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Highlights—April 29, 2006
Coverage of 2006 IBM Stockholders' Meeting in Tulsa, Oklahoma
- The Journal News (Westchester, Rockland and Putnam Counties in New York): IBM
annual meeting set for today. By Julie Moran Alterio. Excerpts: The annual meeting is one of the rare
times investors hear directly from Palmisano, 54, because he makes few public appearances and seldom gives
interviews to the media. A year ago, Palmisano faced an audience of investors dismayed by plunging stock
prices following surprise news of missed sales targets in the first quarter. [...]
Investors will be voting today on nine proposals from fellow shareholders that are
opposed by IBM management, including several on executive compensation and pensions that are back after having
failed to win a majority of votes in previous years. A proposal by James Leas, a Vermont patent lawyer and
former IBMer, to allow employees to choose the pension and retirement medical benefits that were in effect
before the company made changes in 1995 and 1999 is back for the seventh time.
Another proposal that would require the company to stop including pension fund income
when determining executive pay is back after receiving 36 percent of the votes at last year's meeting.
There's also a shareholder resolution that asks the board of directors to create
an independent committee to evaluate the risk to IBM's brand and reputation from sending jobs overseas. The
resolution was defeated by a 10-to-1 margin last year.
Steven Bergeron, a 26-year IBM employee who was laid off twice and started work again
in January, said he was forced to train his Indian replacement when he lost his job in Poughkeepsie in 2003.
"I understand what outsourcing means because I'm in the thick of it," said
Bergeron, a member of the Alliance@IBM, a group of current and former employees who are seeking to create
"When you go up in front of shareholders and say the most important thing is
to grow revenue, that's fine, but you can't do it at the expense of thousands of peoples' lives," said
Bergeron, who plans to confront Palmisano at the meeting today on the topic of offshoring as well as the
effect of mergers and acquisitions on employees who lose their jobs.
- Wall Street Journal: IBM
Chief Offers an Upbeat Outlook. Palmisano Says Tech Giant Is Stronger in Core Sectors; Dividend Is Raised
by 50%. By Charles Forelle. Excerpts: At the meeting, shareholders approved a proposal calling for a simple
majority vote, not a supermajority, on all matters requiring shareholder approval. IBM, whose board recommended
against the proposal, says its rules don't specifically require supermajority voting, though under New York
law a supermajority would be needed for such matters as a merger or dissolution, unless IBM changes its certificate
of incorporation to require otherwise. The proposal passed with 61.5% of votes cast in favor. Mr. Palmisano
said the board would "take this matter under advisement."
Four other stockholder proposals each received more than 40% of votes cast, including
one calling for clearer disclosure of executive compensation. IBM grants restricted stock, performance stock
units and stock options, and makes long-term incentive-plan payouts to top executives along with maintaining
executive retirement and deferred-compensation plans. The proposal, submitted by former IBM employee Janet
Krueger, recommended that IBM disclose "in plain English" the projected obligations under the various
plans for each executive.
IBM has long had testy relations with its veteran employees and retirees, many of
whom say IBM broke its past promises with a series of changes over more than a decade to pension and retirement
Mr. Palmisano defended his own compensation -- which included $6.9 million in salary
and bonus last year, plus $9.5 million realized from options exercises -- in response to questions from shareholders,
saying he and the other executives are compensated on long-term objectives. IBM's shares have declined since
Mr. Palmisano became CEO in 2002.
One shareholder and IBM employee, Jim Askew, said he believes Mr. Palmisano's executive
pension could entitle him to between $10,000 and $22,000 a day upon retirement. "Is $10,000 a day enough?" he
asked Mr. Palmisano. "Do you think you'll be able to live on that?"
Mr. Palmisano didn't directly respond, but he said that some pension benefits for
executives stem from a plan that was recently limited and was put in place to retain executives at a time
when the company's fortunes ebbed in the 1990s.
He also addressed the company's move, announced earlier this year, to freeze employee
pension plans, stopping the accrual of new benefits in 2007. "This was a very, very hard thing for me
to do personally," Mr. Palmisano said. He said the change was necessary to secure IBM's future. In an
allusion to labor costs faced by airlines and automotive companies, he said he wanted to ensure that in the
future IBM doesn't suffer "some of what we read about in the papers today."
- Associated Press, courtesy of Yahoo! News: IBM
Boosts Dividend in Bid to Jolt Stock. By Brian Bergstein, AP Technology Writer. Excerpts: TULSA, Okla.
(AP) -- International Business Machines Corp. increased its dividend by 50 percent Tuesday in an attempt
to jolt the technology bellwether's listless stock price. The move was announced at IBM's annual shareholders
meeting, where about 250 investors heard Chairman and Chief Executive Sam Palmisano tout the company's prospects.
Palmisano also defended the company's recent decision to freeze its U.S. pension
plan, arguing that "we had to do something" to reduce the liabilities and uncertainties surrounding
employee benefits. [...]
Anticipating what he figured would be a hot topic among shareholders, Palmisano began
the investors' question-and-answer session with a discourse of his own on IBM's January decision to freeze
pension benefit accruals after 2007 and instead enhance the 401(k) plan.
Palmisano said he hoped investors would admire the courage it took to make a long-term
decision that would keep IBM from meeting the fate of airlines and automakers smothered by enormous pension
costs. Later, when 51-year-old IBM consultant Jim Askew said he was concerned and felt betrayed by the pension
move -- given that he had banked all his career on a generous retirement -- Palmisano's eyebrows went up.
"I've been here for 33 years," Palmisano said. "I understand. This
was a very, very hard thing for me to do personally."
Whether investors had other beefs was unclear. Palmisano adjourned the meeting after
taking just three questions from the floor and two hand-picked questions submitted over the Web -- including
one about how he justified the $19 million compensation package he picked up last year.
- Alliance@IBM: IBM employee
questions Palmisano on his pension. Full excerpt: The question I asked Sam at the stockholder's meeting
has received a lot of press. I thought it might be useful to post the full question here as the articles
in the press have focused only on the "punch line."
The following is not verbatim...I formulated the question during the meeting, making
scribbled notes on the agenda that was handed out at the start of the meeting. I did not write my question
completely out...and, in fact, during the initial portion of my question there was quite a bit of friendly
banter between Mr. Palmisano and myself. As you can imagine, the banter ended as I neared the end of my question.
So...here it goes, to the best of my recollection.
Hello Mr. Palmisano. Actually, may I call you Sam? (Mr. Palmisano replies that he's
been called worse things). I feel that I can call you Sam because I feel like you're one of us, unlike that "last
guy that occupied the podium where you're standing."
I started with IBM at about the same time you did, but haven't done quite as well
as you have. (Spoken in a self-depracating tone). But then I know you've worked much harder than I have,
and I feel you deserve the position you've attained. And, besides that you were a salesman and I started
as an engineer, and we both know that sales guys always do better at IBM. (said with a smile).
Nevertheless, I've had a great career at IBM, and I truly love this company.
I also must state that I am very impressed with the generosity of the new enhanced
401k plan, and feel that it is very competitive compared with what other companies offer. Unfortunately,
for people like me who are late in their IBM careers, the new plan won't do us much, if any good...
You and I both attended many meetings in the 70's and 80's with our managers where
we were told that our lifetime medical and pension benefits were a form of deferred compensation. I trusted
IBM to keep its promises. In fact, I made lifestyle choices based on IBM's promises, including the decision
my wife and I made for her to be a stay-at-home mom. I counted on the retirement medical and pension promises
IBM had made through all my years as an employee.
As we know, IBM has not kept its promises to its long-term employees. I've run the
numbers. I wasn't affected by the cash balance changes in 1999, but have been affected to the tune of 40%
to 50% of my pension benefit from the changes made in 1991 and 1995. I'll be happy to share the specifics
with you, the board, or the press. And, this cut doesn't include the cut in my retiree medical benefit, which
is even larger than the pension cut.
On the other hand, with the introduction of the SERP under Lou Gerstner, you and
other senior executives have done *very* well, to the tune of $10,000 to $22,000 a day (and that's 7 days
a week) for your pension. This is according to the proxy materials we have in front of us, and a recent article
My question for you, Sam, is "is $10,000 a day enough for you to live on, or
will further cuts to employee benefits be required?"
There was brief applause...the only applause of the meeting that wasn't what I'd
call "courtesy applause." Mr. Palmisano fumbled for a while, then stated that he felt the "gist
of my question" concerned the SERP. He went on to explain that the SERP has now been discontinued, but
that Lou introduced it in 1999 because IBM executives were leaving in droves, and something needed to be
done to retain them. He said more than this...but I don't recall very well what exactly he did say. He abruptly
ended the meeting at this point, twenty minutes early, and after having taken only three questions from the
floor, one of which was from a "plant."
Janet Krueger had a microphone in hand at position 2, but Sam avoided calling on
that position knowing that Janet would ask a tough question. Sam didn't know me, so when he looked at the
left side of the room for a question, he called on position 4...which was me holding that microphone.
- Yahoo! message board
post by Janet Krueger. Full excerpt: The same retired gentleman that stood up in Kansas City to congratulate
the board on doing a great job and to thank them for his retirement checks used up one of the 3 questions
taken from the floor in Tulsa to congratulate Sam on doing a great job and to thank him for his retirement
checks... He said the strategy Sam articulated is right on the nose and that he expects the new focus on
'innovation' to really turn things around.
You'd think IBM would at least be smart enough to hire new retiree plants each year!
One thing we noticed was that that IBM is definitely into cost cutting; there were
no floor demos and no flashy slides or movies. The meeting wasn't put out on webcast and there were no large
pictures shown of Sam up on the stage. IBM managers were brought all the way in from Tulsa to hold the floor
mikes and signs. Sam just talked about the new strategy with no backup slides or pictures. The only slide
used during the meeting was a simple bar chart that Sam used to explain why he had to freeze the pension
plan and to show how 'competitive' the new 401K plan will be...
- Yahoo! message board
post by Janet Krueger. Full excerpt: That reminds me. During one of his answers, Sam talked about his
recent visits in the Oval office and about how gratified he is that the current administration is seeking
advice and counsel from the CEOs...
- Yahoo! message board
post by Ed Hayden. Full excerpt: Oh yes! Janet and crew are responsible for a major sea change here.
It isn't often (ever?) that shareholder proposals to make the executives more open and responsive are carried.
It's also really ho-hum to hear Sam tell us that the company has pulled it's socks up and is on a new track.
That is said every year and every year they do the same things to the employees to justify this. Funny (or
not) but most IBM employees I know/knew worked at 1/2 or less their paid salary if you consider all of the
'donated' hours they put in. I'm getting concerned enough about the ability to squeeze anymore blood out
of the employees which seems to be the only way IBM is successful these days. Time to dump my stock I'm thinking.
- Yahoo! message board
post by "stu_pidasso_2003". Full excerpt: Is it me or did others feel a sense of outrage and
disgust when I read that Palmisano stated 'we will take the matter under advisement' when faced with a 61.5%
approval vote on the majority proposal. You realize that board members across the American economy know how
the deck is stacked against stockholder proposals by proxies and voting investment funds and 'board unanimous'
recommendations that dilute the stockholder voice. Rarely does any stockholder proposal gather greater than
3-4 % of the vote in any corporation. That is why anytime a proposal garners 15-20% of the vote most boards
look into the matter as they know that they have heard from their owners. Often they assign the CEO the task
to report back and suggest remedies that touch on parts of the issue.
When Janet's good work gathered 28% of the vote four years ago...IBM sat on their
haunches...did nothing...ignored the vote entirely and thumbed their nose at the outcome. Now...faced with
four proposals that received over 40% (!!) of the vote....IBM will attempt to do the same unless we raise
the issue. If their is no communication from IBM Corporate Communications immediately on this issue then
it is time to alert the media and DOG IBM to action. To not take measures will fester into greater owner
revolt....and they know it. They want to draw all the attention to the 61% proposal...declare some watered
down action and leave the rest to be ignored. We cannot not allow that.
- Daily Oklahoman, courtesy of Technology Marketing Corporation: IBM
stockholders meet quietly in Tulsa. Excerpts: IBM, one of the world's most-revered business nameplates,
brought its 2006 stockholders meeting to Oklahoma on Tuesday and attracted only 250 shareholders to the Tulsa
Convention Center. [...]
So the crowd was a bit thin, but it still attracted the usual number of shareholder
activists, who poked at IBM management over issues of executive compensation, outsourcing and a downsizing
of its pension program for employees.
Janet Krueger traveled from Rochester, Minn., to get her shots in at the compensation
and retirement plans devised for Palmisano. A retired 23-year IBM employee and a former "Watson Scholar" with
the company, Krueger offered a shareholder proposal that would require greater disclosure of executive compensation.
"IBM should be an example of good corporate governance, not a company that does
the absolute minimum required by law," she said in support of her proposal.
By Krueger's calculation, Palmisano will earn at least $10,000 per day from IBM upon
retirement. She said she added it up and concluded he could claim $1 billion in retirement income. "I
only wish that someone owed me a billion dollars," Palmisano replied to Krueger's allegations.
Still, her shareholder proposal won 41.7 percent of shareholder support -- including
proxies -- in a losing effort. "They take seriously anything that gets into double digits," Krueger
said of the company's board of directors, who sat on the first two rows of the auditorium. "I think
they are listening."
The meeting concluded in less than two hours after Palmisano considered about a half
dozen questions from the audience and some submitted via Internet ahead of the meeting. Jim Askew of Boulder,
Colo., brought things to a close with a final assault on executive compensation and IBM's decision to implement
a 401(k) plan for employees instead of a traditional pension plan.
- New York Times: The
Shareholder Spring. By Gretchen Morgenson. Excerpts: Annual shareholder meetings are typically dull,
scripted affairs, but as executives and directors of public companies step into the spotlight at this year's
gatherings, some for the first time are hearing organized and articulate shareholder discontent.
And officials at many of those companies are digging in their heels, using stockholder-financed
war chests to resist shareholder demands for more say in executive pay practices and director elections.
"Even if there's any inclination to concede the shareholder is right, these
guys are not going to say it in a public forum," said Daniel J. Steininger, chairman of the Catholic
Funds, a mutual fund company in Milwaukee, and author of proposals on director compensation that are under
consideration at seven companies this year. "Having to meet with the shareholders when your stock is
down over a four-to-five-year period is not a fun experience; they'd rather be at the dentist having a root
Increasing stockholders' say in director elections is another hot topic at meetings
this year. At most companies, directors can be elected if they receive just one vote — if they vote
for themselves, for instance. Investors can only register their displeasure with a board by withholding their
votes from directors under current rules at most companies.
- Communications Workers of America (CWA): CWA
Launches Assault on Bad Corporate Policies. Excerpts: CWA made a case for responsible corporate governance
at IBM, General Electric and AT&T this week, at the first of several shareholder actions on the calendar
this spring. [...]
Representatives of the Alliance@IBM/CWA Local 1701 on April 26 turned out at the
company's annual meeting in Tulsa, Okla., to support a resolution calling for simple majority rule on all
matters requiring shareholder approval rather than the supermajority previously required. The measure passed
with 61.5 percent of votes cast.
Also at the meeting, Janet Krueger, an Alliance@IBM member and former IBM worker,
submitted a resolution calling for clearer, "plain English" disclosure of executive compensation,
which includes restricted stock, stock options and long-term incentive plans. That resolution received more
than 40 percent of shares voted. Jim Askew, another Local 1701 member, took CEO Sam Palmisano to task at
the meeting on changes to the company's 401(k) plan between 1991 and 1995 that will cause older workers to
retire with 40 to 50 percent less than they previously could have expected.
- Washington Post: A
Campaign To Tighten Executive Pay Shareholders Seek Ties With Performance. By Brooke A. Masters.
Excerpts: After years of complaining about sky-high executive pay packages, this year shareholder activists are finally
getting some traction in their efforts to do something about the issue. The issue will come up today at the annual
meeting of Merrill Lynch & Co., where chief executive E. Stanley O'Neal took home $37.5 million last year, including
$2 million in long-term incentive pay. The American Federation of State, County and Municipal Employees is sponsoring
a resolution calling for an annual up-or-down vote on the company's pay plan for top executives. Though the vote
would be nonbinding, it would give shareholders a way to make their views clear, advocates argue. [...]
"If management increasingly takes more and more, there's less for shareholders," said
Frederick E. Rowe Jr., president of Investors for Director Accountability, which urged the withhold vote at Pfizer.
Reining in executive compensation has been one of the hottest shareholder issues since the stock market bubble
burst in 2000, but for years, proposals have drawn little interest outside of a small group of activist investors.
"You should get superior pay for superior performance. What we have now is superior pay
for average or below-average performance," said Ed Durkin, director of corporate affairs for the carpenters union.
- The NewStandard: White-collar Workers
Defend Benefits. By Michelle Chen. Excerpts: Though recent
bankruptcies in the troubled airline and auto industries have shown that pensions are prime targets for cuts when companies
are in decline, not all retirement cutbacks have been in response to the threat of financial collapse. Increasingly,
healthy companies, including information-industry giants like Verizon, Sprint and IBM, are restructuring the retirement
plans of salaried workers just to buoy profits.
For IBM, which once touted some of the most generous benefits in corporate America, dismantling
its multi-billion-dollar pension system is more a matter of growth strategy than economic survival.
The company plans to shift its US-based employees entirely onto 401(k) individual savings accounts
by 2008. IBM recently reported to shareholders that planned pension changes in its domestic and international branches – which
employ roughly 329,000 people worldwide – will save an estimated $2.5 to $3 billion over five years. The move
caps the company’s effort since the 1990s to systematically scale back pensions to reduce costs.
IBM spokesperson Jon Bukovinsky cited "the rising costs" and "volatility and
unpredictability" of the pension program as a threat to the company’s global competitiveness. He added that
the restructuring is designed to phase in gradually to prevent people from losing anticipated benefits.
But those who have watched their earned benefits evaporate over the years express little sympathy
for the financial concerns of the corporation, which posted a net income of $7.9 billion at the end of 2005.
"If they hadn’t have robbed us of everything we thought we’d planned for,
I’d still be there," said Lynda French, a 55-year-old former IBM software analyst in Austin, Texas. She
said the company’s overhaul of its retirement programs forced her to rearrange her life in ways she never imagined
when she joined IBM in 1977 – lured by the generous benefits offered at the time.
French said she "was forced to retire early," because in addition to scaling back
pension earnings, IBM was converting its retiree health plan from a long-term coverage program to a lump-sum account.
The new plan, she calculated, would cost her and her husband, also an IBM employee, several hundred dollars more in
monthly insurance costs. She worried that if she did not pull out before the new plan kicked in, she would be unable
to afford adequate medical care for her family.
French noted that the company is rolling back benefits while its executives enjoy compensation
packages in the millions. "If they really cared about cutting costs," she said, "I think they should
be cutting theirs a tad. … They leave with a golden parachute, you know, and the employees don’t." [...]
Bill McGreevy, a 49-year-old information-technology specialist in Wingdale, New York who caught
the tail end of the cash-balance switch, estimates that when he retires, he will be supporting his two children on
a pension worth $15,000 a year, or about half of his entitlements under the old plan. Compounding the loss is the soaring
cost of IBM’s healthcare coverage, which McGreevy predicts will pose an even heavier burden in retirement.
"I might have a white-collar job because I’m salaried," he said, "but
I consider myself gray-collar now. ’Cause I ain’t getting ahead. I’m just falling behind." Joining
industrial workers who have long leveraged union influence to protect pensions, IBM employees have formed Alliance@IBM,
an affiliate of Communications Workers of America, to defend their benefits and develop collective bargaining power.
- TheStreet.com: Pension Freeze's Chilling
Effect. By Dorianne Perrucci. Excerpts: The Big Chill is the bittersweet story
of what happens when seven college friends, who chased sex, drugs and rock 'n roll in the '60s, try to relive the
But here's the message, specific to a column on retirement security: The past is just a goodbye.
In 2006, we're watching a story unfold called "The Big Freeze." It, too, is a bittersweet story that defines
an entire generation -- but it's the story of what happens when the money runs out. As in, "hard-freeze," meaning
no more contributions for current participants, "soft-freeze," meaning less money for current participants,
or "partial-freeze," meaning no money at all for certain employees, such as new hires. [...]
It isn't just the deadbeats who are freezing pensions, by the way; today, more profitable companies,
and large companies, are playing the blame game. The latest list reads like a "Who's Who": IBM, Verizon,
Alcoa, Sears, Sprint Nextel.
- Los Angeles Times: Fees
Eat Away at Employees' 401(k) Nest Eggs. With pension plans vanishing, workers depend more
than ever on these accounts. Yet obscure deductions are quietly eroding their savings. By Walter Hamilton, Kathy
M. Kristof and Josh Friedman, Times Staff Writers. Excerpts: John Fuchs was checking his 401(k) account online one
afternoon when he saw something that seemed amiss. Listed along with his regular contributions was a $48 charge,
in red. That's odd, he thought. Why would anyone be taking money out of his account? After a flurry of phone calls
and e-mails, Fuchs learned that the $48 deduction was no mistake. The money was paid to an outside firm that enrolls
employees in his company's 401(k) plan, mails quarterly account statements and handles other administrative tasks.
- Yahoo! News: Is Your Pension
Plan Retiring Before You? By Ellen Hoffman. Excerpts: If you're still
depending on a traditional pension, it's time to put yourself on a "pension watch." In the last few months,
IBM, Unisys, Verizon, and General Motors, among
others, have announced that they're freezing their traditional "defined benefit" pension plans. [...]
Some companies that freeze pensions, such as the airlines, are obviously in financial trouble
and struggling to meet their obligations. But some other companies, such as IBM and Verizon, have surprised their employees
by getting out of the defined benefit plan business even though they are profitable and appear to be financially healthy.
- Associated Press: With much at
stake, Congress struggles with pension bill. By Jim Abrams. Excerpts:
Squabbles over special treatment for bankrupt airlines and beleaguered auto companies are delaying final action in
Congress on a pension bill that would affect millions of workers, retirees and taxpayers. Lawmakers trying to merge
House and Senate versions already have missed one deadline, April 15, when some companies had to recalculate their
pension fund obligations. [...]
Senate aides say a separate issue - hybrid, or cash balance, plans - could be tougher to resolve
than the credit rating dispute. Under cash balance plans, companies set aside money each year for employees and generally
make a lump sum payment when a worker retires or leaves the company.
The pension legislation tries to clarify the law in the aftermath of a lawsuit against IBM
by employees who said the company committed age discrimination when it switched to a cash balance plan. That case was
settled in 2004 but with two pending claims that could push the cost of the settlement to IBM to $1.4 billion.
Businesses are pushing hard for this part of the House bill, including making it retroactive.
The House, however, has passed a resolution saying the final bill should use Senate language to protect older workers'
pension benefits when their companies switch to cash balance plans.
Congress' Government Accountability Office concluded in a study in November that employees
whose companies switch to cash-balance plans generally lose benefits regardless of age.
- New York Times: UnitedHealth
Panel May Face Scrutiny. Excerpts: The huge paydays for UnitedHealth
Group Inc. Chairman and CEO William McGuire grabbed attention last week -- but that could soon be turning to the people
who signed off on his pay package.
Most companies, including UnitedHealth, have compensation committees made up of a few directors
who set pay for executives. McGuire's $1.6 billion in unexercised stock options have some people wondering whether
UnitedHealth's three-member compensation committee was doing its job.
- Houston Chronicle: Just
one more option on the ways CEOs can sell out stockholders. By Loren Steffy.
Excerpts: Buy low, sell high. So goes the old investment adage. It's more difficult than it sounds — unless you're
a chief executive. Then there's a far greater chance you can beat the odds. For years, top executives have demonstrated
an uncanny ability to exercise stock options granted near the bottom of the market.
- TheStreet.com: Steer
Clear of Incredible Shrinking IBM. By William Gabrielski. Excerpts: IBM is stuck
at $82, and I don't expect shares to move higher anytime soon, regardless of products cycles or gross-domestic-product
growth. Its announcement Tuesday that it will complete another $4 billion buyback of its shares shows that the company
will continue to lower its share count to improve its EPS.
That's just low-quality earnings growth any way you slice it. In addition, the company said
it is increasing its quarterly dividend by 50% to 30 cents a share for an indicated yield of 1.46%. [...]
Forgetting the company's products and growth (or lack thereof) in its end markets -- which
I believe are irrelevant to IBM's stock price -- the company can't create meaningful bottom-line growth through
measures such as gross margins or operating leverage anymore. That leaves management with only buybacks.
This is low-quality earnings growth, and it offers a great explanation for why shares are rangebound in the
low $80s despite the continued chirping of bullish technology-hardware analysts about the stock's attractive
According to Capital IQ, IBM has spent $18 billion on stock repurchases since 2002. This
compares with $28.9 billion in free cash flow over the same period, and represents 31% of the company's operating
cash flow during that time. [...]
What is more telling about how IBM has deployed its cash is the fact that the company has
more capital than it knows what to do with right now. It finished 2005 with $12.5 billion in cash and generated
$14.8 billion from operations during the year. IBM's capital expenditures are a relatively low percentage of cash
flow from operations, and the company is still able to spend like mad on buybacks and grow its cash balance.
finance board post by "rondo_74172". Full excerpt: Share buybacks is only a piece of the strategy.
Blue has been making internal cost cuts for over 2 yrs now, which elevated the EPS too. That can only last so long
before the whole company implodes from the stress created with the cuts in staffing. More is demanded of less - how
far do you think that can take them in EPS enhancement? Start asking employees how happy they are working for this
IBM. After reading this board for a while I can see that not many here are familiar with the inside.
finance board post by "honestly_think". Excerpt: The final conclusion is important.
If you are an IBM employee then you know how this cash is generated! No raises, layoffs, cut on office supply, tools,
cut on travel and education, rob employee pension plan, many many more!!!!
- Washington Post: Skilled
Immigrants Turn to K Street. High-Tech Workers Awaiting Green Cards Hire Lobbyists, Hit the Hill. By S. Mitra Kalita. Excerpt: On the December day when Congress killed a budget amendment
that might have allowed him to become an American a little sooner, Aman Kapoor started a movement. He did not march
through streets, carry signs, wave a flag from here or there. He did not walk off the job or file out of school.
The computer programmer simply went online to a message board tracked by thousands of people in his predicament:
highly skilled foreigners waiting years for their green cards. "I think we can do better and really create the
impact with organized effort," he wrote. "To achieve this we need a group of individuals who have shown commitment
and motivation in this forum." [...]
Most members and all the core organizers of Immigration Voice hail from India, though Chinese
membership numbers in the hundreds and is on the rise. Most arrived on an international student visa or a visa known
as the H-1B, reserved for highly skilled workers who can stay for up to six years -- unless an employer sponsors
their green cards, which grant immigrants permanent residence in the United States and the right to live and work
here freely. Over the past decade, the largest numbers of H-1Bs have been awarded to high-technology workers from
India and China.
- InformationWeek: In
A Reversal, Feds Say Outsourced Programmers Are Eligible For Assistance. Outsourced
computer programmers now can collect the same benefits routinely extended to factory workers who have seen their
jobs disappear amid a flood of cheap manufactured imports. By Paul McDougall. Excerpts: In a turnabout from earlier
decisions, the Department of Labor—in a note published this month in the Federal Register—said that four
employees of IT services vendor Computer Sciences Corp. that were laid off in 2003 from a facility in East Hartford,
Conn., are eligible to apply for benefits under the Trade Adjustment Act. The act provides a number of relief measures
for workers who've lost their jobs to cut-rate foreign competition, including extended unemployment payments, federally
funded retraining, and relocation allowances.
|Vault Message Board Posts
Jack, or maybe even Jill?" by "civilliberty". Excerpts: I have worked for about
7 organisations in my time (3 consulting ones). I have yet to work for an employer that I have enjoyed less
than IBM based on all my experiences. Their general thriftiness both direct and indirect makes me think they
had scottish origins (sorry to all you scots on here - nothing personal). Their appraisal system is universally
the most unfair I have ever encountered and despite the word from management that it is deemed to be the
most fair so far there are many consultants that are disaffected by it (remember you are just speaking for
yourself - I'm speaking from a larger base).
not be changing any time soon" by "deep_eye". Excerpts: You hit the biggest complaint
dead on. The stinginess, the absolute, rub-your-face-in-it, dime-store, bargain basement cheapness of the
organization and how they perceived what should have been their greatest asset - their employees - as just
another mark to be cheated. I personally saw many, many individuals, who just about killed themselves to
bring superior products and projects in on IBM's behalf and were then "rewarded" with ridiculously
low single digit "raises" or "bonuses" or who faced the brilliantly rigged "appraisal" system.
It figures that they must now resort to brainless lackeys to repackage their pathetic offerings to the naive
on to something" by "Dose of reality". Full excerpt: Qualities required for client
- Honesty and trust
- Technical competence
- Putting the clients needs and business case ahead of IBM revenue
- Intellectual curiosity
- A desire to help
- Sophisticated communication skills
Qualities required to get a "1" rating:
- PBC Gamesmanship
- Desire to goose billable hours at all costs
- Honed suck-up skills
- Biased preference
for IBM products
- Absolute adherence to and praise for all IBM policies
- Low cost - Never ask for
anything from IBM
Anyone see a problem with this conflict???!
upon a time" by "wonderaboutibm". Excerpts: Before you graced the IBM scene, and even before
the PwCC acquisition, most IBM employees were covered by what Gerstner called "variable pay." While as
I remembered there was supposed to be variability in it, it pretty much came to 10% of pay. This was in addition
to my departmental bonus, which usually was targeted at around 20% of pay. And through 2000 and 2001, that
is pretty much what I got.
But alas and alack, the money ran dry, or more appropriately, went to the stock buybacks
(now running at about 70 billion over the last ten years -- check the SEC filings.) PwCC incomers were
subject to at least two salary cuts that I know of, the cuts to be replaced by -- you guessed it!! -- target
bonuses , which, as I understand it,were of course not met. The variable pay was discontinued, and bonus potential
is now upwards of 11 to 12 percent if you get a 1 rating and if you are lucky. 2+s got 6 - 8 % I think and 2s
got 2 - 4 %. And of course IBM proudly tells us 3s got nothing.
You must admit ... for a 2+ rating to go from 25 - 30 % bonus a few years ago to about
7 % today, with roughly the same salary, does not make for too happy a camper. Perhaps this employee (and
they are legion, believe me) is some washed up specimen, a despicable expense rather than a valuable asset? Perhaps,
at least in the eyes of IBM Finance.
have as much chance of getting a bonus in BCS as..." by "deep_eye". Excerpts: Getting hit
in the head with a meteorite while watching Seinfeld reruns on your yacht with your new wife, Miss America,
2005. Making a financial killing by sending $500K and your bank account number and access code to Mr. Umbutu
Limumba of Nigeria, to help his close friend, Mr. Sekki Jambambi move funds out of Nigeria and share them
with you. Beating a speeding ticket in Bugnutz, Alabama Yeah, I got your bonus, right here.... I do like
your phrasing though - "you may get a bonus, but it is not a certainty." Before becoming a spinmeister
for IBM, did you sell used cars?
HR policy is timeless" by "Dose of reality". Excerpts: The simple fact of the
matter is that we do not connect reward to performance. It is a game of musical chairs with 2 or 3 chairs
for every 100 players. The variation in performance between those in the 70th - 95th percentile and those
in the top 5% is a small fraction of the variation in reward. To add insult to injury, due to the margin
of error on evaluations, there are many that are graded to the 70th - 95th percentile with real performance
that is significantly better than those lucky few that bootstrap themselves into a "1" rating on
The incremental margin contributed by the 70th - 95th percentile as compared to those in
the middle of the pack is sufficient to pay an enticing bonus, yet they barely get a token. This is the fundamental
problem with HR management here. We expect staff to work on spec, and then fail to reward them for their efforts
and results. We don't have to be in boom times to warrant an equitable compensation policy.
It is mass exploitation, pure and simple, and no one should be willing to accept it. We
are balancing the books on the backs of the front line staff and destroying the energy and continuity of the organization
in the process.
'Alumni Effect' or the Hydra's teeth revisited" by "DM Bingham".
Full excerpt: he Big Pigs that run the blue Pig have no sense beyond their own immediate gratification. The
principle of reaping what you sow is a foreign concept. I offer a not unsubstantial example from the Strategic
IBM has laid off thousands of employees in Austin over the past ten years. Many hardware
types moved over to Dell when it was a > $ 1 B per year enterprise and built it up. Many of the programming people
moved to jobs in the Texas State agencies, either as programmers or programming managers. Others went into the State
In the subsequent move away from spaghetti-coded mainframe programs running those State
agencies to modern Web-based ones, the Pig's hardware penetration disappeared. The home town favorite Dell has their
stuff everywhere. Gee ! Can you imagine !
The really big hurt to the Pig is their failure to win the major outsourcing deals that
were awarded in 2005. Two major Call Center contracts worth $ Billions went to Accenture despite huge Blue
cost concessions. Allegations were made of leaks of the IBM proposal to ACN during the downselection period. Gee
! Can you imagine !
Similar things have occurred in Arizona, where the IBM Tucson plant has shed lots of people
over the years. As well, the former American Express employees in Phoenix now litter the streets. There is no way
the Pig can win back the allegiance of the thousands of people it has scr5wed. They live every day to Pay Back the
- "Thoughts" by "whitespider".
Excerpts: But look ... supply chain is what it is and may be an alright practice with some good people in
it ... however it is also embedded within IBM and hence you will bs subject to the usual rubbish of unrealistic
utilisation targets, no training, little chance of meaningful career progression, and an approach to bonuses
that is predicated on using staff variable pay as a cost control mechanism rather than a tool to motivate
performance and encourage the right behaviours for clients and the corporation. You will have to put up with
marketing people who make plans to make plans, and legions of administrators who never see clients and just
manage internal "processes".
Chain Interviews in May" by "old chop". Full excerpt: I've been invited to what
seems to be a gang interview session for the BCS Supply Chain Management group in May. I would expect to
be interviewing at the level of Project Manager, Engagement Manager, or whatever that level is called at
IBM...I've got more than 25 years behind me since college. I understand all the angst expressed here by the
new college grads, but I'm interested in what life is like for those of us with more than a few gray hairs.
I'm not interested in career growth, and I don't need any lectures on the evils of the Beltway Bandit biz,
I'm just trying to pay the mortgage in Fairfax. What would be the rough pay band be for the level of experience
that I've described. (MBA, tons of experience in supply chain in government and industry.)
you put it that way" by "Dose of reality". Excerpt: From one gray hair to another,
the root sources of angst for the new college grads are the same as they are for the gray hairs. If you are
truly just looking for a paycheck and are not interested in career or compensation growth, or incentive pay
commensurate with above baseline performance, then you might find a home here. If you have a thick skin,
can tolerate taking orders from arrogant SOB's with less talent, skills, and knowledge then you, then you
might even not dread going to work every day. If you can spin team member straw into gold without losing
your patience, you might even enjoy it!
is a good place, it that's all you know" by "terrymarry". Excerpts: IBM is a good
place, it that's all you know Author: terrymarry Date: Apr 25, 2006 8:13 PM EST I think you got this wrong.
I am compelled to respond to you. IBM is in fact a bad place to work. Let me tell you why! IBM spends an
inordinate amount of money in its HR-Separation process. There is a whole bunch of people who is job it is
to offload you at IBM's choosing. If I were IBM, I would have spent an equal amount of money in retaining
the talent they have. I for one left IBM and got a phenomenal job elsewhere (a competitor mind you). IBM
has been, is and will continue to leave a trail of bad blood wherever it goes and whatever it chooses to
I bet you 10 dollars for every dollar you have in your pocket that the deals IBM is
losing now are due to former IBMers who are now in a position of power telling IBM to "go, stuff it" This
is not whining. It is a hard, cold fact. You believe whatever you believe in. This is the world I live
in and know the facts. Once you leave IBM, you will find out, but for now, it is a blurry world for you. No
hard feelings, just hard facts.
is it?" by "O_Byteme". Excerpts: I haven't been there in over 10 years, but when I
was working at my development lab, IBM had built up a generations of good will among its employees, which
it was in the process of slowly eroding away with endless rounds of benefit takeaways, small or nonexistent
raises, accelerated schedules and unpredictable layoffs, accompanied by an ever increasing spiral of executive
salaries and bonuses. The environment, however, felt more like a graduate school study dorm, as my co-workers
seemed to be about the best and brightest I had ever worked with, and the spirit was one of cooperation instead
of competition, as we were all pretty enthusiastic about creating this extremely complex product with as
close to zero defects as humanly possible. The overall management structure seemed to be based on the military
model, with regiments, companies, platoons and squads being replaced by divisions, areas, departments, and
teams. I guess this was required in order to get so many thousands of people working together efficiently,
and it didn't seem overly intrusive.
So I know what it felt like to work there, but I still don't know how I would define what
the "culture" at IBM was, although I think I know what it was supposed to be: equal opportunity based
on talent and initiative, reward for hard work and loyalty, respect for the customer and the individual, and a commitment
to your work and to your community. All of this of course seemed like just talk by the time I left, but it meant
a lot to me and to a lot of others when we joined. My question, though, is this: what is the perceived "culture" at
IBM now? Is it even a question that has relevance any more?
short answer" by "Dose of reality". Full excerpt: The best analogy I could make is
that IBM has been changed from America in the 50s/ early 60s to the Soviet Union of the same period.
Not only has the baseline floor of universal benefits and treatment been eviscerated, but
we have eliminated any semblance of a meritocracy as well. The entire organization is presided over by a tenured
politburo that is virtually devoid of the best and brightest that were in the pipeline in lieu of the sociopaths
that found themselves the most adept and the most interested in bootstrapping themselves up the hierarchy with a
combination of deft politics and blind ingratiation to the organization.
We’ve transformed the corporation from one built for success into one that is built
for short term survival.
As to what the "perceived culture" is, it depends on one's tenure. New hires see
it as a blue chip employer, but once the rookie year is over, all but the most dense understand that there
is no future here, unless you want to be a civil servant.
has changed...a lot" by "Thirty and Out". Full excerpt: I retired a few years ago after
thirty years and ten days. The "culture" has changed a lot.
With the birth of my first child, my third line manager in R&D stood in my doorway and
told me to go home. Later I was surprised with the silver spoon sent by Frank Cary.
When I was in large systems marketing as a Systems Engineer, your contributions were directly
recognized with bonuses. It truly was "pay for performance".
My last ten years were in Services - first consulting services and then strategic outsourcing.
This is when and where things changed. Changed in that every manager seemed to be trying to save their own asses.
People became limitless resources - limitless in that there was not limit in the time and effort you were expected
to contribute. Billing 2,080 hours in a year (do the math...52 weeks at 40 hours a week) was "meet requirements." Managing
a "transition" of an outsourcing deal became a painful experience. Folks from the acquired working diligently
knowing they were now part of IBM. And I became more and more aware that their efforts would soon be met with efficiency
standards. That is, not that the systems are running efficiently we don't need you...good bye. What moral bankruptcy
in just thirty years!
Glad I am gone after thirty years and ten days.
- it has" by "DM Bingham". Excerpts: I'm tempted to contrast what is going on now with
what went on back in the day... Let me try to speak outside the compare and contrast mode.
The first thing that comes to my mind about the IBM "Culture" is the Climate of
Fear. Every non-management employee is in peril of his job at all times. I believe that fear and anger are closely
allied so in that sense most employees are also angry. Angry at the reality that their livelihood can be snatched
away not necessarily because of poor performance but because of non-business related reasons, even for something
out of control such as a chronically ill child who uses "too much" Medical Benefits.
Layoffs are supposed to trim business units' staffing to the existing environment in order
to return to profitability. IBM uses layoffs to tickle the books to pad SP's pay and benefits. Case in point:
IBM used to claim that layoffs were "one time" events and therefore used the event to hide other extraneous
losses under the category of severance charges. Not so anymore. Our sleeping dog auditors call them "on going
business" and won't let the Pig's Finance people get away with what they used to when Clueless Lou was in charge.
Along with the omnipresent anger I believe there is also rampant bullying going on. Like
a recent article in Fast Company said, tumultuous conditions attract psychopaths who are looking for a situation
in which they can inflict pain. When the Pig decided to go out and hire "Industry" expertise in 2002,
HR turned to the horde of laid off Wall street types and lured in some unbelievably bad characters. The several
I dealt with then in Telco were extraordinary liars. Today in Proposal Support, the costing people are at the mercy
of the Sales types who make no bones about their intimidation techniques while the victims' management cowers as
far away as possible. This push to close no-profit business is facilitated by the "no-rules hold anymore" paradigm.
It is not profitable to the business but it supports the kleptocrats.
When Sprint signed the big SO deal SP gave himself a $5 M bonus. Has he given it back
now that the deal has collapsed?
Lastly I would point out that fatigue is omnipresent. You Consultants whine about your
95 - 100 % utilization requirements. We in SO Delivery are expected to work 113 % of the work year to "Meet
Requirements". We in Proposal Development are not billing a real Customer but Industry. The high figure is
to pay for the lard-butt multi-layers of management we have to carry in Delivery.
So in my view, the IBM Culture can be characterized by these words: fear, anger and fatigue.
That's every day.
to assess the culture in an organization" by "Dose of reality". Excerpt: However,
what they have created, in order to satiate their "corporate greed and furtherance of personal agenda",
is an environment that stifles creativity, asks for, but ignores performance, stagnates, micro-manages and
bureaucratizes compensation, micro-manages work assignments to the detriment of the development of staff,
and discourages responsiveness to the needs of customers.
I am in the wrong GBS unit" by "wonderaboutibm" Full excerpt: But... where the hell
is IBM's supposed skill in customer relations? I just get on one after another project that features nasty,
snarling and disgusted customers. It's not just me, either: I am asking coworkers and getting the same feedback
that I get from my own customers.
IBM mgmt looks as though it's becoming a yellow-bellied marshmallow in the face of customer
demands. I think the customer base has caught on to this delivery weakness and is exploiting it for what
it is worth. Then, too, there are the real and significant problems of IBM delivery, which as we all know is fragmented
and not well trained enough. It all seems to be feeding into the vicious downward cycle that GBS is slipping into.
smell blood" by "Dose of reality". Full excerpt: A market bully can only thrive if
he isn't called out. We are no longer dealing from a position of strength, since the competition has out
maneuvered us on price and quality. The market knows we are having trouble sustaining our top line, let alone
growing it. They know that we are desperate to hold onto the contracts that we have. Add to that the fact
that the grass roots dissatisfaction at the customer level spreads more and more with each dilution of our
resource quality, the increasing lack of staff motivation, and our multitude of "David Spade moves
(no, no, no....", and customers are bound to get aggressive with us. Unless they are hopelessly dependent
on us, they have all the negotiating power.
Yes, it is all part of the vicious downward spiral, and the financials haven't come close
to realizing the fundamental weakness in our operations and business model.
again" by "Dose of reality". Full excerpt: Revenue growth requires business acumen.
Cost cutting requires nothing more than motivated financial hatchet men, and HR/legal to
clear the path.
Which do we have more of at IBM? I rest my case!
If they were capable of growing revenue, they would, but they have been resorting to cost
cutting to close short term profit gaps. The revenue CONTRACTION implications of those actions come next
year, so every year they start in a deeper hole. Someone really should take their shovel away.
We are addicted to the cost cutting drug, and all the desire for growth opportunities in
the world won't fix that until we get "clean".
If you want revenue growth, we have to tap the "power of three". United we stand,
divided we fall. Two heads are better than one. Translation:
Stop pitting revenue hungry sales guys against reality based delivery guys
Get incentives for cross-divisional success instead of pitting us against each other
Be able to measure all in profit transparently and readily - take the transfer pricing
shenanigans out of the mix - it is a game used to reward the connected in lieu of the effective.
| New on the Alliance@IBM
- Job Cuts Status & Comments
- From the General Visitor's Comment
- Comment 4/25/06: Here is what I don't understand about IBM. How can this company keep
a low life performer like Sam Palmisano around and pay him gobs of money each year, i.e.
19 million dollars per year? It just doesn't make any sense. In fact, it is so ridiculous
it is laughable. No wonder IBM is in such trouble. -Anonymous-
- Comment 4/27/06: Fellow IBMers & Retirees, I am an IBM (downsized) retiree. I would
like to share with you a frustrating experience I had with the new IBM Human Resources.
I am raising a granddaughter & recently applied for health benefits for her. I submitted
an application & a copy of the court-ordered custody to IBM Benefits in Raleigh, NC.
They were denied.
I appealed the decision & resubmitted all requested documentation including a copy
of her father's Death Certificate & her mother's Disability info. They were denied again. Reason: Because I
am a grandparent, a 'Parent/Child Relationship' doesn't exist as stated in the IBM Health Plan. OK, so I sent a
certified letter to Randy Macdonald (IBM Sr VP Human Resources to get an explanation for the real meaning of a
'Parent/Child Relationship'. About 3 months later, after another registered letter to him, he finally responded
These are his exact quotes from his letter "The appeal is final and binding so I saw
no need to respond. I apologize. I am bound by the plan; therefore, I must support the previous stated position
of IBM." He wouldn't even take the time to answer my question. That's why he makes the big bucks. I guess
according to the existing IBM Benefits Plan, Parents, Spouses, Ex-Spouses, Children, Step-Children, & Domestic
Partners can exist, but Grandparents & Grandchildren are Virtual persons and don't exist.
This is the NEW IBM and reading between the lines, I foresee major changes coming for the
outdated old IBM Health Benefits Plan & they aren't good. Hold on to your socks IBMers & Retirees, it's
coming. Good Luck to you all. Ed Grigor (Retired from OLD IBM) - Edward J. Grigor -
- Comment 4/27/06: I have been intrigued with the way Sam gets paid. Especially, at last
two performance review time, my manager said to me that I am already paid good and he cant raise the salary
any more. He also went on to say that mine is one of the highest salaries in the group. Mostly he is giving
everyone the same reason. I am more than convinced that the salary that one earns is a function of the
power one holds in the company and not his/her performance. -Anonymous-
- Comment 4/27/06: Anyone else notice that the yearly amount saved by recent pension pension
reductions, supposedly due to severe current conditions, matches the amount to be spent on increased stock
dividends, due to current strength in market conditions. So to get that money back, all you have to do
is purchase the amount of stock that, as a proportion of total IBM stock, matches your personal pension
loss, as a proportion of total pension losses. -Anonymous-
- Comment 4/27/06: The IBM Health Plan is so bad now, that if you retire and then get married,
after retirement, your spouse is not covered. The same holds for having a child, after retirement, they
are not covered either. Ever Onward, IBM...Poor Executive management means the masses of real WORKERS have
to suffer. -Anonymous-
- Comment 4/28/06: Kudos to the IBMer on microphone 4 who asked Sam the tough questions.
Interesting that Sam wouldn't respond to whether he felt $10,000 a day in retirement was enough to live
on. How can you respect such a pompous A$$ like Sam who wouldn't respond to that question. Yes, Sam has
indeed been called worse names than "Sam". What an A$$. -Anonymous-
- Pension Comments page