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Highlights—June 17, 2006
- Information Week: IBM Chief
Palmisano Says Offshore Outsourcing Could Help Save World from Terrorism. By Paul McDougall.
Excerpts: In a letter to the Financial Times, IBM CEO Sam Palmisano says his multi-billion dollar investments in
offshore production facilities are part of a campaign to transform the company from classic multinational (read:
evil, exploitive, outdated, bad for world peace) into "a new actor" known as "the globally integrated
GIE, says Palmisano, is a benevolent form of industrial organization that creates lasting wealth and meaningful
jobs around the world. It can even disarm terrorists--figuratively, at least. Sounds like a corporation your mother
could love, even if she's a raving anarchist. But is this really why IBM is spending $6 billion in India?
Proving that CEOs love their children too, Palmisano says he wants to make IBM a GIE not solely
because it's an efficient way to organize a company that does business around the world. Sticking with the old MNC
model, he says, inspires protectionism against the West or, in the worst case, nightmarish acts of terrorism. "Left
unaddressed, the issues surrounding globalization will only grow. People may ultimately elect governments that impose
strict regulations on trade or labour," writes Palmisano. "Worse, they might gravitate toward more extreme
forms of nationalism, xenophobia and anti-modernism."
- Motley Fool: IBM: "I" Stands for India.
By John Finneran. Excerpt: IBM's chief executive, Sam Palmisano, announced IBM would invest $6 billion in India over
the next three years. Apart from confusing an analyst meeting with a World Cup game -- the event was held in a blue
tent in Bangalore with 11,000 people attending and webcast to 330,000 employees – it's unclear how IBM can spend
all this money in India, or, more importantly, why. The answer may be more Wall Street sharpness than Bollywood pomp
and circumstance. [...]
Although India produces 2.5 million new graduates every year, McKinsey estimates that only
10% to 25% of the graduates are up to multinational standards. The result is high turnover and wage inflation -- salaries
for project managers have increased 23% annually over the last four years.
Spending $6 billion in India is not easy or especially profitable, but that may not matter.
Though couched in grandiose terms, IBM can neutralize the competitive advantages of the Indian outsourcing firms, such
as Wipro and Infosys. Once IBM is the same size (or bigger) with the same Indian cost structure, it can apply its superior
heft and innovation skills to drive down the margins of the big Indian firms. Then, IBM can go back to being International
- Financial Times: IBM chief calls for
end to colonial companies. By Francesco Guerrera and Richard Waters. Excerpt:
Sam Palmisano, head of IBM, on Monday called on multinationals to evolve into a new type of corporation if they are
to avoid an anti-globalisation backlash that leads to the election of governments hostile to the interests of big
Instead, he argues they need to move towards full global integration of their operations so
as to stop the current unease about the forces of globalisation turning into an all-out assault on big business. The
danger for multi-nationals that fail to change their thinking is that countries will elect political leaders who impose
draconian labour regulations or try to constrain free trade.
- Yahoo! IBM Stock Message Board: "Re:
Visionary Sammy: End Colonial Compan" by "ibmaccountant". Excerpt:
The use of the word "colonial" is fascinating, in that it is derogatory to many of IBM's key customers, which
are the Global Fortune 100. I have already heard that some customers are cancelling orders and contracts as a reaction
to them being insulted by Sam. It also is derogatory to IBM's past, even though IBM was probably among the least
colonial of all US multi-national companies. Speaking ill of clients and peers like this is not good consulting, even
if the plan is to offer "de-colonializing" services of some sort.
"Colonialism" is also a politically charged word, which throws Sam into the emerging
versus industrialized world controversy. It's almost as if he (and thus IBM) is taking sides against American political
objectives and the current administration. He could also be preparing the company or a major unit (IGS? Let's hope!)
for sale to a a foreign owned company. IBM has always espoused internationalism because it could protect them from
their frequent violations of the law. They'd like to be above any country's tax, labor and banking laws, and operate
any which way they want.
- The Australian: Globalisation
must be embraced: IBM's Elix Put simply, Big Blue wants big business to kill off the protectionist threat. By
David Nason. Excerpts: Doug Elix has a big IBM message for anyone concerned about the way technology and globalisation
are turning multinational corporations into globally integrated enterprises that don't give a toss about national
boundaries or local interests. "The first thing to understand is you can't fight it," says Elix, the Australian
who is in charge of IBM's massive sales and distribution operations in 170 countries. [...]
Put simply, IBM wants big business to kill off the protectionist threat by adopting global
integration strategies en masse. This would set in stone the fact of globalisation and force governments to collaborate
on creating a permanent culture of innovation that generates the smart jobs needed to maintain living standards.
In this equation, intellectual capital rules while the bad old days of multinationals exploiting workers and nations
give way to a new era where the globally integrated corporation seeks to "open new possibilities for business
growth and social progress". [...]
IBM's plan was announced amid week-long company hoopla in Bangalore, a southern Indian city
that was an important colonial administration centre during the days of that earliest of multinational incarnations,
the British East India Co. Elix says Bangalore was an "exciting week", though it must have seemed surreal
when Palmisano was cheered wildly by 10,000 of IBM's Bangalore employees after his arrival on stage with Indian
President Abdul Kalam was counted down on a giant clock. But in the job-sensitive West, investments of $US6 billion
in India inspire fears, not cheers, so a week after Bangalore, IBM began a bold political sell. [...]
Elix believes such an historic transition of the corporation will have wide political implications,
though the political models that might emerge remain very hard to predict. "But I do think it's quite natural
that if activities globalise, then the idea of parochial governments might one day change too," he says.
- Yahoo! pension board: "New
Pension Comparison Tool". Excerpt: Ran the newly available
pension comparison tool today. I was surprised to see a change in my "PCF Annuity Conversion Factor" between
the 2007 PCF plan and the 2008 PCF plan. This conversion costs you a lot of money for those who already have 30 years
and have a retirement. The graphs clearly show an increasing drop in the PCF plan payout for every year you stay.
I also ran NetBenefits runs with and without PRP included for the exact same retirement date
and the numbers are quire different. NetBenefits is quite lower. Have they run quality checks on this tool or are
the older employees eligible to retire under the PCF plan before 1/1/2008 getting screwed again with the conversion
- Yahoo! pension board: "Re:
New Pension Comparison Tool". Full excerpt: My situation sure looks different.
In my case the PCF amount for "New 2008 Plan" is 16% less than in "Current Plan". This is reflected
in page 3 under "Single Life Annuity as of December 1, 2010. In looking at it in some detail, it looks like the
PCF calculations are swapped when it comes to final 5 year pay average. Since I'm one of the few that has continued
salary growth, the 2008 plan should look better than the current plan, but they appear reversed in the tool. The
5 year pay average dwarfs the PCF conversion factor, which I agree, as you say, is less and would be better. My max
points are at 425 already, so that doesn't change.
This ought to be a real surprise for most folks that still have rising pay and are over 30
years of service as of 2006. In my summary graph, every year the old plan delivers 15%-20% more than the 2008 new plan!
In other words, the Before is always much more than the after and in 2013 it's still about 14% even after they apply
the enhanced 401(k) monies.
If this is the case, there's a lot of folks that won't be staying past December of 2007!
- Yahoo! pension board post: "Re:
New Pension Comparison Tool" by "bits_bytes_and_bugs". Full excerpt:
My new vs. old plan delta was 20%. However, the assumptions of 2.75% raises and 5% variable pay are insane compared
to reality in my organization - unless you include the executive raises which skew the averages. I'll do a serious
run and comparison when they allow you to put in real raise figures (0%) and real variable pay (less than 2%).
- Employee Benefit News: N.J. book publisher
brings back a classic. By Steve Davolt. Excerpts: Oxford
University, established 1167. The Sorbonne, 1257. Harvard, 1636. Clearly, old school is best sometimes. Book publisher
John Wiley & Sons embraced that premise when it pulled a classic off the shelf. The two-century-old company revived
and upgraded its traditional pension plan at a time when most other companies are giving them the heave-ho. Watson
Wyatt principal Kevin Wagner can only marvel: "That's impressive. That's very rare these days."
Formerly standard fare, a defined benefit retirement plan is now the kind of perk Wagner calls
a "true differentiator," distinguishing a company from its competitors. A benefit like a DBP can make all
the difference in attracting workers to an industry or profession in acute demand, such as nursing. [...]
Of course, it doesn't pay to have a benefit of that caliber if employees don't appreciate it.
Wiley has gone all out to communicate the value of its DBP in its total benefits statement. In fact, the brochure explaining
the value of Wiley's total rewards won the company an Apex Award. Employee reaction to the retirement upgrade, say
benefits administrator Tony Brisbin, has been "universally positive, ranging from just pleased to highly enthusiastic."
- The Inquirer: IBM sues data mining man poached
by Microsoft. It wants a lot of money back from him.
Excerpts: Big Blue took legal action against former employee and Fellow Rakesh Agrawal, who left IBM to join Microsoft
in May as a Fellow in the fellowship of the Vole. Agrawal is credited with being largely responsible for inventing "data
mining" but IBM alleges he breached his contract and exercised options despite knowing that Microsoft is a competitor.
The action, filed in a New York district court, said Agrawal was employed for 16 years
and latterly held the position of IBM Fellow, which he held until he quit Big Blue on March 1st this year. IBM
claimed it made efforts to retain Agrawal with stock options as recently as September 16th last year, but said
a clause he signed meant he couldn't exercise such options if he joined a competitor within 12 months of leaving.
Agrawal, said IBM, exercised a number of options, the last being on February 14th 2006. In all, he cashed in $777,564.76
worth of IBM stock.
- Des Moines Register: Let's
keep a deal: Pass the Senate pension bill. By John Hale. Excerpts: Imagine
that you are a loyal worker who has spent a lifetime earning a pension for a secure retirement, and you suddenly find
that the rug has been pulled out from under you when your company changes the pension rules late in your career — costing
you tens of thousands of dollars in lost income.
You feel surprised, shocked, heartbroken and probably angry. And you wonder if anyone in power
is on your side. It is up to members of Congress — including our own U.S. Sen. Charles Grassley — to decide
whether workers who have devoted many years of hard work to the same employer will receive the pension benefits
they had been promised. [...]
In recent years, thousands of older workers who thought they could count on a certain amount
of money each month during retirement were shocked to find that they will receive much less. That's because their
employers have switched from one type of pension plan (a traditional "defined-benefit" pension plan) to another
(a "cash-balance" plan)
that will provide much less money to those closest to retirement and to others who have devoted years to their
The dramatic reduction in benefits for older workers created by the adoption of a cash-balance
plan was confirmed by a detailed report by the General Accounting Office in September 2002. Under the model of
a typical conversion used for the GAO study, a 45-year-old worker at the time of conversion receives an annual annuity
of about $18,500 at retirement from the cash-balance plan instead of the $39,800 annuity the worker could have received
from the defined-benefit plan with a final-average-pay formula. Likewise, a worker 50 years old at conversion receives
an annual annuity of about $17,800 from the cash-balance plan rather than the $35,100 annuity the final-average-pay
formula would have provided.
- New York Times: Reasons
to Worry. By Niall Ferguson. Excerpts: When the National Debt clock in Times
Square was turned on in 1989, the federal debt amounted to around $2.7 trillion. Eleven years later, on Sept. 7,
2000, the clock read: "Our national debt: $5,676,989,904,887. Your family share: $73,733." That's when the clock
was turned off, because, in those innocent days, it seemed as if the $5.6 trillion debt was set to decline, perhaps
to disappear altogether. On that same date, CNN reported, "Vice President and Democratic presidential nominee
Al Gore . . . outlined a plan that he says would eliminate the debt by 2012." The proposal was uncontroversial.
Economic advisers to the Republican candidate, George W. Bush, were said to have "agreed with the principle of
paying down the debt," but their candidate had "not committed to a specific date for eliminating it." That
should have set the alarm bells ringing. (And, in fact, the National Debt Clock started running again in 2002.)
Since becoming president, George Bush has presided over one of the steepest peacetime rises
ever in the federal debt. The gross federal debt now exceeds $8.3 trillion. There are three reasons for the post-2000
increase: reduced revenue during the 2001 recession, generous tax cuts for higher income groups and increased expenditures
not only on warfare abroad but also on welfare at home. And if projections from the Congressional Budget Office turn
out to be correct, we are just a decade away from a $12.8 trillion debt — more than double what it was when Bush
- For Collins Coloradoan letter to the editor, by John Kotson: "Keep
Your Promises". Full
excerpt: Prior to Marilyn Musgrave's election to Congress, members of the National Retirees Legislative Network
met with her to discuss health care and pension reforms. She signed a questionnaire promising to actively pursue
legislation for protection of earned health-care and pension benefits, low- cost prescription drugs and protection
of retiree benefits from bankruptcies. A year passed with no action, so a second meeting was held to reiterate our
requests for increased pension and health care protections. We offered the services of the NRLN lawyer, one of the
original authors of ERISA, to help draft new legislation to provide those protections. The Congresswoman promised to
seriously consider our request and respond soon.
Several months again passed with no action, so the author attended the Republican Monday morning
breakfast to confront the congresswoman. Upon entering, he was told by (Musgrave staffer) BJ Nikkel, that Musgrave
fully intended to work our issues. Guy Short, her chief of staff, would call that week to set up a meeting on how to
proceed. The call finally came late Friday afternoon stating there was no interest in pursuing our agenda further.
Is this the kind of representation we want in Congress? Are Colorado citizens happy with broken
corporate promises on health care and pension benefits? Can we individually afford the runaway costs of health care
and prescription medicines? We are still waiting for you to take action to fulfill your promises, congresswoman.
- Yahoo! message board: Global
Unionization of IBM Employees. Full excerpt: We are an advocacy group
/ alliance of German IBM employees having been established since the recent pension cut announcements. We believe that
it is as important as it has never been before to unionize as much as possible IBM employees to safeguard our interests
regarding pension cuts, job cuts and salaries. For that reason we have built a relationship network with other IBM
Unions and Employee Organizations around the world. We believe it would be very beneficial to exchange information
across countries. We would appreciate very much if you are interested to build a partnership with us. We are looking
forward to hear from you.
- Philadelphia Inquirer: Pension
law not likely to aid firms. Some of the 1,800-plus that switched plans
have sought protection from older workers' lawsuits. By Jay Newton-Small and Laura Litvan. Excerpts: Federal pension
legislation probably will not include the retroactive protection from lawsuits that companies such as International
Business Machines Corp., Bank of America Corp. and AT&T Inc. want, House Majority Leader John Boehner said yesterday.
The legislative effort stems from a change in the pension plans offered by many American businesses. More than
1,800 companies have switched their pensions from defined-benefit plans to so-called hybrid plans. [...]
A federal court ruled in 2003 that IBM's plan discriminated against older workers, siding
with employees who argued that IBM's switch from a traditional pension to a hybrid plan occurred as they would have
been accruing their most lucrative years of service under the old plan. The case is before the U.S. Seventh Circuit
Court of Appeals. After that ruling, the U.S. Treasury Department suspended licensing of hybrids.
More than 300 lawsuits have been filed against companies offering these plans, including one
against AT&T by 30,000 employees. The legal uncertainty is fueling the companies' push for legislative protection.
IBM, AT&T, and 37 other companies signed a Jan. 4 letter to House and Senate members calling
on them to provide "comprehensive clarification of the basic age-discrimination standard for defined-benefit
plans that provides legal certainty for all existing and future hybrid plans."
About 47 percent of conversions to hybrid plans compensated at least some older employees,
according to a study released in October by the Government Accountability Office. The same study also found that older
workers who were switched to hybrid plans could lose as much as $250,000 of what they would have earned if they had
remained in the traditional defined-benefit plan.
- Washington Post: SEC
Chief to Push for Fuller Disclosure of Executive Stock Options. By Rob Urban
and Jesse Westbrook. Excerpt: The SEC and the Justice Department are investigating allegations that companies manipulated
option grant dates. At least 30 companies have disclosed such inquiries, and a half-dozen more are conducting internal
probes. The SEC's proposal on disclosure rules drew more than 20,000 comments, Cox said.
- Washington Post: The
Next Options Scandal. How to pay executives under the table. Excerpts: The latest
abuse concerns the suspicious dates on which options are granted. At more than 30 companies, executives have received
options on a day when their firm's share price was at a low; the subsequent rise in the price has made the options
valuable. As the Wall Street Journal has reported, top executives at KLA-Tencor Corp., a maker of semiconductor equipment,
were awarded options on two days in 2001. The first day marked the low point of the firm's share price in the first
half of the year. The second day marked the low point in the second half.
The chances of this being a coincidence are around one in 20 million. It seems likely, therefore,
that the options were gamed: Perhaps the issue date for the options was chosen retrospectively, so that the firm could
look back on a six-month period and pick the most advantageous date from the point of view of the executives. If so,
a mechanism that was supposed to reward performance was used instead to pay bosses irrespective of performance. The
aim was to disguise the scale of executive pay and to make it look more merit-based than it was.
- Washington Post: A
Crackdown on 'Perfect' Timing SEC to Clarify Rules on Lucrative -- and Potentially Abusive -- Backdating of Options. By Kathleen Day. Excerpts: Federal regulators plan to crack down on an increasingly
popular corporate practice that boosts executive compensation by guaranteeing profits on stock-option awards. The
Securities and Exchange Commission is to issue a statement, possibly as early as next month, clarifying the agency's
view of when current law allows backdating of stock options -- picking a date when the stock was at a low point to
be the date of the award, thereby immediately guaranteeing a profit. Companies need the permission of directors,
consistent with company policy, and full disclosure to investors, including properly counting the added costs against
he action stems from a widening federal probe by the SEC and the Justice Department into whether
several dozen companies backdated stock options illegally, making them more valuable by changing the date on which
they were said to have been issued without telling shareholders and without recording the additional compensation cost
as an expense against the bottom line.
- Yahoo! message board: "Re:
Demand Lower Service Contracts". By "ibmaccountant". Full excerpt: There are 2 companies, TPI and
ICN (IBM Contract Negotiations) that are already helping customers in IBM contract negotiations who are asking for "India
services rates". IBM negotiators are getting the heat from ICN and TPI trained and assisted customer/client negotiators
to reduce IBM services rates for work that is done in India by 60-67%. Sammy should have kept his mouth shut.
- Inside Higher Ed: The Disappearing Chinese
Engineers. Pop quiz: What is the significance of 600,000,
350,000, and 70,000? Excerpts: As anyone who has attended one of the many recent Congressional hearings on American
science education or economic competitiveness knows, those are the numbers of engineers who graduated last year
from institutions of higher education in China, India and the United States, respectively. The numbers were included
in a hugely influential report, titled “Rising Above the Gathering Storm,” on the future of the American
economy, which was released in October by the National Academies. [...]
The hearings — along with press releases from politicians and news articles, including
a recent feature in Newsweek, that use the numbers — have combined to pound out a steady drum beat of doom and
gloom for the future of American science and engineering. But the numbers, though oft repeated, are no longer embraced
by the National Academies.
- Washington Technology: H-1B
expansion draws support. By Alice Lipowicz. But some worry workers will
be hurt The Senate’s recent expansion of the controversial H-1B visa program is shaping up as one of the big
political mosh pits of the IT world. Squaring off are corporate bosses and computer worker bees; high-flying Internet
entrepreneurs and low-paid programmers; Bill Gates and newly graduated computer scientists who think the IT job market
stinks. IT companies are strongly promoting expansion of the 16-year-old H-1B visa program, which lets them offer temporary
work visas to specially skilled foreign workers.
But many IT workers fear job displacements and depressed salaries under the Senate-approved
program enhancement. The Senate voted May 25 to increase the number of H-1B visas annually available to foreign
workers from 65,000 to 115,000 with the possibility of an additional 20 percent increase every year. [...]
H-1B visas have been capped at 65,000 annually since 1990, but Congress hiked the cap to 115,000
in fiscal 1999 and 2000, and to 195,000 from fiscal 2001 through fiscal 2003. It restored the 65,000 limit at the beginning
of fiscal 2004. Numerous exemptions to the cap are granted. Of the 217,340 visas that were approved in 2003, only 78,000
were counted toward the legal H-1B cap. The rest were granted for employment in exempt institutions, including universities
and non-profit organizations, according to NumbersUSA, an organization that promotes reduced immigration.
one member of Congress, Rep. Bill Pascrell (D-N.J.), said the H-1B program needs to be reformed. He has introduced
legislation that would, lower the number of H-1B visas available, require all employers to prove they are hiring qualified
U.S. workers first, and greatly strengthen enforcement and accountability provisions. “My legislation faces
the Americans who have high tech degrees in one hand and pink slips in the other,” Pascrell said in introducing
his H-1B legislation in November 2005. “We must address this fundamentally broken program that is tearing down
the labor standards American workers have worked so hard to build up.”
- WashTech News: Study
Reveals "Jobless Recovery" in Tech Labor Market, Despite Industrys
Contrary Claims. Just 76,300 new Information Technology jobs added since April 2003; New jobs total fewer than
one-quarter of those lost earlier in the decade. Excerpts: Job growth in America's information technology sector
has been significantly less robust than industry leaders have claimed, and fewer than one-quarter of the IT jobs
lost during the early part of the decade have been recovered over the past three years, according to a new study
released today by the nation's leading union of high-tech workers. With limited exceptions, the so-called "recovery" of
the IT sector has been a jobless one the study found, even though an economic recovery began more than five years
"Technology job growth is weak at best in most major markets across the country," said
WashTech/CWA president Marcus Courtney. "Tens of thousands of highly-skilled American IT workers remain unemployed
or underemployed, while at the same time-more and more technology jobs are being shipped out of the country." [...]
The transfer to foreign markets of jobs and services once performed by American workers is
a significant factor in the continued weakness of the IT labor market. Since the mid-1990s a growing array of processes
and services formerly conducted in the U.S., including code writing, software design, data processing, claims processing
and customer service, have been outsourced to providers in low-wage countries.
- Wall Street Journal: U.S.
Wages Face Glut of Pressures. By David Wessel. Excerpts: The conventional
economist's story was that the clearest losers from this new competition wouldn't be workers in the U.S., which has
already lost factory jobs to places like Mexico. Those Mexican workers would be displaced by low-cost Asian labor.
But China and India didn't follow that script. They are investing in educating workers and creating a cadre of scientists
and engineers. "It isn't how many engineers per capita that produces a technological breakthrough as much as the
total number of engineers working on a problem," Mr. Freeman says. China and India have a growing number. He predicts
that "will undo some of the advanced countries' monopoly in high-tech innovation and production," threatening
Such arguments once were dismissed by mainstream academics. But that's changing. In a recent
Foreign Affairs essay, Princeton economist Alan Blinder, a former Federal Reserve vice chairman, said his peers "are
greatly underestimating" both the "importance and disruptive impact" of offshoring. "The societies
of rich countries seem to be completely unprepared for the coming industrial transformation," he wrote.
- BBC News: Powergen shuts India call centres. Excerpts: Energy firm Powergen is to close its Indian
call centres, with staff in the UK dealing with customers instead. It said the move would create 450 new jobs by
the end of the year and reduce the number of customer complaints. Powergen began using call centres in India five years
ago citing, like many other businesses, the financial benefits it brought. But the firm said it was "not prepared
to achieve savings at the risk or expense of customer satisfaction".
- ComputerWorld: Confessions
of an offshore developer. "'I'm the guy you're afraid of." Excerpts: I'm
the guy you're afraid of. I was born in India, and in 2000, fresh out of college, I was working for an engineering
services company in Pune -- one that helped design and build manufacturing plants worldwide. The company was a wholly
owned subsidiary of a U.S. company based in New York. I had less than a year of experience when an enterprising project
manager decided to make me the lead engineer on his project. He told me that a similar project was being run out
of the New York office with a 10-year veteran as the lead. I guess the idea was to compare costs and results. [...]
My New York associates received a stern warning and were instructed to resolve future issues
via phone or e-mail. We completed the project without further incident, and by the time I left the company, the Indian
office had grown to 350 people. By then, the U.S. office was half its original size. I know now that it wasn't personal.
The company was trying to stay competitive in a global market, and the U.S. team members were trying to protect their
jobs. Today, I work in the U.S. (better salaries!), and when I hear my friends and associates complaining about offshoring,
I truly understand. To the bean counters, it's a zero-sum game. Not so to the people who are involved.
- Hindustan Times: IT workers
should decide on union formation: CITU. Excerpts: Alleging "gross
violation" of workers' rights, the Centre for Indian Trade Unions said on Friday that the employees of IT and
other sunrise sectors should be given a free hand to decide on formation of unions to exercise their fundamental
rights as laid down by the ILO. "Our stand on the issue is clear. The workers of the IT and other sunrise sectors,
where gross violation of labour laws are rampant, should have a free hand in deciding whether they want formation of
unions or not," CITU General Secretary Chittabrata Majumdar said.
- Greenock Telegraph (Scotland): Giant
killers win a second round. Excerpts: Global giant Sanmina was
defeated for a second time by a group of sacked workers. The electronic firm, formerly based in Spango Valley Greenock,
lost its appeal against a tribunal's decision to award more than £180,000 in total to the employees for unfair
dismissal. The 16-strong group, some backed by the union Amicus, took on the might of the multi-national during a
29-day hearing last year. Yesterday, Judge Mr Justice Elias, of the Employment Appeal Tribunal, threw out Sanmina's
appeal case and ruled that the compensation awarded to 14 of the employees should stand. Although the original unfair
dismissal verdict for two of the employees was reversed.
One of the former workers who took Sanmina to tribunal, William Colhoun, of Port Glasgow said: "The
appeal should never have been allowed to go ahead and the fact that we have won again speaks volumes. "The only
reason for the appeal was time wasting by Sanmina." The workers concerned were among the 300 to lose their jobs
in 2004, only a year after Sanmina took over from IBM at the plant. They then pursued unfair dismissal through
the tribunal. The panel found unanimously in their favour on grounds including lack of proper consultation, an
unfair application of absence and overtime, and how vital employees were to the company. [...]
Sanmina's controversial three-year stay in Greenock came to an end this year when it announced
manufacturing was moving to Hungary with the loss of the remaining 300 jobs. Mr McCourt added: "The whole situation
has been tragic. It is just a case of IBM handing the workers over to Sanmina to dismiss them. "Both Sanmina and
Lenovo were brought in to do IBM's dirty work." Only a cabling division run by Sanmina remains at the former IBM
plant in Greenock.
- Contractor UK: Contractors fear IBM job exodus. Excerpts: The prospects of UK plc losing hi-tech
jobs to lower cost regions of the world was highlighted again last week when IBM announced a massive upgrade of Indian
The concept of a "globally integrated company" was explained by Palmisano in The
Financial Times, when he said a company following such a strategy would connect more intimately with partners, suppliers
and customers and, most importantly, "engage in multifaceted, collaborative innovation."
Fancy words; and one supposes that FT readers might understand them more immediately. Yet Lee
Conrad, national coordinator for Alliance@IBM – a workers' organisation connected to the Communications Workers
of America – thinks the motivations can be explained much more simply. "This really is about job shifting,” he
said in an interview with Contractor UK. “Last year 14,000 IBM employees and contractors lost their jobs in Europe
and the United States. That same year IBM India increased IBM employee population by roughly the same number.” [...]
Anne McMahon, contract project manager, is dubious of the advantages even given the lower rates
for offshore workers. "These high flying directors and managers see huge dollar signs when they compare the flat
rate here to an offshore one. However that is not a realistic comparison, you need to introduce new roles within
your onshore team to do all the management, analysis, QA and release management," she says. She explained how
two out of three of her former clients that used offshore services "were really struggling to get any cost savings."
- Reed Business Information: IBM
moves purchasing headquarters (to China). Excerpts: IBM says it is
moving its global purchasing headquarters from Westchester County, N.Y. to Shenzhen, China effective Aug. 1 John Paterson,
vice president and chief procurement officer for IBM, will re-locate from Somers, N.Y., to China, and run IBM's Global
Procurement operations from there. It is the first time IBM has located the headquarters of a global corporate function
outside the U.S.
- The Economist (United Kingdom): Inequality
in America. The rich, the poor and the growing gap between
them. The rich are the big gainers in America's new prosperity. Excerpts: But after 2000 something changed. The pace
of productivity growth has been rising again, but now it seems to be lifting fewer boats. After you adjust for
inflation, the wages of the typical American worker—the one at the very middle of the income distribution—have
risen less than 1% since 2000. In the previous five years, they rose over 6%. If you take into account the value
of employee benefits, such as health care, the contrast is a little less stark. But, whatever the measure, it seems
clear that only the most skilled workers have seen their pay packets swell much in the current economic expansion.
The fruits of productivity gains have been skewed towards the highest earners, and towards companies, whose profits
have reached record levels as a share of GDP.
The White House professes to be untroubled. Average after-tax income per person, Mr Bush
often points out, has risen by more than 8% on his watch, once inflation is taken into account. He is right,
but his claim is misleading, since the median worker—the one in the middle of the income range—has
done less well than the average, whose gains are pulled up by the big increases of those at the top. [...]
The rise of the working rich reinforces America's self-image as the land of opportunity. But,
by some measures, that image is an illusion. Several new studies* show parental income to be a better predictor
of whether someone will be rich or poor in America than in Canada or much of Europe. In America about half of
the income disparities in one generation are reflected in the next. In Canada and the Nordic countries that proportion
is about a fifth. [...]
The one truly continuous trend over the past 25 years has been towards greater concentration
of income at the very top. The scale of this shift is not visible from most popular measures of income or wages, as
they do not break the distribution down finely enough. But several recent studies have dissected tax records to investigate
what goes on at the very top.
The figures are startling. According to Emmanuel Saez of the University of California, Berkeley,
and Thomas Piketty of the Ecole Normale Supérieure in Paris, the share of aggregate income going to the highest-earning
1% of Americans has doubled from 8% in 1980 to over 16% in 2004. That going to the top tenth of 1% has tripled from
2% in 1980 to 7% today. And that going to the top one-hundredth of 1%—the 14,000 taxpayers at the very top of
the income ladder—has quadrupled from 0.65% in 1980 to 2.87% in 2004.
|News and Opinion Concerning Health Savings Accounts, Medical Costs and
Health Care Reform
- AARP: Your Take-Charge
Guide to Affordable Health Care. 55 insider tips for saving money on drugs, doctors, hospitals, dentists,
and eye care. By Russell Wild. Excerpt: Recent
estimates by Fidelity Investments show that a 65-year-old couple retiring today should have at least $200,000
saved just to cover out-of-pocket medical expenses during their retirement years. For couples ages 60, 55,
and 50 planning to leave the work force at 65, the numbers jump to $275,000, $350,000, and $425,000, respectively. "This
is considerably more than most Americans have planned for—if they have planned at all," says Brad
Kimler, senior vice president of Fidelity Employer Services Company. This harsh reality is starting to translate
into a kind of revolutionary fervor among some Americans. "Our health care system clearly isn't working," says
William Schwied, M.D., M.P.H., an 85-year-old retired physician who has organized hundreds of California
retirees in a grass-roots effort to fight for a better health care system. "The only way we'll see change
is for people to take to the streets," he says.
- San Francisco Business Times: Most
health savings accounts are staying empty. Excerpts:
Many consumers simply aren't funding the health-savings accounts or HSAs linked to their high-deductible
health insurance, say several new studies, calling into question whether the impact of so-called consumer-directed
health plans is all it's cracked up to be. As of January, about 3.2 million Americans were enrolled in high-deductible
plans, but only 820,000 of them -- 26 percent -- had opened and funded an HSA, according to data from Inside
Consumer-Directed Care, a newsletter published by Atlantic Information Services.
Other industry studies estimated that as many as 4 million consumers would be signed up
for such plans by the end of March, and that about 1.4 million of them would have put funds into their health savings
accounts. Figures for the first-quarter aren't yet available. But some observers say many consumers can't afford
to fund the HSAs that accompany many of the these plans -- or don't benefit from their tax-advantaged aspects because
of their tax status and income levels. Officials at WageWorks and others say the large gap between consumers with
high-deductible plans and those who fund their HSAs challenges the thinking among policymakers and employers who
believe that HSAs will play a big role in making health care more affordable.
Raff said proponents of the plans are overstating their impact by ignoring the number of
unfunded HSAs. "I think it's intentionally muddled when (these numbers) are reported nationally to the press.
People are using this overly inflated number (3.2 million), or saying that they're talking about the number of HSA
accounts when it's really the number of high-deductible plans with HSAs attached," she said.
- Kaiser Network: Lack
of Action on Creation of Single-Payer Health Care System Hurting U.S. Auto Industry, UAW President Says. Full excerpt: The lack of action on a single-payer
national health care system has led to problems for U.S. automakers, United Auto Workers President Ron Gettelfinger
said on Monday at the 34th annual UAW convention in Las Vegas, the AP/Houston Chronicle reports. Gettelfinger
also said that UAW agreements last year to make health benefit concessions to GM and Ford were difficult
for him but necessary to address the large retiree health benefit liabilities of the companies and to protect
future benefits. Under the agreements, UAW retirees and their dependents for the first time will pay part
of their health insurance premiums, annual deductibles and copayments. Hourly UAW employees will have to
contribute some of their future wage increases to a trust for health care costs. According to the AP/Chronicle,
GM in 2005 spent about $5.4 billion on health benefits for 1.1 million employees, retirees and their dependents,
and Ford spent about $3.5 billion for 550,000 employees, retirees and their dependents. Gettelfinger said
that UAW must develop a new relationship with automakers, which face difficult times because of high health
care costs and other issues. He said, "Like it or not, these challenges aren't the kind that can be
ridden out. They demand new and farsighted solutions, and we must be an integral part of developing these
solutions." UAW members on Wednesday likely will re-elect Gettelfinger to a second term as union president
| New on the Alliance@IBM
- AFL-CIO: The U.S. Needs Manufacturing Jobs—So Does the Middle Class. By James Park. Excerpts: The
crisis in manufacturing stems from a lethal combination of bad trade policies, misguided tax plans and a
lack of a comprehensive health care system, write Baugh and Yudken in “Is
Deindustrialization Inevitable,” in
the summer issue of New Labor Forum. Baugh, executive director of the AFL-CIO Industrial Union Council (IUC),
and Yudken, an economist and consultant on high-road industrial strategies, point out that beginning with
the fatally-flawed North American Free Trade Agreement (NAFTA) 11 years ago, the United States has signed
a series of deals that do not protect workers’ rights, paving the way for low wages to suck away higher
paying jobs from the United States. This movement of production and jobs is encouraged by a tax policy that
rewards companies for moving production offshore.
Companies that try to do the right thing by providing health care and good retirement benefits
are put at a competitive disadvantage with companies that are located in countries that provide comprehensive
national health insurance. Last year, the nation imported a record $725 billion more in products than it
$2 billion worth of goods and products that Americans didn’t make every day of the year. [...]
The evil soul mate to the nation’s bad trade policy is bad tax policy. The authors
cite Rep. Charles Rangel (D-N.Y.), a congressional tax expert, who explained in a recent report that U.S. tax policies
encourage companies to move abroad. When corporations close a plant to move it overseas, they can deduct the cost
of the plant closing from their taxes. They also receive a benefit worth as much as 35 percent of the plant closing
costs. And on top of all those benefits, corporation can then borrow money from the federal government to fund foreign
operations and deduct the interest from their taxes.
The last straw breaking the back of U.S. manufacturing is health care. U.S. competitors
are located in countries that either offer national health insurance for everyone—or none at all—and
so unlike U.S. firms, they aren’t obligated to pay soaring employer-paid health care costs. General Motors
plants in Detroit, for example, spend $1,400 more to build each car because of health care costs than they do across
the river in Windsor, Ontario. Health care costs also have undermined bargaining power for wages, and health care
is the number one issue in nearly every contract negotiation.
- Job Cuts Status & Comments
- Comment 6/14/06: An honest and brave soul who posted this on internal IBM site when
reacting to recent IBM's gala at Bangalore, India: IBMer in Global Financing — Rochester, New York,
USA: "I have very mixed emotions about this event. I respect the Indian people for their education
and business skills. I understand how the business world is changing and why IBM is investing in India
and similar countries with a low cost work force. The bottom line is IBM is investing where labor is
cheap and can do so with the advancement in communications technologies.
The part I struggle with, like many, many IBMers these days, is for that the last several
years my peers/friends continue to lose their jobs, many of which get moved to India, etc. For those
of us who remain, work hours are significantly longer due to less people around to do what needs to be done,
no raises in 5-6 years, "working vacations" and a more difficult staff work process working with IBMers
outside the United States. Not to mention responsiveness to customer requests is slower with multiple
countries' employees working various steps in a process.
This does not make for a high morale environment. At my division's kick-off meeting this
year, many folks who normally attend were not invited to save money and there was not any "fun" activity
as part of the week...yet IBM has an "extravaganza" in India.
I find myself having a hard time getting excited about this Bangalore event, sorry. It
does not seem our executives have an understanding and appreciation of what folks are going through in countries
where the employee base is shrinking...There are many long term dedicated IBMers who have invested years to support
IBM's efforts along the way. In closing, I look forward to the time when our stock goes up to see the fruits
of all these changes...Thank you for listening." -Anonymous-
- Comment 6/15/06: US Corporations are offshoring and removing the "buying-power" of
the American workers, therefore the US public can no longer purchase the homes/cars/items we use to purchase
because we no longer make money. US Corporations are offshoring to India/Brazil/China to people with
lower paying salaries, but still are not the "true" buying power of goods. Note: US Corporations
are offshoring all of the US public financial information; government and corporation knowledge and secrets;
credit card information of the public; etc. to these countries.
- Comment 6/15/06: Attrition? Jobs do not have to be cut - but they can make it unbearable
if you decide to stay. I have lately seen people walk away after giving up. They chip away at your self
worth until you just give up. I would prefer to be laid off. But you see, it costs more $$$ for IBM to
do this and nothing if you just walk away. I guess they do not think employees in other countries will
mind being treated this way. What goes around, comes around. -Anonymous-
- Comment 6/17/06: IBM internal VM and MVS support going to India at the end of June.
The Fishkill desks received walking papers last week. The AIX desk was downsized and will be in India
- Comment 6/18/06: IBM Greenock Born 1954 Died 2004... At its height about 5,000 workers.
Up until year 2000, IBM prided itself on no (enforced) redundancies (US version of layoffs.) " We'll
always find work for them!" From circa 1990 slow drip effect which saw contractors more involved
thus undermining pay rates, bonuses, etc - especially mid-late 1990s. Courtesy of new CEO well paid jobs
became low paid with premiums and shift allowances, etc eroded. Agencies were encouraged to undercut
each other till many previously well paid jobs became minimum wage.
At no time were there any unions at this site (50 years) .'Ploys' over the last 10 years
included Solectron (lasted 2 years) and Mimtec and others local but off-site of the massive Spango Valley Site.
Hey, has everyone figured this one out?.. if only cheap labour economies get to build products where does this
leave 'industrialised' countries. Service industries have to have manufacturers; if not, where do they get their
local revenues from.. if no one is building anything except in China, India, East Europe etc, Is this a recipe
for unrest? Could this be the end of Blue collar workers and also the middle classes? -Anonymous-
- Comment 6/18/06: Any of you guys hear anything about the Dublin campus? Management won't
disclose anything. All we hear are rumours of job cuts and plant closure in the next 3 years. All we
know for certain is we are losing a lot of our low end product to China. Any help would be appreciated!
- Comment 6/21/06: Hearing a rumor that IBM USA is working on a means to "vendor
out" 1st, 2nd and 3rd line management, to some offshore business consultant company? Any truth to
this? Why not, once done with offshoring US workers, logically the next in line is management and HR.
It's an IBM global world after all! Loyalty to employees is old fashioned...maybe so, but, I'll never
use an IBM product or service because of IBM's odd way of dealing with long term employees. -Anonymous-
- Comment 6/21/06: Yes, I too am hearing the same rumor about offshoring lower levels
of management in RTP. The reasoning is that current US management doesn't have what it takes to fire
the 3's and managed 2's. With offshored/non-IBM management, the job becomes easy and IBM's hands are
- From the General Visitor's Comment
- Comment 6/15/06: As a former IBM employee, forced into early retirement in 2002, I am appalled by
the way IBM treats its employees and retirees. I would like to see all employee stockholders unite, insist
on a board seat and push for fair and equitable treatment of employees and retired employees. The current
CEO is doing a horrible job and doesn't deserve a 29% pay increase and a rediculously high pension after
Gerstner cut the pension of all retirees. -Anonymous-
- Pension Comments page
|Vault Message Board Posts
- "I hope
so but" by "CandorSense". Full excerpt: My guess is you will not see the IBM Help desk
come back. While we might have went there to save money, it had the additional effect of pissing off everyone
who called and thus we developed our own internal help networks (friends and co-workers). So my guess is
that the stuff we shipped to India not only resulted in lower costs, but every month contributes to fewer
Must be some evil genius who loves that. If you moved the help desk back, and put competent
people on it, we'd use it. lol.
I'm pretty sure IBM couldn't care less about how its employees are "helped" so
why bother. Pretty soon they'll be able to staff the IBM help desk with a half dozen people working one telephone
of IBM's dichotomies" by "civilliberty". Full excerpt: I found it very frustrating and bizarre
that for a company that claims to help make other companies more efficient they were incredibly in-efficient
and myopic with their own internal processes. I worked in an area that because of the number of external clients
with different communications setups required us to run a non-standard operating environment. The desktop support
group were so dumbed down that their immediate response to system issues was to 're-image' a your machine. Of course
because our setup was non-standard we had to rely on each other to get our machines working correctly again - and
it once took me 2 weeks. Multiply that by say, 30 people in an area who might experience the problem at least once
a year and that's more than a full year's salary. Add on top of that the inability to meet SLA and getting slammed
financially by the client and all the attendant Bad Will and it all adds up.
really rather simple" by "Dose of reality". Full excerpt: The implicit assumption in
all of the IBM HR policies is a total disregard for experience as a driver of effectiveness and success. This
supports the age discrimination policies, the pension plan grabs, the offshore model, the H1/L1 model, and
the outright deceptive compensation policies and practices which leads to the high attrition rate.
The 6 month neophyte has the same number of eyes, ears, mouth and brain as a 40-year old
veteran. That allows IBM to superficially represent them as capable, while lowering our cost structure. They are
no more than movie props.
What we all know is that in services, there is no substitute for experience and people skills,
and this is where the low cost employee will fail over and over again.
As far as the connection to our internal support structure, the operative word in your post
was “claims”. Even with external clients, we pitch our projects as business process improvements, but
in the end do no more than slam in technology. It’s the same or worse on the inside, since the billing rates
are much lower!
are correct, sir!" by "Frank_Reality". Full excerpt: Unfortunately, executives don't
want outsourcing to fail, so all problems and failures are hidden from their view. We're not allowed to disrupt
the executives' imagined views of utopia by communicating the truth. In short, they live in a fictional world
and cannot be bothered with the truth. Real short, they're clueless.
I know of one such utter failure of an outsourced project. Not only can't you kill it,
you can't get any improvement in performance because they know they are protected by the execs. Result: The work
isn't getting done and when it is done it's done poorly.
BTW - Don't ever be the IBM equivalent of the child who reveals that "the Emperor
has no clothes" and insists on telling the truth. That can be a quick career ending event.
point on internal projects" by "civilliberty". Full excerpt: I did some internal
IBM training (which I am genuinely grateful for). The instructor who was very competent in this field bemoaned
the quality and accuracy of the course notes - they were out of date in a number of areas and so made it difficult
to complete various exercises. It was of course due to the fact that no budget was provisioned to keep the
course material up to date.
-- Death by weight" by "CONsulting_2_long". Full excerpt: The matrix is implemented
poorly with measures for sure. Additionally, the matrix is a way to have more chiefs for everyone's buddy.
Too many dimensions of a matrix makes for a lot overhead.
- Practice Area
- Service Area
At one point, I had over 20+ hours of standing conference calls for coordination. These
were merely status calls that were not part of any proposal, client, or engagement management. If you add
those calls, then the standing call time rose to over 30 hours/week. Most of calls were of questionable value,
mostly a way for a 'leader' to speak to the organization to demonstrate his/her leadership capabilities. Obviously,
non-value added, I skipped a great deal of them in order to do the real aspect of my position. I was quickly
labeled 'a non-team player' for not participating. (That is how Dose and other have soooo much time to post here.)
In addition to wasting part/whole practice time, the matrix must support the cost of these leaders and direct support
It is a poor model, unless you have to do a bunch of shopping on the internet.
just overhead" by "Frank_Reality". Full excerpt: The impact is far beyond the overhead
that puts us at extreme competitive disadvantage. To make up for the cost, the employees on the front line
take the brunt of cost reduction and takedown resulting in an anorexic work environment: no raises, no education,
no promotions, third rate tools and PCs, poor accommodations when traveling and so on.
Also, this overhead with all their staffs, bean counters and bureaucrats severely slow
and block our abilities to serve our customers. Creativity is thwarted, agility is blocked, common sense is wiped
out and customer satisfaction is eroded - all are sacrifices made at the Great Throne of the IBM Matrix.
In the new economy, the slow will be devoured by the quick. Businesses that can't move quickly
and effectively will be in economic danger. A service company that can't move quickly enough for their customers
will soon have no customers.