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    Highlights—January 21, 2006

  • MSN Money: CEOs cut pensions, pad their own advertisement. Some executives who slash workers' pensions are keeping or even padding their own fat retirement packages. And some even reap bigger bonuses as pension cuts boost profits. By Michael Brush. Excerpts: When International Business Machines froze its pension plan in early January, thousands of its employees suddenly felt a lot less certain about their retirement security. Samuel Palmisano, IBM chief executive, has no such worries. Palmisano, according to IBM's regulatory filings, will receive an annual pension of $4 million when he retires at age 65. That works out to $75,000 a week -- or more than $10,000 a day, including weekends. [...]
    In IBM's case, executives will reap the rewards of fat pensions that remain fat even as the company changes its rules. In others, high-ranking managers are given extra pension credit for time served. Some CEOs at company's scaling back benefits are guaranteed multimillion-dollar payouts when they leave their companies, even if it's as a result of being laid off.
    And there's another benefit to top executives: By cutting pensions, they make their companies more profitable, thus boosting their own bonuses. “It is unseemly for executives to reap higher bonuses on that basis,” says Eleanor Bloxham of the Value Alliance and Corporate Governance Alliance, a Westerville, Ohio-based outfit that advises boards and companies on corporate governance issues.
  • MSN Money: While pensions fall short, CEOs fly high. By Michael Brush. Excerpts: At companies across the country, workers are watching their pensions dwindle. At UAL’s United Airlines, workers stand to lose more than $3 billion in promised benefits as the airline passes its pension obligations on to the government. [...] In the executive suites of these companies, however, there's no pain to be found. United Airlines chief executive Glenn Tilton collected $3.4 million in compensation in the year leading up to the airline’s 2002 bankruptcy. He received another $4.5 million of his pre-bankruptcy pay package in 2003-2005. [...]
    It's no secret that corporate bigwigs have paid themselves handsomely while stiffing their workers and sending jobs overseas. It's particularly galling, though, to see these same executives locking in their own lifetime of luxury while rolling the dice with their workers' retirement years. [...]
    The excesses don’t stop with the sweet pay packages. Indeed, while rank-and-file workers wonder if the red ink in their retirement plans may mean they’ll spend their final years in the poor house, their well-heeled execs are taking steps to assure they won’t. [...] IBM has a $7.38 billion hole in its retirement plan. Yet IBM chairman and chief executive Samuel Palmisano has a $4.1 million annual pension, calculates the Corporate Library.
  • The Register (United Kingdom): IBM plans executive sweetener. By Mark Ballard. Excerpts: IBM is planning to upgrade executive remuneration packages to compensate for freezing their pensions. Details of executive pension arrangements are still being worked out, said a Big Blue spokesman. One idea being discussed was a supplemental programme. [...]
    According to a source, IBM executives are being told that a non-tax qualified excess plan would be used to ensure they could still base their pension contributions on their whole income. An IBM spokesman said this plan did not imply that, under the new pension arrangement as it currently exists, executives would be under-compensated or able to put less of their incomes, proportionally, into their pensions than less well paid staff.
    Expressed as the sort of conundrum that is often necessary in order to have a conversation with a PR representative, IBM also denied the plan implied that executives' current arrangement had an absence of the supplemental arrangement they are now considering. "No, it just means you are looking at the situation. It doesn't mean one thing or the other," he said.
    In another twist of language, IBM is keen to point out that "80 per cent of employees would have an economic neutral effect" from the replacement of their company pension with the 401(K) scheme in two years time. At face value, that says everyone is as well-off under a 401(k) as they would be under a company pension scheme. So what's all the fuss about? What IBM actually means is that it will be making the same contributions to the 401(K) scheme as to company pension arrangements for most employees. What IBM does not mean is that employees will have an "economic neutral effect" at retirement. That's the whole point of the scheme.
  • MSN Money: Can a 401(k) make up for a lost pension? IBM, like many corporations, is euthanizing traditional pensions. Here's how one worker can use IBM's exceptional 401(k) plan to make up the difference -- though at a high price. By Timothy Middleton. Excerpts: IBM jolted its employees two weeks ago when it announced it was extinguishing its traditional pension in favor of a 401(k) plan. It said it would save as much as $3 billion over five years, and employees suspect those dollars are coming directly out of their hide. [...]
    “I will lose $900 a month” because of the switch, says Linda Guyer, an IBM project manager in Endicott, N.Y. “IBM is shifting responsibility for retirement from themselves to the employees.” While traditional pensions remain the norm in the public sector, in private enterprise they are disappearing. Whether that is good or bad is debatable. Guyer is spot-on, though, when she notes that the risk of saving for retirement has been shifted to employees, at IBM and elsewhere. [...]
    Filling the pension gap. Guyer is president of Alliance@IBM, a pro-union group seeking to organize IBM's work force. Her income forecast is based on IBM freezing pension benefits at 2008 levels, whereas she is 15 years from retirement. The shortfall does not include 401(k) benefits. If she were to join the plan today, and invest in the equivalent of what I described several months ago as the “perfect portfolio of funds,” I think she can triple her missing $900 with income from the 401(k). It will, though, mean reducing her take-home pay by more than $10,000 a year (based on assumptions I'll describe at the end of this column).
  • On the Yahoo! IBM Retiree board, Janet Krueger responds to the following question: Q: Does anyone know from a legal standpoint, (as the laws now stand) what IBM can and can not do those who are ALREADY receiving pensions. Specifically, can they "cash out" our pension?
    Ms. Krueger replies (full excerpt): Under current federal ERISA (Employee Retirement Income Security Act) law, IBM only has two options with people who are already receiving pensions; they can continue paying them each month out of the pension trust fund, or they can purchase an annuity with money from the pension trust fund for the retiree from a bank or an insurance company.
    The only way the person's pension can legally be reduced under current law is if the PBGC (Pension Benefit Guarantee Corporation) decides the company is in danger of going bankrupt and takes over management of the pension trust fund -- at that point, the PBGC has the authority to completely eliminate all early retirement subsidies.
    Please note that I can only speak to current law, and that there is a 'pension reform' bill in the works in Congress that could do very nasty things if Congress thinks normal retirees are not watching and paying attention...
    There are rumors that some of the corporate lobbyists are asking for companies to be given the authority to make the same reductions the PBGC can do -- the theory is this would reduce the number of underfunded plans the PBGC ends up taking over. There is already such a clause in the house bill for multi-employer plans that are underfunded. All the conference committee would need to do to meet the lobbyists' request is keep the clause and take out the qualifications.
    There are also rumors that some of the corporate lobbyists are suggesting companies should be able to 'cash out' existing payment streams -- again, it would take very little effort for the conference committee to add this option; they already have sections to work with that adjust how lump sum payment options work and when they are allowed.
    Together, the house and senate bills include over 800 pages of fine print. Under today's Congressional rules, the conference committee has the option of adding brand new content and completely changing what is there. One thing I can say for certain is that the corporate lobbyists are camped out on the doorsteps of every representative and senator who might be appointed to the conference committee, and much of what they are asking for is NOT for our benefit!!!
    The simple message you need to send to your representative and senators is that you rely on the pension that was promised to you by your employer, you understand that pension is currently protected by federal law, and you will be extremely upset if Congress does anything to allow or encourage your employer to break that promise. The Pension Reform Act of 2005, if passed, needs to strengthen employee protections, not weaken them...
    You don't need to send a detailed critique of the current legislation; what comes out of the conference committee is likely to be much different. A short emotional letter letting them know you are a retiree and you are watching will help. Similar notes from your friends, neighbors, and family will help even more.
  • Wall Street Journal: Legislation Weakens Pension Protections. Bill Designed to Bolster Underfunded Plans Creates New Ways for Employers to Cut Benefits. By Theo Francis and Ellen E. Schultz. Excerpts: Pending federal legislation aimed at pushing companies to shore up underfunded pension plans also eliminates some longstanding retirement protections and gives employers new powers to reduce some workers' pensions. [...] But several little-noticed provisions appear to let employers bolster their pension plans at the expense of employees. For example, measures in both the House and Senate versions would force employers whose plans become underfunded to freeze pensions and, in the House version, even revoke benefits in some situations. Other measures would allow employers to significantly reduce the size of pensions they pay to many departing and retiring workers. Companies also would gain greater ability to transfer more money from pension funds to pay for other retiree benefits. [...]
    Among the most significant legal changes in the proposed legislation are rules in the House version that would allow poorly funded plans to take away certain pension benefits that older employees have already earned. This would reduce the plan's payment obligations, and thus render it better funded. Specifically, such plans could eliminate early-retirement incentives, a core feature of many pensions that provides a subsidy to people who retire between 55 and 65, and can boost the total pension payout by 20% or more. The change would apply to so-called multiemployer plans, which are generally plans for workers at different companies represented by the same union and cover about 25% of the private work force with pension plans.
    The change, if adopted, would reverse a key protection under federal pension law, which forbids employers from rescinding a benefit that has already been earned. But pension advocates worry that modifying a core protection in the law would establish a dangerous precedent that would soon be extended to the majority of pensions, so-called single-employer plans.
  • Washington Post: Fake Retirement Security. Among Congress's many bits of unfinished business is corporate pension reform. Both the House and the Senate have passed bad bills that the White House has threatened to veto; the chance to do better will come next month, when the bills go to conference. Unfortunately, the omens are not promising. Lobbies are pressing Congress to stick with its bad legislation, and the news from corporate America is likely to be twisted to suit the lobbyists' ends.
    The corporate news is depressing. A procession of blue-chip companies is walking away from traditional defined-benefit promises, the sort that guarantee a fixed proportion of salary upon retirement. Companies such as IBM Corp. and Verizon Communications Inc. have stopped allowing new pension claims to accrue under these plans, while others, such as Alcoa Inc., are barring new hires from participating in them. From the companies' viewpoint, switching to defined-contribution 401(k) plans cuts risk: Companies just have to pay in a fixed and knowable sum each year; they don't have to worry about how long retirees will collect pensions or whether their investments will grow fast enough to pay for their promises. But reduced risk for the company means increased risk for the employee. Companies are better placed to shoulder risk than individuals, so the switch away from traditional defined-benefit plans is a loss to society. [...]
    So although it's true that companies are dropping defined-benefit plans, and that even more may do so if they are told they can no longer fudge the numbers, this is not a reason to allow the fudging to continue. It makes no sense to extol the reliability of traditional pensions at one moment, then to propose legislation that makes them unreliable in the next. Yet that is what a recent letter circulated by a group of lobbyists styling themselves the Pension Coalition does: It complains that the administration's sensible push for pension rules that reduce the funding shortfall would "leave fewer Americans with the retirement security of a defined benefit plan." But how much retirement security is there in an underfunded plan? If workers are going to face risk, they might as well have 401(k) accounts. A t least these make no pretense of guaranteeing income in retirement.
  • Yahoo! message board post by Janet Krueger. Full excerpt: ...Contact your representative and senators in Washington -- it is not too late, yet, to ask them to strengthen ERISA protections instead of weakening them... Specific things I would ask for are:
    • Early retirement subsidies, once vested, and especially once being collected, need to be fully protected.
    • Plans that are underfunded need to be fixed by forcing companies to increase their contributions to those plans, NOT by forcing them to cut benefits to current and future retirees.
    • Do not reduce the size of a lump sum distribution that can be offered in place of a promised annuity and make sure the promised annuity stays an option.
    • Strengthen plan termination rules so that excess funds have to be used for the sole benefit of plan participants and cannot be returned to the company or to the corporate executives.
    Conclude by stating how happy you are that neither the house or the senate bill retroactively legalizes cash balance conversions. Remind them that you would be upset if you lost a large share of the Cooper settlement because Congress retroactively legalized what IBM did and tell them if they must legalize cash balance conversions, they should include all of the protections for older employees that are in the senate bill. Thanks for writing and calling -- it helps!!!
  • Yahoo! message board post by Janet Krueger. Excerpt: I've said for several years now that both the pre-FHA (Future Health Account) retirees are being gypped out of just as much as the FHA ones. The only difference is that the FHA crowd had quite a bit more warning that retiree medical benefits were going to be substantially cut; those who retired before 1993 never had medical payments deducted from their paychecks and had no reason to believe they would end up paying IBM a check for their medical insurance because their medical insurance now exceeds their pension checks... )-;
    One thing that should not come as a surprise, now, to either group is that since there is no federal obligation for companies to pay retirees any medical benefits at all, IBM will eventually eliminate them entirely. The FHA accounts never vest, and IBM will only stay in the retiree medical business for as long as they can keep it as a profit center!
    This is another instance where there is nothing to be gained by waging a 'who has IBM cheated the most?' campaign... None of us can count on IBM to provide promised health care benefits, so the sooner we move to a workable version of universal health care, the better off we'll be... See www.uhcan.org for more information on what could be done besides crying on each other's shoulders!
  • Yahoo! message board post by "west_coast_retired_guy". Excerpt: I agree with Janet that on average the prior medical plan is about the same as the FHA for those retiring at 65. The primary difference is that IBM took much of the "insurance" aspect out of it. I mean by this that for someone who lives longer than average, the FHA runs out whereas the old plan continues to contribute $3000/$3500 per year to medical costs, assuming they don't kill it at some point. Where the FHA really hurts relative to the old plan is for those retiring significant prior to 65. The old plan contributed $7000/ $7500 year whereas with the FHA one can go through the balance rapidly and could potentially end up with a zero balance prior to 65.
    As to the "really old" plan which I and other "old timers" had expected to have (I retired in 1991), there was no cost to retirees, no coordinated benefits with medicare or any other plan, and the co- pays, deductibles, etc. were very small. Us older retirees really took a big hit with no warning to plan for it during our careers. I was personally lucky in getting a really good job with another company after leaving but many didn't have the right skill set to do so and are now suffering badly.
  • Times Herald-Record (Hudson Valley, NY): Smaller firms joining pension plan freeze. Excerpts: Experts say the recent freezing of pension plans by corporate giants IBM and Verizon has set the path that many companies will now take - where current employees accrue no more benefits, future employees get none, and companies instead make more generous contributions to 401(k) accounts. "If IBM and Verizon can do it, everybody is going to say, 'Why not me?'" said Karen Ferguson, director of the Pension Rights Center in Washington, which advocates for workers' pension rights. "The implications for everybody else are amazing. It's going to be a race to the bottom if it doesn't stop."
  • Yahoo! message board post: Watch out for the next take-away. It just happened in IBM Canada. By "peveeh". Full excerpt: In IBM Canada, we were mostly moved to the DC plan a number of years ago. This year, they took away post retirement medical (basic, supplemental, vision, dental, catastrophic ....) benefits (after 65 yrs old) if you are not eligible to retire prior to 12/31/2007.
    Holy Crap!! that represents a huge cost for me. I am in my 27th year, so will miss this "window" by about 18 months. I asked them "What have they done with all the $$ that was part of my "total compensation" for the past 27 years? Can I have that please so that I can take care of myself in retirement?" They declined to answer me. I feel that they owe it to me. Every year they have told me that it is part of my "total compensation" .... now they keep all they have put away in the past for this .... and are not upping my salary to cover this shortfall in my remaining years.
    I must have a legal standing here. Any opinions?? And if you are in the other IBM countries ... watch out, this bombshell is likely just around the corner for you. My own calculation of this is that they have "stolen" approx $200K from me (at least)
  • New York Times: The Pension Deep Freeze. Excerpts: In the past, the public dialogue about Corporate America's move away from traditional pensions for retirees centered on struggling industries - steel, airlines - that had dumped their pension obligations on the federal government. But the announcement last week that the financially healthy technology giant I.B.M. will freeze its pension system reiterates the message businesses are increasingly sending their employees: you're on your own. [...]
    A safe retirement based on a 401(k) account requires decades of discipline, something many people don't have. A recent study by Hewitt Associates, the employee benefits research firm, found that 45 percent of workers cashed out their 401(k)'s when leaving a company, instead of leaving the money in the plan or rolling it over into a new one. And some workers cannot or do not participate in the retirement plans available to them.
    As a society, we have proved unwilling to deal in any comprehensive way with the looming retirement crisis that is likely to occur in the years when the baby boom generation leaves the workplace. The deal between workers and businesses is breaking down, and there is nothing to take its place. It is incumbent on our elected leaders, along with business and labor leaders, to confront this issue now. Poor investment decisions or a market downturn as an employee is entering retirement and needs to draw on the funds can be the difference between a secure retirement and an old age spent in poverty.
  • Yahoo! finance board post: "IBM Will Underperform Because" by "dottieovertherainbow". Excerpts: A majority of the employees are so pissed off at management that they could care less where the company or its products and services end up. Employees at this company are made to feel completely worthless and are constantly told that there contribution means nothing. The following statement reflects the sentiment of the overwhelming majority of IBM's employees in North America and Europe (including middle management). "In 15 years I have learned a lot at IBM:
    • I am expendable, more so because I cost more
    • As long as I can justify my time, it does not matter if I am really productive
    • I do not have to work long hours anymore because it gets me nowhere and is unappreciated
    • Talented creative people are smashed to bits and undervalued unless what they create is directly tied to $$$.
    • IBM is good at hiring "yes" men (and women) and rewards those attributes.
    • Top performers are routinely moved or resource-actioned and replaced with multiple requisitions (or not replaced) at lower cost.
    • Quality is sacrificed for $$$
    Senior management has simply pissed off every employee. Not a good situation if you expect good results. Just wait until new products start missing announcement deadlines and customer complaints increase because service techs stop showing up.
  • The Forward: Chile Future. Excerpts: Bachelet’s problem is going to be our problem because Chile pioneered the changeover that’s all the rage these days among economists, business leaders and Republican wonks in our country: the switch from traditional pension funds, which pay a defined monthly benefit, to individual investment accounts that reward your market savvy. Chile was actually the first nation in the hemisphere to enact a national pension on the old model, back in 1925. It adopted the new system in 1981, during the conservative dictatorship of General Augusto Pinochet, who was deeply influenced by the free-market theories of Milton Friedman. Chilean leaders have been touting its success for years. President Bush and his advisers reportedly look to Chile as the model of an efficiently privatized pension system they’d like to build here.
    Except that it doesn’t work. During the past few years, as workers who joined the system have moved toward retirement, reports have been pouring out of Chile that show a pension system in meltdown. The crisis was one of the main issues in this month’s presidential campaign. Even Bachelet’s conservative opponent, Sebastián Piñera — the younger brother of the man who designed the system — admitted that it’s in crisis. Fixing it will be the number one item on Bachelet’s agenda.
    It won’t be easy. It turns out that fewer than half the participants in the system have made enough payments over the years to qualify for a monthly check. Those who are collecting checks find they’re getting barely 60% of the income received by the lucky few who held onto their old-fashioned pensions. The size of the benefit depends, of course, on smart (or lucky) investing over the years, but there is a guaranteed monthly minimum — equal to about one-third of the minimum wage. Things are so bad that the government’s last-resort pension fund, which it set up to help the most unfortunate retirees — but never thought to fund adequately — is now eating up nearly a quarter of the national budget. Just about the only winner in this sorry mess is the business community. Under the current system, Chilean businesses are relieved of their former responsibility to pay a share of their employees’ retirement. The difference goes into their pockets. Not surprisingly, they’ve been making out like bandits. [...]
    Companies say they can no longer afford to be responsible for the retirees’ plight if they hope to compete in today’s economy and maintain their stock prices. Not coincidentally, Forbes magazine reported last September that the number of billionaires in America had risen in 2005 to 346, up from 228 three years earlier (and just 79 back in 1996, “before the stock market really took off”). Forbes estimated the combined net worth of the nation’s 400 wealthiest individuals last year at $1.3 trillion. That’s equivalent to about one-eighth of the national debt. What happens to retirees when their companies bail out on them? Some find themselves suddenly reduced to penury, their incomes suddenly cut in half or worse. Some give up dreams of retiring and keep working into their 70s. As for those employees who are still on the job, not to worry: Most are being switched into individual investment plans such as the 401(k), which the wise men in Washington hail as the model of individual responsibility in an “ownership society.” Yes, that would be the Chilean plan.
  • New York Teacher: Changing paradigm for pensions. Excerpts: In the past year, right-wing think tanks have published many justifications for slashing costs by replacing "defined benefit" pension systems for educators with private savings plans that would have little or no employer contributions. In New York , the calls for drastic change have come even as administrators of the pension plans for public school employees say the plans are in excellent financial shape. Pension experts and union leaders believe much of the debate about New York teacher and SRP pensions is simply rhetoric fueled by private-account proponents looking to eliminate pensions as part of a larger political agenda. [...]
    Breaking a promise In 1974, Congress enacted the Employee Retirement Income Security Act to ensure that employers adequately funded and ethically administered their pension plans. In private industry, ethically administered pension plans have become more the exception than the rule. In recent years, several multi-billion-dollar corporations have scrapped pension systems or filed bankruptcy to avoid paying them, refusing to meet obligations to retired and active workers. [...]
    Early this month, IBM announced it would freeze pension benefits for its American employees starting in 2008 and offer them only a 401(k) retirement plan in the future. This move would affect 117,000 employees. Other companies have used ERISA loopholes to underfund pension plans, file for bankruptcy, dump pension obligations on PBGC and emerge from bankruptcy in better financial shape. Meanwhile, because of limits on PBGC payouts, some workers receive less than half of what had been promised. Why is this happening now? Many pension plans performed well with very little funding in the 1990s, while the stock market climbed to record levels. But the market has cooled, baby boomers are retiring and many companies simply are refusing to shoulder the cost of honoring their pension commitments. [...]
    Advocates of a so-called 'ownership society' in America have attempted to place a positive spin on the difficulties of many traditional defined-benefit pension systems in order to promote private 401(k) and 403(b) plans. These defined-contribution plans are controlled by the individual, who can invest in stocks, bonds, annuities and other investments, perhaps with a percentage matched by employers. Supporters claim the money is safer because it is inheritable and can't be touched by the government. But according to a report by Time magazine, these plans are troubling as replacements for traditional pensions.
    In October, Time reported that half of the active 401(k) accounts in America have less than $17,900 — one in four has less than $5,000. Unlike pensions, 401(k) and 403(b) plans provide no guarantees that you won't spend your retirement in poverty. In addition, the stock market can be volatile. Many workers — public and private — had their retirements put on hold as a result of the bear market that followed 9/11 and the collapse of the dot.com bubble.
  • Vault: IBM Workplace Surveys are detailed accounts of jobs and careers at IBM, including, but not limited to corporate culture, diversity, hours, dress code, and opportunities for advancement. Note: You must subscribe to Vault to read the IBM survey. You may read only the first few words of contributor's comments without subscribing.
  • New York Times: First, Do More Harm. By Paul Krugman. Excerpts: It's widely expected that President Bush will talk a lot about health care in his State of the Union address. He probably won't boast about his prescription drug plan, whose debut has been a Katrina-like saga of confusion and incompetence. But he probably will tout proposals for so-called "consumer driven" health care. So it's important to realize that the administration's idea of health care reform is to take what's wrong with our system and make it worse. Consider the harrowing series of articles The New York Times printed last week about the rising tide of diabetes. [...]
    Critics of health savings accounts have mostly focused on two features of the accounts Mr. Bush won't mention. First, such accounts mainly benefit people with high incomes. Second, they encourage wealthy corporate employees to opt out of company health plans, further undermining the already fraying system of employment-based health insurance. But the case of diabetes and other evidence suggest that a third problem with health savings accounts may be even more important: in practice, people who are forced to pay for medical care out of pocket don't have the ability to make good decisions about what care to purchase. "Consumer driven" is a nice slogan, but it turns out that buying health care isn't at all like buying clothing. The bottom line is that what the Bush administration calls reform is actually the opposite. Driven by an ideology at odds with reality, the administration wants to accentuate, not fix, what's wrong with America's health care system. If link is broken, view Adobe Acrobat version [PDF--29 KB].
  • Washington Post: With Health Care, First Fix Terms of Engagement. By Steven Pearlstein. Excerpts: The White House line that we need to get government out of the health care business, or that we'd have better, cheaper health care from an unregulated market, is not only nonsense. It is also the kind of ideologically charged rhetoric that will immediately ensure that Democrats oppose anything that follows it. Government -- in the form of Medicare, Medicaid and insurance coverage for employees and veterans -- already pays half of the nation's health bill. Those are among the most popular government programs, cherished by Republicans and Democrats alike. So to think government won't be heavily involved in health care is an economic and political fantasy. [...]
    So, please, let's dispense with the free market, personal choice rhetoric. Economically, its inappropriate. Politically, its just stupid. It didn't work with Social Security and -- trust me on this one -- it really won't work with health care.
  • The Register (United Kingdom): Union woos IBM with love hearts. Militants spread love not spittle. By Mark Ballard. Full excerpt: Union organisers have asked IBM employees to mock the firm with love letters in retaliation for its recent decision to freeze their pensions. That is about as much as the union, the Communication Workers of America, can do in their defence. With just a handful of members and a mere 6,000 loosely affiliated supporters among roughly 125,000 IBM employees, it lacks the mandate to win a compromise like the one exacted at Verizon. Nevertheless, the union is doing what it can, the latest wheeze being equivalent to a surrealist guerilla campaign: bemuse the enemy into giving concessions. In an email to IBM employees, the CWA urged IBMers to print out and post a rather cheaply designed love heart to IBM CEO Sam Palmisano and human resources vice-president J. Randall MacDonald.
    The idea, says Linda Guyer, president of the CWA branch Alliance@IBM and a Big Blue manager, is that, as IBM is heartless enough to deny its dedicated employees decent pensions, people should donate paper hearts - "like in the Wizard of Oz," she said. A harmless, indeed heart-warming campaign, it is a far cry from the hateful confrontations of the 1970s. But what kind of effect does gentle mockery have on the sort of leather-skinned executives who run corporate America? MacDonald, according to Guyer, went on a tour of IBM offices last week to give the good news about the revised pension arrangements to employees. Executives, old plebs and new plebs where told in separate meetings. He had bodyguards with him.
  • Workforce Management: 2 Faces of AARP. AARP has banished "retired" from its name, going simply by its former acronym. It is perhaps best known as the political behemoth that stopped private Social Security accounts cold. And it has increasing clout on workplace issues. By Mark Schoeff Jr. Excerpt: AARP’s ultimate goal, says Lynn Dudley, vice president of the American Benefits Council, which represents about 250 large companies, is to inculcate an entitlement mentality in which people demand all the benefits they are expecting from age 50 until retirement, even if they haven’t earned them yet. "AARP’s interest is in vesting the expectations of the older worker," she says. "If you go down the road of vesting people’s expectations, it’s hard to know where to stop."
  • New York Times: The K Street Prescription. By Paul Krugman. Excerpts: Consider the career trajectories of the two men who played the most important role in putting together the Medicare legislation. Thomas Scully was a hospital industry lobbyist before President Bush appointed him to run Medicare. In that job, Mr. Scully famously threatened to fire his chief actuary if he told Congress the truth about cost projections for the Medicare drug program.
    Mr. Scully had good reasons not to let anything stand in the way of the drug bill. He had received a special ethics waiver from his superiors allowing him to negotiate for future jobs with lobbying and investment firms - firms that had a strong financial stake in the form of the bill - while still in public office. He left public service, if that's what it was, almost as soon as the bill was passed, and is once again a lobbyist, now for drug companies. Meanwhile, Representative Billy Tauzin, the bill's point man on Capitol Hill, quickly left Congress once the bill was passed to become president of Pharmaceutical Research and Manufacturers of America, the powerful drug industry lobby. Surely both men's decisions while in office were influenced by the desire to please their potential future employers. And that undue influence explains why the drug legislation is such a mess.
    The most important problem with the drug bill is that it doesn't offer direct coverage from Medicare. Instead, people must sign up with private plans offered by insurance companies. This has three bad effects. First, the elderly face wildly confusing choices. Second, costs are high, because the bill creates an extra, unnecessary layer of bureaucracy. Finally, the fragmentation into private plans prevents Medicare from using bulk purchasing to reduce drug prices. It's all bad, from the public's point of view. But it's good for insurance companies, which get extra business even though they serve no useful function, and it's even better for drug companies, which are able to charge premium prices. So whose interests do you think Mr. Scully and Mr. Tauzin represented?
  • TheStreet.com: The Maven: The Tape Makes the News. By Marek Fuchs. Excerpt: Opinion : Investing Email This Story Print This Story. The Maven: The Tape Makes the News. By Marek Fuchs. In addition to putting investor money at risk, this week's coverage of IBM's earnings, which were flatter than "The Business Press Maven's" feet, proved once and for all that the old Wall Street maxim "the news makes the tape" is good and gone. In this day and age? "The tape makes the news." Here's how it works. The number that holds most importance to IBM's long-term prospects is its top line growth, aka revenue. (This is doubly true for its service division, the company's largest.) If the boys and girls from Armonk, N.Y., can't get most of the units in their behemoth growing (especially that big one), then no amount of cost-wringing will save the day in their uber-competitive environment. Shaking down retirees and watering down the coffee will go only so far. [...]
    Fast forward to Big Black and Blue's fourth-quarter report, in which the company fessed up to ... pretty crummy revenue growth. At first glance, revenue fell 12% -- an unmitigated disaster. But allowing for the sale of its personal computer business, revenue was "only" down in the low-single digits. Note: Whenever there is even a simple accounting adjustment in an earnings report, you are wise to place a hand on your wallet and carefully go over the coverage, which generally written by liberal arts majors who would rather be on the culture desk.
  • Communications Workers of America (CWA): Watch "A Tale of Two Companies". Excerpt: In this 8-minute video, employees at the nation's two largest wireless companies – Cingular Wireless and Verizon Wireless – describe the stark differences in how the companies treat workers. Cingular Wireless, the nation's largest wireless company, respects their employees' right to organize and belong to unions. More than 80 percent of Cingular's employees, or 38,000 workers, have gained representation with the Communications Workers of America. Despite saying how good they treat workers, top management at Verizon has aggressively fought efforts by its Verizon Wireless employees to form unions. It does not respect its workers' legal rights under the law to organize and form unions. Recently, Verizon, one of the nation's most profitable companies, froze the pensions of its managers and unrepresented employees at Verizon Communications.
  • Wall Street Journal: Some Students Use Net To Hire Experts to Do Their School Work. By Lee Gomes. Excerpts: But what the computer-programming student who goes by the handle "Lover Of Nightlife" did last month, as the fall semester raced to a close, could only have happened in the age of the Internet: He went online to outsource his predicament. "This is homework I did not have time to study for," he said in a message on a Web site devoted to outsourcing computer projects. "I need you guys to help me." Attached was a take-home final exam for a computer class that Mr. Nightlife Lover wanted to pay someone else -- presumably, someone from a place where people can't afford a lot of night life to begin with -- to take for him. This bit of commerce took place on Rentacoder.com, a Web site that has been mentioned before in this column as an example of globalization in all its blood-curdling efficiency. Rent A Coder enables people -- usually Americans -- who need computer programs to put them out to bid -- usually for cut-throat prices by Indians and Eastern Europeans.
    But if U.S. companies can go online to outsource their programming, why can't U.S. computer students outsource their homework -- which, after all, often involves writing sample programs? Scruples aside, no reason at all. Search for "homework" in the data base of Rent A Coder projects, and you get 1,000 hits. (An impressive number, but still a tiny fraction of all computer students, the vast majority of whom are no doubt an honest and hardworking lot.) A few examples: "I need a simple console-based program and a PHP script written that uses the openssl library." "I need 2 algorithms filtering -- median and Gaussian." "A C++ program that will implement a billing system using threads. Needs to be completed tonight if possible."
  • USA Today: SEC: Report single figure for exec pay. By Kathy Chu. Excerpts: The Securities and Exchange Commission on Tuesday approved a proposal to force companies to disclose a single figure for executives' total pay, but signaled that small businesses could be exempt from some provisions. [...] Lofty executive compensation has been a topic of increasing controversy in recent years. Even when corporate profits fell, executives won generous pay packages.
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.
  • "What are you waiting for?" by "deepocean". Excerpt: Yes, I also left in 2005. Former PwCer. But first I made sure I got vested . . . don't leave with money on the table! I am extremely happy now working for a large investment bank. Great position managing a team of 10-15 technologists. Pay is great (32% more than at IBM), people are nice, work is challenging but not ridiculous (40 - 55 hrs per week), no travel, great benefits! IBM is hands down the worst company I have ever worked for. I have 20 years of experience working for many of the best companies in the world. Main problem is that IBM is a huge bureaucracy that is very inefficient with little reward for people who really know what they are doing. I think I was supporting about 16 managers/executives in my reporting chain when I was there . . . they were not billable. If that is not inefficient and completely absurd, I don't know what is?! I did all the work, they made all the money. Nice job if you can get it (unless you have a conscience).
  • "now that ive been here a few months..." by "eng909". Full excerpt: I noticed that a lot of business consultants (SAP, supply chain, siebel) get staffed onto these technology implementation projects, and because they are not from technical backgrounds, get put into support roles like testing. why does this happen? is it commonplace? surely its detrimental to their careers to do that as opposed to practicing their primary specialty
  • "Morphing magic" by "Dose of reality". Full excerpt: You are correct sir. We constantly recruit functional experts by leading them to believe that they are coming here to do management consulting. Many want to do leading edge process or strategy work and are in for a rude awakening, when we train them in SAP, or Siebel and give them configuration design roles. They have hopes of “working their way up to Mckinsey”, and before they know it they have spent 3 years morphing into IT code monkeys. Meanwhile, we tell clients that we will put functional SME's on their projects in order to try to differentiate ourselves from Wipro and TATA, and then staff the projects with a heavy mix of recent graduates of the “Bangalore Institute of Technology and Sewage Treatment Emporium”. The reason that we do this is that it is much easier to convert a functional expert into an effective IT specialist than it is to convert a Business-ignorant, linguistically-challenged, neophyte code monkey into an effective, customer-focused IT consultant. Unfortunately, we then ask the functional guys to work magic with the tech resources, who are generally clueless about what clients really need.
  • "Excellent Thread and Comments" by "ancientblueconsultant". Full excerpt: The truth is that as the firm's financials collapse due to the ever increasing appetite of SG&A, the blue pig has moved to "just in time" swill optimization for its piglets. The simple answer is money, lack of money to be more exact. No investment in the prime alleged asset, practitioners. They will invest in executives, staff and other non-customer facing people, but not in the front line practitioner because they expect the front line practitioner to become essentially a contractor, which most are. People (human resources, not assets) are being pressed into other roles because there aren't enough people around and because the pig does project expense item hiring, not people asset hiring. They will sell the idea of "expanding" your career horizons when assigning you other roles, but keep it secret from the client. The fact is that the blue pig is every day more of an integrator and IT solution opportunist as it loses its technology edge (notice patent application counts are dropping with a nice excuse about quality over quantity)and it will become only more so.

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.
  • Professional workers unions? You bet!
  • Remarks by John J. Sweeney, President of the AFL-CIO, National Press Club, on the Senseless Slaughter of the Good American Job. Excerpt: But we’re facing a question of even greater magnitude that is being ignored by leaders of one party and avoided by leaders of the other. And that question is: “What are we going to do about the destruction of good jobs in our country -- the jobs that for the past half century helped us create the largest middle class, the most dynamic economy and the strongest democracy in the history of the world?” Headlines from recent months chronicle the destruction. From the Washington Post: “Consumer Prices Increase, Outstrip Wages.” From Reuters, “China to Service United Fleet.” Another from the Post: “Trade Gap Ballooned in October.” A cover headline from The Economist warned: “Danger Time for America.” A headline from the Associated Press: “Tough Times Ahead for Middle Class Worker; Manufacturing Jobs Vanishing From Our Shores.” From the New York Times: “IBM Freezes Its Pension Plans.” From the Wall Street Journal: “Growth in Medical Cost Slows As Firms Shift Tab to Workers.”
  • Job Cuts Status & Comments page
  • From the General Visitor's Comment page:
    • Comment 1/19/06: Do our managers think that building skills in layoffs is marketable, or do they think they will continue on until they retire? What will their resumes look like when their jobs move overseas? "Middle-aged middle level manager. Skill in layoffs, over 400 employees offshored. Never had to deal effectively with employee issues. Downsized business. Expert in jockeying numbers. Follows orders. Successfully offshored my own job." -Anonymous-
    • Comment 1/20/06: Hey, just had my PBC review. My appraisal was lowered because I have a bad attitude. Can anybody tell me where the definition of that metric is in the personnel guidelines? I am starting to feel like the peasant that I am. -Anonymous- Alliance reply: You must have missed the small print that says you must smile as your pension gets ripped off and your working conditions decline. :) Time for a peasant revolt.
    • Comment 1/20/06: It's not apathy causing the lack of action...it's battered worker syndrome....after years of abuse inside IBM and around all of corp America, you feel powerless. The govt not only permits such thefts and abuse, it advocates doing the same thing with Soc Security. And union protection is not a guarantee either...not while corps can sell off units or declare bankruptcy to force those contracts to be renegotiated downward, all while protecting the booty for those at top. We need a change in the focus of our govt and in our laws. We need unions to step up to the plate, together across all industries, to form the Workers Lobby to help focus the influence of the individuals, to try to re-establish a govt of the people, by the people, FOR THE PEOPLE (not just the ultra rich and their corporations). -Anonymous-
    • Comment 1/21/06: I was let go from IBM three years ago. At the time, after twenty years of giving my life to the company and with children and a mortgage, I was beyond devastated. If you are facing this fate today, take heart! After so many years in stinking IBM, once I got over my shock and panic, I found out how wonderful it was to get out into the real world, to begin working for human beings with hearts and decency (the way IBM was so many years ago -- remember?) I have been treated so much better by my new employers, and I don't have the IBM axe hanging over my head anymore! I am not alone in this post-IBM Hell observation. Be glad that you are out of this sick company. After you get over the shock and despair you will see that life on the outside is so much better! Most of the decent people are long-gone from IBM management anyway and there are only heartless sharks left! You will survive, and you will thrive! Don't panic, it will be OK. -Anonymous-
  • From the Pension Comments page:
    • Comments 01/14/06: I am an X-IBMer from Endicott, NY. I now get a IBM pension check from IBM based on my vested rights in 2002, after IBM sold us out, with the EIT deal. Today I got an encouraging letter from the IBM Sr. Vice President, human resources, Randy MacDonald. The letter states IBM retirees need not worry. The recent freeze will have no effect on current retirees or former employees. The letter stated that the IBM pension is fully funded. However, just below Randy's signature is this. "Please note that IBM retains the discretion at all time to change, modify or terminate any plans or benefits." What do you think this IBM statement means? I have to wonder if Randy and the IBM CEO, whomever, are planning to start cheating current retirees soon.. I'm sure it won't happen very soon but someday there maybe a modest change, for starters. Then some more. I hope this is not the case but I have to wonder if this letter is an IBM forewarning of rotten deals for IBM retirees and former employees here in the good ole USA. -Anonymous-
    • Comments 01/15/06: I was at one of the special meetings mentioned by Anonymous in East Fishkill. Even more distressing than Randy MacDonald's stand-up comedy routine was the audience's reaction. Many employees being screwed again by IBM were laughing hysterically at his jokes. It was a very sad day. -Anonymous-
    • Comments 01/15/06: I left IBM a short while ago and having only around 25 years, I, too, lost quite a bit of my pension. For me, though, it was a good thing because as a former HR person who joined years ago when HR played the role of employee advocate; I became really disillusioned and ashamed of the organization during the last few years. Even though I wasn’t directly involved in downsizing or pension cuts, it was a lot of mental torment just being a part of that organization. Still, there was a time when I felt very loyal to IBM and also the people I worked with, so I can't help feeling badly when I see more and more of these takeaways. I have now joined the union and will definitely put pressure on the politicians as well. IBM could be in for a big change depending upon future elections.
      If we continue to elect people like George W. and his cronies such as DeLay, Cheney, and the rest of the white collar thieves, well then, we will continue to get what we ask for. If you don't care to join the union for yourself, just try to think what kind of futures our kids are going to have with the way this country is heading. As for the execs, don't be envious of any of them. All the money in the world won’t by them the respect of their kids. If anything, the kids will probably suffer from shame when they realize how they got it
      I once heard Lou Gerstner went to church every morning. I think there is probably a good reason for that. Unfortunately for him, since his church has a major focus in helping the poor and since he has done exactly opposite by deliberately contributing to the financial ruin of thousands of employees and their families, I think we can all rest assured that in the afterlife, good old Lou will be sent somewhere where we won’t have to run into him--and hopefully Sam, Randy and the rest of the really lousy people in this world. -Anonymous-
    • Comments 01/16/06: I worked for the California Cottle road plant during the 80 to the late 90s. I recently received a Letter from Human Resources IBM pertaining to my retirement and that of recent news coverage. The Letter began by letting me know that my retirement benefits which are vested are not affected by the recent changes mentioned in the recent News is reporting. I got down to the last line and noticed that there was a "PS" at the bottom of the letter. Carefully folded so it was out of view.It stated, that IBM had the right to change benefits as it felt they had the right to.That blew me away because they had just said they would not change my benefits......Who does IBM think they are fooling? I read my letters, how about any of you? Lawyers keep up your fight. This New ibm has some gall. -Anonymous-
    • Comments 01/17/06: This is amazing - quote by Randy on the w3 home page. He is boasting how there are two employee advisory boards to help with the retirement change as if this is all something employees can really participate in for decision making. It seems like having you dig your own grave and making you think it is a great thing and you are part of that decision. Hey, we don't need a union - IBM is letting us create this. QUOTE: IBM will form two employee advisory panels to help guide the company's development of two important services related to our new approach to retirement plans for 2008. "IBMers are some of the smartest and most innovative thinkers around. We want to tap into the collective power of our talent base, to make sure these new services are designed with IBMers in mind," said Randy MacDonald -Anonymous-
    • Comments 01/17/06: How can you trust anything IBM execs say? I would stop trying to figure out what your retirement benefits are 10 years from now. If IBM wants to change the rules willy nilly, they can. With a union it would make it much harder for IBM to change the game plan. IBM has demonstrated that they can't play by the rules without a union as a referee. Screw the IBM execs right back. Vote for a union! -Anonymous-
    • Comments 01/18/06: To those who think this announcement is only bad news for the 30,000 "old plan" employees....What make you think IBM is going to treat the next group in line any better? That leading-edge TDSP, management is bragging about, is the perfect setup for the next "it's-not-affordable" announcement. You'll just have to wait until you're closer to retirement to hear the speech. -Anonymous-
    • Comments 01/18/06: IBM employee advisory boards for pensions? A little too late! This is secret IBM code for, we don't really have a good plan so make it the employees problem. If it fails it's the employees fault, if it is a success, IBM executive take the credit. What is needed are contracts that make IBM promises legally binding, not BS task forces. that are just a means to blow smoke and hide the point, IBM is cheating it own employees again, out of promised compensation! -Anonymous-
    • Comments 01/18/06: Well things are tough at IBM so they had to cut the pension plans on the hard workers who make it happen.... Amazing that they only made $3.19 BILLION of PROFIT in the 4th quarter alone and over $8 BILLION PROFIT for the year. Yes things are tough at IBM and for Sam and the execs to make their BIG BONUS's we the worker have to toughen up. BS!!!!! They could have easily taken a portion of the profits and made the affected workers whole. At 55 and 25 years of dedicated service I will have to contribute an 'additional' 18% to my 401K and work approx. 8-12 years longer just to break even. I hope the SEC fines the hell out of the exec's. -Anonymous-
    • Comments 01/19/06: I attended a meeting today about the pension changes. The meeting was held for the traditional pension group only. Since most of my colleagues are not in the traditional plan, I attended so I could network with those in a situation similar to mine. To my surprise (and horror), I found that no one in this group was angry, and most had either resigned themselves to the changes, or felt that the changes would have little impact on them. Talking to this group made me more depressed than ever. If these sentiments are representative of the majority of the IBM traditional plan population, then we are in trouble. -Anonymous-
    • Comments 01/20/06: "IBM to Release ''IBM and the Future of Crime'' Pod cast ARMONK, N.Y.--(BUSINESS WIRE)--Jan. 20, 2006--IBM announced today that the eighth pod cast in the series, "IBM and the Future of . . ." will begin today on its investor Web site. The pod cast is called "IBM and the Future of Crime." Do you think it will be about the Executives' pension theft? -Anonymous-
    • Comments 01/21/06: I got out of the IBM dumpster in 1993, and have never looked back. I now make more than I ever would have if I had been so foolish as to remain with the company. The saddest comments I've seen are from people who claim that they put in all those extra hours, for no compensation, and worked while on vacation, and accepted abuse and exploitation that no Roman galley slave would have tolerated. All for what? Nothing! The hours and hours you toiled availed you exactly that - nothing. And now you're getting IBM's thanks in return by having your pension and your take-home pay slashed simultaneously. My advice to you, and since I've already done it, is to get out, and get out now. It will only get worse, as Sam Palmisano and his criminal cronies continue to raid and rape the employee pension fund in ways yet to be realized. Their ultimate goal, in case you haven't realized it by now, is to completely terminate all pension payments, by whatever criminally funded legislative action they can buy to enable this. They are ardently striving to find a way to avoid payment of all pension and health benefits for employees in the nearest possible future. If you continue working for them, you will get to witness this first hand, but alas, too late. Don't worry about what color your parachute is, just bail out now. -Anonymous

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