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    Highlights—July 8, 2006

  • In a Yahoo! message board post, Janet Krueger responds to the following question: Janet, is there any word on the status of the legalizing CB plans retroactively? Full excerpt: No word.
    If you're tired of writing to Congress about this (I know I am -- especially when I get back a wordy form letter demonstrating they didn't choose to understand a word I said!) something else that would help is a flurry of letters to the editor of local and national letters to the editor...
    Please let the press know that the so-called 'pension reform bill' is of great concern to you, not because you are an airline worker or an employee of a company with an underfunded plan, but because you have been subjected to an age discriminatory cash balance conversion. One clause that has been in and out of the proposed legislation so often our heads are spinning is the retroactive legalization of such conversions. Ask them why they aren't reporting on this critical part of the bill that could adversely impact millions of workers and retirees. Let them know you're a class member of one of the lawsuits against such a conversion, and that you will be outraged if Congress intervenes and lets IBM keep the bulk or the settlement money they owe you just so that other equally guilty corporations can enjoy 'legal certainty'...
    Perhaps enough letters on the issue will convince the press to cover that aspect of 'pension reform' and let us know what is going on!
  • BusinessWorld (India), courtesy of Zinda hoooo blogger: Why IBM's Sam Keeps Coming Back to India. Excerpts: The big India push of the past three years — which includes the takeover of the BPO company Daksh eServices for $160 million and ramping up its delivery centres in Bangalore — is meant to remove the second weakness. A small point here — the India strategy is part of IBM’s overall plan to create four delivery hubs in the BRIC (Brazil, Russia, India, China) countries to bring down cost of operations. However, as we will see, India is way, way ahead of the other three.
    The BRIC plan has been clearly laid out. Essentially, over the long term, it will use these four hubs to offer clients the best deals at extremely competitive prices. Brazil, where it has over 6,000 people, is expected to become its offshore hub for tapping the Latin American market, as well as a nearshore option for US customers. Russia, a nascent operation, gives IBM a nearshore but low-cost solution for the diverse European market. Its big advantage in Russia is a large per capita pool of engineers — 3,500 for every 1 million people. Then there’s China. Compared to India, IBM has just 7,000 people in China doing offshore, but the country has a huge domestic market over which IBM has established a stronghold over a 15-year period. India, as Micahel Cannon-Brookes, vice-president (business development, China and India), puts it and as IBM sees it, is at the epicentre of the flat world. In 2005, the BRIC countries collectively ploughed in $3.8 billion in revenues and employed close to 60,000 people. [...]
    Palmisano’s strategy is based on the premise that IBM’s consultants in the US should be able to sell high-end, high-margin consulting solutions to clients across the globe and then have those solutions implemented out of its base in India. It is not something that others haven’t thought of — practically every one of its rivals is following the same strategy, including Accenture and EDS. And Indian software services companies like TCS, Wipro and Infosys are trying to transform themselves into end-to-end solution providers by adding consulting services to their traditional range of offerings. [...]
    Since 2004, Palmisano has accelerated the India initiatives. He has reorganised the India team to drive growth in line with IBM’s global objectives. Most of the senior India management team, for instance, does not report directly to Annaswamy. So, former PwC Consulting man Amitabh Ray, head of IBM Global Services India, reports directly to IBM Global Services’ chief Ginni Rometty. “This helps get rid of the bureaucracy and makes decision-making faster,” says a company source. [...]
    India is growing explosively, but is it growing fast enough to make a difference to IBM? That is the question analysts are beginning to ask. The questions are valid because, of late, IBM Global Services seems to be struggling. A year ago, it missed both its revenue and earnings targets. High-cost operations in Europe and sluggish European markets were identified as the root cause of that miss.
    That miss was the primary reason why IBM decided to shed 14,500 jobs from its European operations — 14.5 per cent of 100,000 it had there. That caused huge protests and much pain within IBM, which had always tried to project itself as a company that offered jobs for life. One big loss was the exit of IBM Global Services’ chief John R. Joyce, who quit in July 2005. Joyce left two months after the job cuts in Europe were announced. But, so far, Palmisano hasn’t let the pain deter him.
    In the latest quarter again, IBM Global Services’ revenues have been flat. The trend continues from last year. Revenues grew 2.1 per cent in 2005. Gross profit margins were also unimpressive: 25.9 per cent in 2005 against 25.1 per cent in 2004.
    Clearly, Global Services seems to have hit some sort of a plateau. The PwC acquisition is not yet bringing in the kind of heavyweight business IBM had hoped for. More importantly, with topline of the global services business largely flat, IBM needs to make sure that at least the bottomline is improving. And for that, it needs to cut jobs drastically in the US itself, which is likely to be far harder to accomplish than Europe. By some estimates, IBM needs to slash its US employee strength of 260,000 by half. Before it can do that, IBM India will have to be able to take up the workload of those 130,000 people that it needs to shed — and that is going to be the key factor. (Emphasis added by editor of these highlights.)
    • In a Vault forum, "wonderaboutibm" comments about the preceding article. Full excerpt: So ... between getting rid of half the US GBS staff (admittedly "difficult") and ramping up IBM India hard, there we have it. If SP thinks this is a viable strategy, more power to him. But even in the positive glow of the article, we can discern the risks. Too bad that IBM let GBS get so much into the doldrums that not even wonderful India can pull it out.
    • In a Vault forum, "wonderaboutibm" adds a second comment about the preceding article. Full excerpt: The article is merely saying that, with a mass buildup in India (and in Brazil, Russia, and China,) IBM can lower its costs enough so that laying off 130,000 in the US won't hurt the business in the short term. It also insinuates that, given the massive rampup needed, IBM may need to buy Wipro or Infosys or Satyam. IBM apparently assumes that: (1) they can keep pricing power, (2) they have costing power in that they can shift the work from legacy US resources to the "BRIC" countriesm and (3) they can complete this labor transformation without too much pain. This is a high risk strategy. There are too many moving parts...
  • Nature, courtesy of the Marxism message board at the University of Utah: India's finest, for hire. By K. S. Jayaraman. Excerpts: By collaborating with western companies, are India's research institutes consolidating their positions or allowing their young researchers to be exploited as a cheap scientific labour force? K. S. Jayaraman investigates
    On entering the campus of the Indian Institute of Technology (IIT) in New Delhi, the very first building you see carries the logo of IBM. When IBM's New Delhi lab was set up three years ago, Paul Horn, the company's worldwide head of research, promised that this lab would "become a world class facility", with scientists from IBM and the IIT collaborating to develop "software solutions for challenging problems in information technology".
    But since then, the IIT faculty's relationship with IBM has gone sour - as it has with several other western companies that have established a presence on the IIT's campus. In fact, last November, the majority of the IIT's faculty backed a resolution to prevent commercial organizations opening premises within the institute. The resolution also said: "Steps should be initiated to nullify the existing agreements."
    This vote reflects a wider concern felt by many Indian academics. They believe that India's national research priorities are being distorted by links with western industry. And they are particularly worried that the country's highly qualified young researchers - its most valuable scientific asset - are being used as cheap labour to address the problems of multinational companies, rather than the issues facing India's developing economy.
    Given its high profile, IBM's New Delhi lab has been a particular focus for criticism. Many IIT faculty members complain that the company has failed to fulfil its promises of a mutually rewarding, collaborative relationship. "IBM set up shop here because the IIT is the best address in the city and its students are available to provide cheap labour," claims H. B. Mathur, a former professor of mechanical engineering at the institute. "IBM can stay in the campus provided they want to work with us," adds J. S. Rao, another mechanical engineer. Rao felt so strongly about the issue that in July 1999 he resigned as faculty representative on the IIT's board of governors. "If they want to remain an island, they can step outside," Rao says.
  • Wall Street Journal: The Myth of the New India. By Pankaj Mishra. Excerpts: In recent weeks, India seemed an unlikely capitalist success story as communist parties decisively won elections to state legislatures, and the stock market, which had enjoyed record growth in the last two years, fell nearly 20 percent in two weeks, wiping out some $2.4 billion in investor wealth in just four days. This week India's prime minister, Manmohan Singh, made it clear that only a small minority of Indians will enjoy "Western standards of living and high consumption."
    There is, however, no denying many Indians their conviction that the 21st century will be the Indian Century just as the 20th was American. The exuberant self-confidence of a tiny Indian elite now increasingly infects the news media and foreign policy establishment in the United States.
    Encouraged by a powerful lobby of rich Indian-Americans who seek to expand their political influence within both their home and adopted countries, President Bush recently agreed to assist India's nuclear program, even at the risk of undermining his efforts to check the nuclear ambitions of Iran. As if on cue, special reports and covers hailing the rise of India in Time, Foreign Affairs and The Economist have appeared in the last month. [...]
    But the increasingly common, business-centric view of India suppresses more facts than it reveals. Recent accounts of the alleged rise of India barely mention the fact that the country's $728 per capita gross domestic product is just slightly higher than that of sub-Saharan Africa and that, as the 2005 United Nations Human Development Report puts it, even if it sustains its current high growth rates, India will not catch up with high-income countries until 2106.
    Nor is India rising very fast on the report's Human Development index, where it ranks 127, just two rungs above Myanmar and more than 70 below Cuba and Mexico. Despite a recent reduction in poverty levels, nearly 380 million Indians still live on less than a dollar a day.
    Malnutrition affects half of all children in India, and there is little sign that they are being helped by the country's market reforms, which have focused on creating private wealth rather than expanding access to health care and education. Despite the country's growing economy, 2.5 million Indian children die annually, accounting for one out of every five child deaths worldwide; and facilities for primary education have collapsed in large parts of the country (the official literacy rate of 61 percent includes many who can barely write their names). In the countryside, where 70 percent of India's population lives, the government has reported that about 100,000 farmers committed suicide between 1993 and 2003.
    Feeding on the resentment of those left behind by the urban-oriented economic growth, communist insurgencies (unrelated to India's parliamentary communist parties) have erupted in some of the most populous and poorest parts of north and central India. The Indian government no longer effectively controls many of the districts where communists battle landlords and police, imposing a harsh form of justice on a largely hapless rural population.
    The potential for conflict — among castes as well as classes — also grows in urban areas, where India's cruel social and economic disparities are as evident as its new prosperity. The main reason for this is that India's economic growth has been largely jobless. Only 1.3 million out of a working population of 400 million are employed in the information technology and business processing industries that make up the so-called new economy. [...]
    Many serious problems confront India. They are unlikely to be solved as long as the wealthy, both inside and outside the country, choose to believe their own complacent myths.
  • Wall Street Journal: Adding It All Up. Using a tool called "tally sheets," boards are discovering how much their CEOs are really making. The numbers are shocking directors -- and changing pay practices. By JoAnn S. Lublin. Excerpts: Nicknamed "holy cow" sheets for the way they often expose the immense worth of current and potential payouts, tally sheets can help a board gain a fuller picture of a chief's entire compensation. For years, board pay panels have been faulted for failing to do the math when it comes to grasping the true value -- and possible future cost -- of CEO packages. But tally sheets make it easier to keep score, allowing boards to project payouts under different scenarios for everything from salary and perquisites to equity grants, deferred compensation, severance and supplemental pensions.
  • Jim Hightower: Connecting the Dots to CEO Pay. Excerpt: Why do corporate CEOs keep getting such astronomically-high pay packages? The official answer is that they're merely paid the going market rate for managerial superstars. But wait – they get tens of millions of dollars a year even when their corporations do poorly. The real answer is that CEO pay is the product of a corrupt system of cronyism within corporate boards of directors. These boards, which are supposedly watch dogs over top executives, usually consist of a closed circle of fellow corporate officials and close friends of the CEO. In other words, it's a brother-in-law deal.
  • CNN/Money: Nortel CEO takes cut to pension benefit. CEO Mike Zafirovski volunteers to take a 29 percent cut to his annual pension benefit payments. Excerpt: Nortel chief executive Mike Zafirovski has volunteered to take a 29 percent cut to his special lifetime annual pension benefit payments, the struggling telecom equipment giant said in a regulatory filing Wednesday. Zafirovski, who took over at Nortel's helm last fall from Bill Owens, will now be eligible to receive $355,000 a year, compared with $500,000 previously.
  • New York Times: Working for a Pittance. By Bob Herbert. Excerpts: The federal minimum wage, currently $5.15 an hour, was last raised in 1997. Since then, its purchasing power has deteriorated by 20 percent. Analysts at the Economic Policy Institute and the Center on Budget and Policy Priorities jointly crunched the numbers and determined that, after adjusting for inflation, the value of the minimum wage is at its lowest level since 1955. For those who don't remember, Eisenhower was president in 1955, the Dodgers were still in Brooklyn, and Barack Obama hadn't even been born. [...]
    Senate Republicans recently blocked a Democratic bill, sponsored by Senator Edward Kennedy, that would have raised the minimum wage to $7.25 an hour over the next two years. Jared Bernstein, a senior economist at the Economic Policy Institute, noted that while Republicans in Congress are standing like a stone wall against this modest increase in the poverty-level wage, "they are working as hard as they can to repeal the estate tax." "That," he said, "is just vicious class warfare." [...]
    Polls have shown that Americans overwhelmingly favor an increase in the minimum wage. But the low-income workers who would benefit from such an increase are not part of the natural G.O.P. constituency. Thus, the stonewall.
    A separate study by the Economic Policy Institute found that in 2005, with the pay of top corporate executives up sharply, and with the minimum wage falling further and further behind inflation, "an average chief executive officer was paid 821 times as much as a minimum wage earner."
    That C.E.O., according to the study, "earns more before lunchtime on the very first day of work in the year than a minimum wage worker earns all year."
  • E.E. Times: Lenovo starts pension plan for Chinese employees. By W. Gardner. Excerpts: Lenovo said Wednesday it would establish a retirement plan for its employees in China. The action contrasted with IBM's recent efforts to diminish retirement benefits for employees in the U.S.
    "We are very proud to be among the first to offer leading-edge retirement benefits to our employees in China," said Ezra Singer, Lenovo vice president of compensation and benefits, in a statement. "This is a key milestone for our China employees and marks the continued evolution of Lenovo as a truly world class global organization as well as the strong relationship and deep commitment we have to our employees worldwide."
  • Los Angeles Times: Happy? Let's Sum It Up. Researchers tap the 'dismal science' of economics to quantify well-being. It isn't money that leaves you feeling like a million. Excerpts: Midway into his career as a professor, USC's Richard Easterlin deduced something that seemed astonishing, at least for an economist: Money doesn't buy happiness. Grandparents and sages have said as much through the ages. Yet when Easterlin published his first happiness research in the 1970s, fellow economists brushed it off. "People don't take this as serious stuff," he said. "They think it's maybe cocktail party conversation." [...]
    If earning more money generally does surprisingly little or even nothing to make societies happier, they wonder, what works better? Good health? Marriage? Sex? By one reckoning, boosting the frequency of sex in a marriage from once a month to once a week brings as much happiness as an extra $50,000 a year. [...]
    Happiness economics, its enthusiasts emphasize, isn't a touchy-feely enterprise. They say that it eventually could harness the power of economics to better benefit humanity and help guide public policy. Their findings often suggest that, instead of focusing so heavily on economic growth, governments could turn more attention to things that might, in essence, cheer people up. The options include better medical care, greater job security and reduced crime. These cost money, but they don't necessarily put more cash in a person's pocket. [...]
    In comparing nations overall, the pattern was mixed, with the happiness levels for poor countries often nearly as high as they were for richer ones. (The United States was tops in happiness, but Cuba was a close second.) What's more, data available from 1946 to 1970 led him to put forth what became known as the Easterlin Paradox: Even though the average U.S. family became more than 60% richer, it didn't make Americans significantly happier. In late 1947, about 42% of Americans surveyed by one pollster pronounced themselves "very happy." Though the numbers went up and down over the decades, a similar poll found that only 43% declared themselves "very happy" in 1970.

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Los Angeles Times: Minding Medicare's Drug Gap. The program leaves a $2,850 hole in coverage. Now half a year into the plan, 3.4 million seniors may have to decide how to pay or avoid the costs. By Ricardo Alonso-Zaldivar and Rong-Gong Lin II. Excerpts: When Congress created the Medicare prescription drug program, it adopted an unusual idea to hold down costs: the so-called doughnut hole. The program pays most of a participant's drug bills until expenses reach $2,250 in a year. Then it stops paying until costs exceed $5,100. That leaves a hole of $2,850 that seniors with serious prescription needs are expected to manage on their own.
    Now, six months into the drug program — the first new major healthcare benefit for the elderly in decades — 3.4 million seniors are approaching the doughnut hole. Most of them are middle-class seniors with multiple chronic illnesses. (The poor are exempt from the gap.) Some have already experienced an abrupt surge in prescription costs. [...]
    Under the Medicare drug benefit designed by Congress, beneficiaries pay the first $250 in drug costs for the year. The plan then pays 75% of the next $2,000. After that comes the $2,850 doughnut hole, for which seniors are solely responsible. Then, when a beneficiary's drug bills for the year exceed $5,100 ($250 plus $2,000 plus $2,850), Medicare pays 95%. [...]
    Democrats say the coverage gap can be closed if Congress grants Medicare authority to directly negotiate lower prices with drug manufacturers. Eliminating the gap with tax dollars would be expensive, perhaps costing more than $10 billion a year now, and bigger sums in the future.
  • Wall Street Journal: Health-Care Costs To Hit Workers, Retirees Harder. By Jilian Mincer. Excerpts: Americans should expect to pay more for medical costs whether they are employed or retired, according to two new studies. The reports, by Milliman Inc. and Watson Wyatt Worldwide, show that health-care costs are still rising at a fast pace -- despite slowing from double-digit rates in recent years -- and that businesses expect to curtail or limit retiree medical benefits. [...]
    The average annual medical cost for a family of four participating in a preferred provider organization, or PPO, program is up 9.6% from 2005 to $13,382 in 2006, according to Milliman, a consulting and actuarial firm that released its second annual study Thursday. Unlike other major health-care cost studies, which look at costs in terms of annual premiums or just the employer's share, the Milliman study also factors in employees' costs, including out-of-pocket expenses. [...]
    Nearly two-thirds of employers expect to increase the financial contribution for future retirees, and half expect to change the design of their plans. Twenty-four percent plan to tighten eligibility for future retirees. Fidelity Investments has estimated that a 65-year-old couple retiring without employer-provided health benefits will need $200,000 for out-of-pocket health-care expenses during retirement.
  • Jim Hightower: Health Care Morality. Full excerpt: Contrary to the "contrived wisdom" of the Powers That Be, providing health care for everyone is not an economic or even a health issue – it's a moral issue.
    Notice that corporate chieftains and the political elites all have the Rolls Royce of health care – while most Americans are trying to make do with a sputtering Yugo, and while millions of our people are walking barefoot. This crass inequality on such a basic human need is a moral abomination.
    How is it that the richest country with the most democratic ideals of any country in the history of the world has 45 million people with no health coverage and millions more with pathetic coverage? And how is it that We The People pay $1.2 trillion a year to a corporate health care complex (more than any other people pay) and rank only 37th in the world in the quality of health care we receive?
    The Powers That Be just shrug their shoulders and say, well, sadly, America can't afford a system of good quality coverage for all. Can't afford it? George W says America can afford the $1.2 trillion in tax giveaways he's bestowed on the wealthiest people in our land. He says America can afford the $300 billion in direct costs already shelled out for his war of lies in Iraq. He says America can afford the hundreds-of-billions of tax dollars being pocketed by drug companies and insurance giants through his boondoggle prescription drug program.
    Of course, our so-called political leaders don't feel the pain of America's corporatized and exclusive health system. The very politicos who say America can't afford universal coverage receive full platinum coverage for their families – courtesy of you and me.
    This is Jim Hightower saying... No public official should have even a dime's worth of coverage until every man, woman, and child in America has full coverage. For morality's sake, the president and congress ought to be last in line, not first!

New on the Alliance@IBM Site:
  • From the Job Cuts Status & Comments page
    • Comment 7/07/06: On 7/6/06, IBM Rochester has cut approximately 41 band 2-level regulars. They will be replaced by a temporary work staff. Dublin will hire 300 employees for software development & management. Go figure.... -Anonymous-
  • From the General Visitor's Comment page:
    • Comment 7/01/06: If a foreign entity targeted and attacked a strategically important industry of the US with dumping, unfair trade or even bombs, our government leaders would understand the threat and react accordingly. How is it different when our own citizens destroy the technology industry? These attackers are under the rule of law of our country, which should make the whole affair more controllable, yet nothing happens. We are told that this is somehow good for us. Has our whole system of government become so corrupt as to ignore the obvious? They feed us the same corporate speak and provide no results, in a direct imitation of their corporate counterparts.-Anonymous-
    • Comment 7/01/06: I do not understand IBM upper management anymore. I was told that my product is projected to sell double or even triple; but we are not allowed any headcounts. Having said that, the upper management wants all the numbers to be good, which is making all of us work many overtimes. When we work many overtime, the management is lecturing us about not having work-life balance. If we let stuff drop so we can go home, we get lecture from the management that we are not meeting our goals. Our management is giving us mixed messages.
      Having said that, if the management team is understaffed, they will staff it. If the SWEs are understaffed, we have to work harder. I seen all of the SWEs working many hours of overtime but I do not see any of our first line working too much overtime so they can preach about work-life balance. -Anonymous-
    • Comment 7/05/06: Looks like Old Smoke And Mirrors (SAM) Palmisano has led us back to the $70 price range in our stock. Can’t believe this is shortly after Sidney Taurel, chairman of IBM’s executive compensation (CEO of Eli Lilly, the company that makes the antipsychotic drug Zyprexa) approved SAM’s 29% increase in pay. But maybe the thought is that the price would have fallen even farther without such a big incentive to perform! Another concern I have. Without investment in the future (employee training, significant new product development, etc.) which will provide increasing, or at least consistent returns, the part of the stock price that’s based on speculation of future returns will continue to evaporate. The share price could get down close to $21 per share (the hard asset value per share). For proof, Lou’s “no vision” took the stock down to within twenty-some dollars of that mark. -Anonymous-
    • Comment 7/05/06: To the person who said this "If a foreign entity targeted and attacked a strategically important industry of the US with dumping, unfair trade or even bombs, our government leaders would understand the threat and react accordingly. How is it different when our own citizens destroy the technology industry? These attackers are under the rule of law of our country, which should make the whole affair more controllable, yet nothing happens. We are told that this is somehow good for us. Has our whole system of government become so corrupt as to ignore the obvious?" I say - the reason is that these people all play golf in the same country clubs, their kids go to the same prep schools, they are immune to any backlash of problems caused by this because of their golden parachutes, they do not care about America only as it relates to their own wealth, they do not care about employees, and they sure as heck do not care about customers either as people outside of IBM know now which is why they stopped investing in its future. -Anonymous-
    • Comment 7/05/06: Remember when IBM was number 1 in Business Ethics magazine. Well IBM is now number 41! It seems others have caught on to what employees have been saying: http://www.business-ethics.com/media/Chart%20of%20100%20Best%20Corp%20Citizens%20for%202006.pdf
  • From the Pension Comments page
    • Comments 07/04/06: Ran the new comparison tool. Time to go, there's no chance my pension after 12/31/2007 will ever make up the loss with 401(k) money. -Anonymous-
    • Comments 07/05/06: Don't be surprised if on 01/02/2008 IBM decides to end the 401(k) plus plan to remain "competitive"... They broke promises and lied to us before and in the present and they sure can do the same in the future! -Anonymous-
    • Comments 07/05/06: If there isn't a class action suit over the changes , i will be appalled. The pension was promised and those that promised it are long retired and collecting as PROMISED, the pension plan should be honored. A class action suit needs to be put fourth and the CEO named in the suit. Nothing would please more then to see a Pompass Ass doing time. -Annoyed-
  • From the IBM employees on employee raises page:
    • Comment 7/01/06: According to my manager (and a lot of other managers evidently) I am near the top of my pay range. I was given a 3% raise (only the second in the last six years). PBC 2, "regional" scale, 25+ years at RTP. What I find interesting is the information on my compensation summary statement. The monthly market range within the industry and local labor market for my job family and band (Advisory Software Engineer, band 8) is 5240 - 10757. Now I am supposedly near the top of the range. But unless they are using new math, my new salary is only 77% of the maximum and only at the 60% mark inside the given range. I think that the "top of the pay range" remarks are probably uniformly untrue. Suggestion: Let us share our monthly market range information. I am curious how much variation there might be depending on where we work. -Anonymous-
    • Comment 7/04/06: Note that the CPI-U, known simply as the "inflation rate," is 4.2% for the year ending May, 2006, according to the U.S. Bureau of Labor Statistics (http://www.bls.gov). Thus a 1% raise is really a 3.2% pay cut. Moreover, the BLS reports that worker productivity continues to rise quite substantially -- 2.5% over the past year for non-farm businesses, and that's not including the effect of extra hours worked. At least over the long term employees should receive some share of those productivity gains in the form of higher wages. That's not happening. We're going backwards, fast. And I'm still excluding pension, health insurance, and other benefit cuts. Just to give you all some idea, here's an example. Assume inflation moderates somewhat and averages 4% per year for the next 10 years. Assume also that you receive a 2% annual increase in salary, without fail. (Now that's ambitious given recent trends!) In that situation, after 10 years, your salary will be nearly 20% lower in value. I would encourage everyone not receiving pay increases at least equal to inflation -- that's probably everyone except Sam -- to describe them as pay cuts, because that's exactly what they are. -CPI Watcher-
    • Comment 7/05/06: I am an IBM employee in KL, Malaysia. My raise this year is 0, as my manager told me that I needed 6 months to learn the ropes (I joined in March 2005), and this is official company policy, to give nil increments and performance bonuses to those that joined within the previous year. My question is, does this apply to IBM employees worldwide as well? -Anonymous-

Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
  • "IBM's cost burdens" by "DM Bingham". Full excerpt: One disadvantage the Blue Pig has is that the indirect costs the management has imposed on the financial structure of bidding for work to pay for: 1) Huge management bonuses for a bloated kleptocracy 2) Another $5 - $7B USD free cash flow for stock buybacks.
    I assume every competitor has similar management enrichment schemes, but you can see that IBM has very little $ in the bid sales price to pay for the actual performance of the work. Thus the race to the bottom of the wage pool and quality be darned.
    It is very similar to the manufacturing flight abroad but the ability of the customer to discern quality is limited, the Pig wraps every contract in a battalion of lawyers, and the true stories of slipshod work and wrecked progress are kept out of the news to keep the customer management from getting fried by their stockholders. Witness how Accenture and ACS keep the multiple stories of their failures in the Public Sector out of the news. You have to go to the Yahoo Financial Message Boards on each stock to see what is going on. Only the the stories of Medicare recipients not getting their benefits gets these stories told. The private sector massacres like Firemens' Fund and Mt Sinai Hospital never make the news.
  • "The client base has already detected it" by "phooey69". Excerpts: The client base has already detected it Author: phooey69 Date: Jul 3, 2006 1:24 PM EST Does the client base know that something is wrong? Hell yes, they know. Maybe they aren't aware of all the details, but they know something is wrong. In SO, you can see the changes. Not as many deals are being signed. When deals ARE signed, they are not the winner-take-all megadeals of the past...they are more likely to be the small, segmented deals like helpdesk or server admin.
    Also, there are various consulting groups who assist the customer in negotiating deals with IBM. Those consultants all have their own business interests, to be sure, but that doesn't stop the customer from enlisting them when dealing with IBM.
    One of IBM's bigger problems right now is that IGS has adopted the body shop mentality. By doing so, it is subjecting itself to business, economic, and political concerns that could have been avoided under different circumstances. IBM might get away right now with changing staff to India, but don't expect it to last in the long run. Either IBM's $250/person/hour fee is going to go down, or the $20/person/hour staff cost is going to go up. Economics and competition will take care of that.
  • "IBM does not reward technical skills" by "PBCS_SUCK". Full excerpt: The pig does not reward people for being technical and performing in a technical role. They have a philosophy that technical skills are a "commodity" which is one of the reasons they are offshoring so many technical jobs. The "skills" that employees are rewarded for at review time quite frequently have nothing to do with how well they perform their job. It doesn't take too long for many employees to realize that their hard core technical skills and achievements are not rewarded by management. So, the ones who want to stay and prosper begin to focus on other things that the pig rewards such as internal politics, paperwork, fluff technical presentations, and B.S. certifications.

Modern-Day Robber Baron Corner
Today's highly compensated executives face many difficulties, including figuring out how they can possibly spend all of the rich rewards they've earned on the backs of ordinary workers. Take a look at the insider trading of many of our IBM executives—spending the cash from all that stock "acquired at $0 per share" must be a real challenge! Or, imagine the difficulty IBM CEO Sam Palmisano will face spending his $10,000 a day pension when he retires!
As a way of helping out our beleaguered, modern-day robber barons we will periodically feature "spending opportunities" that the "upper crust" of our society may want to take advantage of!
  • Forbes: Priciest Private Planes. By Neal Santelmann. Excerpts: Flying to exotic destinations has become almost as routine as grocery shopping, and promotional pricing means it can occasionally be cheaper to take a plane than a bus to your destination of choice. Still, one segment of the aviation industry is flying high when it comes to status and price--the private aircraft in all of its intriguing variations.
    Rare is the business big shot or celebrity bright light who would be caught in commercial first-class these days. Russian billionaire Roman Abramovich reportedly owns a private jet to go along with his trio of yachts. New papa Tom Cruise, who topped our Celebrity 100 list this year, served sushi to Katie Holmes aboard his private jet on their first date. Damage to the windshield of Oprah Winfrey's private jet forced the talk queen to re-land at Santa Barbara Municipal Airport late last year. And in April, hip hop maestro Snoop Dogg departed London in a private jet following detention after his entourage clashed with police at a Heathrow departure lounge. [...]
    While the sky's not exactly the limit on cabin excess--weight requirements and FAA restrictions see to that--Roth says his customers may spend anywhere from $800,000 to $1.5 million to make their cabins just so. For instance, an International Jet Interiors client from India recently requested crocodile leather trim throughout his aircraft, including for the centerpiece of the lavatory. "That's going to be a $10,000 toilet seat," notes Roth.
  • Wall Street Journal: Insurers Cater to High-End Homeowners. Pricey Services Are Offered for Special Protection Even Before Hurricanes, Wildfires. By M.P. McQueen. Excerpts: AIG's Private Client Group is piloting a new Hurricane Protection Unit in three Florida counties starting this month that will send company employees to your home to scope out what you need to do to prevent wind and water damage. They'll work out a customized disaster plan to roll up your Oriental carpets and move them to higher floors, or evacuate your art collection to safety. After a storm hits, AIG will dispatch, even before you filed a claim, a special team with tarps and boards to patch up a leaky roof to make sure that more damage doesn't occur from rot and mold.
    High-end insurers offer other benefits as well, such as more-generous living expenses for homeowners displaced because of damage to their dwellings. Fireman's Fund, provides relocation services through a sister Allianz company that help families find new schools and doctors as well as temporary housing commensurate with the family's usual living standard. Such deluxe services are generally available to homeowners whose properties are valued at a combined $1 million or more. Annual premiums range from about $3,500 to $20,000, or even more. By contrast, the average homeowner paid about $668 in annual premiums in 2003, the latest data available, according to the National Association of Insurance Commissioners.
"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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