 8 were lowered to band 7 after 8 years
of IBM experience! This really sucks as now they are at the top of their
band and get NO pay increases. Another reason for management to keep any
pay hikes away. This is an easy way to alienate hard working sincere employees.
And guess, what it does to the employee morale. Any one seen or heard this
- Comment 11/21/05: I’ve, now, been laid off under
EACH of the three Bush administrations! The third of which has been by
The first time was by Martin Marietta, in Denver, CO, in
1991, right before Desert Storm, due to outsourcing to Arthur Anderson, who, in
turn, sent the systems to the Philippines – and, by the way, Ronald Reagan,
towards the end of his presidency, walked within yards of my desk, while we I/T
personnel hammered the nails into our coffin by building the bridges to Arthur
Anderson’s software. What he saw that day were two large, open, rooms devoid
of cubicles with row after row of khaki green chairs and military style desks with
mice and cords running around the room!
The second time I was laid off was by a software development
company doing prescription claims processing, here in Kansas City, in 2002. They
put in management who had been mainframe people working on those systems, and told
them they wouldn’t have to learn any of this new Java/Web development, as
contractors would be hired – that left someone like me, with many years of
mainframe experience, and taking classes, at night, in web development – with
straight A’s! – totally, out in the cold, because I didn’t have
the years and years of experience with those particular systems to have developed
an understanding of the business!
I was rebadged from Sprint to IBM a year ago, and told
that eight hundred positions - not applications - but positions would be going
overseas within a year's time. Well, the year is over, and I was part of the start
of layoffs in Sept., but I got a short reprieve by being sent to their AT&T
account in a very large building, complete with a large cafeteria and four-story
car garage - that is now almost devoid of people! (I was told that the last of
the software developers had been laid off last spring.) I am now laid off at the
first of this month, because IBM didn't have any positions listed for my city,
and I would have had to move for a short-term contract elsewhere (I have mostly
mainframe and a couple years of Java/Web development), but I'm like so many Americans
where I have a house and an employed spouse. IBM had me look at "remote" possibilities
and I wouldn’t travel over 25%, but most of their positions require 100%
travel and I found myself competing with people all across the U.S. I would always
get back the "canned" response which was, "You do not have the qualifications" -
even if I had had up to two interviews with the people! Now, I’m able to
spend more time looking to the outside for jobs, but at forty-nine, I’m feeling
a tremendous amount of built up age discrimination, and a lack of work experience
with certain computer skills, but, financially, I have to keep looking for either
a business analysis, mainframe or Junior Java position. -Anonymous-
- Comment 11/22/05: I used to work for IBM. Left way back
at the end of 92. No, I didn't take a buy out. I had been working for IBM
since 84 and had seen how the company was beginning to change. So I had
a little heart to heart with myself to decide what I wanted out of life.
Working for a big corporation was not high on my list, although it had
been at one time. So, I started to look into different fields. Realizing
I was a geek at heart I starting looking at academia. Found a much lower
paying job held my nose and took it. That was about thirteen years ago.
Now after reading how low IBM has sunk I'm glad I made the change. I do
look back on some of the glory days at IBM with fond memories, but I knew
it was time for me to go. Guess the moral of my story is to follow your
heart and gut.Sure you may have to take a cut in pay and bennies, but you
will be happy. No money can buy that, so they say. -Anonymous-
- Comment 11/25/05: I'm one of the many Canadian IBM employees
laid off in June, excuse me, forcibly retired from IGS (AMS). I don't
know how many others were let go although there appeared to be many and
I do know it was a mix of layoffs and forced retirement. I also know that
a few more were let go in July. I'm still actively looking for work because
I can't afford to and I'm too young to retire. In October, another Canadian
division sent out a note to employees requesting them to 'lure in' new
employees. Seems like the right hand doesn't know what the left hand is
doing or else I was let go to meet an exec's reduced head count target.
Too many jobs are going offshore. At some point in the future, these third-world
employees are going to smarten up and ask for more money ... I wonder how
IBM and so many other companies are going to cut costs then. -Anonymous-