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Highlights—August 12, 2006
|News and Opinion Concerning U.S. Court of Appeal's Overturn of Cooper
v. IBM Decision
- Randy McDonald's (IBM's Human
Resources Director) internal e-mail to IBM employees, courtesy of "Dana_Roberson" on
a Yahoo! message board. Full excerpt:
I am writing to let you know that a federal appellate court today ruled in favor of IBM
in a legal challenge to its cash balance pension plan that dates back to 1999.
In its ruling, the U.S. Court of Appeals for the 7th Circuit affirmed that cash balance
plans are legal and valid and that IBM's plan treats all employees equitably regardless of age. Today's
decision in Cooper vs. IBM overturns key aspects of an earlier 2003 ruling where a lower federal court judge ruled
against IBM. It also reaffirms our longstanding position -- that the design of our pension plans is not age discriminatory.
While IBM announced early this year it would move away from defined benefit pension plans
and focus on providing leading-edge defined contribution retirement plans instead, we are gratified nonetheless
to have the legality of our cash balance pension plan finally clarified by the Court in this way. More information
appears on the Career & Life tab of w3.
To be sure, today's ruling is important vindication for IBM -- a values-based company that
has a longstanding record of providing industry-leading benefits for employees, a record we have maintained in
the face of sweeping changes in this company, this industry and this country.
We have long anticipated a successful conclusion to this case. We are hopeful that today's
ruling is the final chapter.
- Kathi Cooper (of
Cooper v. IBM) posts a statement from the Cooper class attorneys: Judge
Easterbrook's opinion in Cooper v. IBM ignores the fundamental differences between defined benefit and defined
contribution plans and disregards the statutory provisions expressly enacted by Congress to protect older
workers from age discrimination. The decision judicially creates an "equal cost" defense for defined
benefit plans even though Congress expressly chose not to provide such a defense for defined benefit plans.
Because of the adverse impact of this decision on the statutory protections Congress provided all workers,
young and old alike, plaintiffs intend to ask the entire Court to reconsider the panel's erroneous decision.
By Doug Sprong.
- Kathi Cooper comments
on the ruling. Full excerpt: Two thoughts:
- Randy, it isn't over.
- People, IBM held back a part of your salary to save it for your retirement then decided not to give it all
back to you. (That is what deferred income is, your salary taken from you and deferred until a later
date, called retirement. ) No where I know of in this world could any one get away with doing such a
thing, except in America.
- In a Yahoo! message
board post, "not_catbert" comments on Mr. McDonald's e-mail to employees.
Excerpts: > This is the part that really gets me: "To be sure, today's ruling
is important vindication for IBM -- a values-based company that has a longstanding record of providing
industry-leading benefits for employees, a record we have maintained in the face of sweeping changes in this
company, this industry and this country".
When I reached 30 years of service, all my co-workers, including managers congratulated
me reaching the milestone where I will be getting paid medical insurance for life. I retired 10 years after that.
Now, my out of pocket medical expenses (which includes the cost of Medicare part B and the IBM insurance policies
will be $8,000 this year. I have to take the best IBM plan because there is no HMO in my area I can use. My cost
will certainly go up next year.
Even my doctors are surprised how little (if any) this IBM plan, that is under the United
Healthcare name, pays. How did it ever get to the point the retirees, with the least income, have to pay the highest
premiums for the IBM Insurance? Our benefits used to be compared to the other best companies. Now, we are compared
to companies who have no insurance, making us look great. I really feel IBM has let us down by leading us to believe
what our deferred compensation benefits would be when we retired. I, along with many others, gave the best part
of our lives to make IBM what it was. Now we end up being just a liability to IBM, with all direct communication
with IBM severed. Not a happy thought to have in our final days.
- Wall Street Journal: IBM
Ruling Paves Way For Changes to Pensions. Appeals Court's Reversal
Of Discrimination Finding To Aid Cash-Balance Plans. By Ellen E. Schultz and Theo Francis. Excerpts: "A
number of companies have held back" in converting defined-benefits plans to cash-balance plans because
of concerns raised by the IBM case decision, says James Klein, president of the American Benefits Council,
a Washington-based group that lobbies on pension issues and supports cash-balance plans. He said the ruling,
combined with last week's congressional pension reform that deemed cash-balance plans aren't age-discriminatory, "will
give a green light for companies to make the conversion."
The plaintiffs, who are current and former IBM employees, intend to ask the full appeals
court to reconsider the ruling, saying it ignored key legal distinctions between pension plans and defined-contribution
savings plans. The decision "disregards the statutory provisions expressly enacted by Congress to protect
older workers from age discrimination," said a spokesman for the plaintiffs.
Pension advocates, older employees and the AARP have been distressed by the conversion
to cash-balance plans because the move typically reduces the pensions of older workers significantly. In a traditional
pension, benefits are calculated by multiplying years of service by average salary, producing a pension that grows
steeply in one's later years on the job. When companies change to a cash balance pension plan, the former pensions
are essentially frozen, and the value of their cash-out value is converted to an "account." This hypothetical
account grows each year with credits, based on pay, plus interest.
When older workers are shifted from a traditional pension to a cash-balance plan, they
lose the steep buildup of pension benefits and can end up with pensions that are 20% to 50% lower. Most companies
that adopted the cash-balance formula had large older work forces. What's more, some companies also froze the cash-balance
credit for older workers, so that after the switch they didn't earn anything under the new cash-balance plan either
for a period of months or years, while younger workers began to build up benefits right away. Both of these outcomes
led to charges of age discrimination.
While it is legal to reduce or eliminate a pension going forward, it is illegal under pension
law to provide a pension accrual that declines with age. Employers with cash balance plans don't dispute that this
happens, but maintain that because the pension is intended to look more like a "defined-contribution" plan,
such as a 401(k), the age discrimination rule shouldn't apply.
Writing for the Seventh U.S. Circuit Court of Appeals in Chicago, Judge Frank Easterbrook
accepted IBM's position that because its pension plan resembles a defined-contribution plan, it shouldn't be deemed
discriminatory. The judge noted that because workers of all ages in the IBM plan received an annual 5% pay credit,
the plan couldn't be said to be discriminatory. That younger workers had many more years to earn interest, and
thus would end up with larger pensions, he said, wasn't illegal.
Norman Stein, a University of Alabama law professor specializing in
pension law who also has served as a consultant for employees suing over cash-balance plans, says the
ruling essentially ignores the law, which treats defined-benefit and defined-contribution plans very
differently, even if they can resemble each other superficially. (Emphasis added by editor of www.ibmemployee.com.)
IBM's pension saga started in 1999 when it changed its pension formula. The ensuing employee backlash led the
Internal Revenue Service to stop approving the plans and to calls for legislation to protect older workers
when their pensions are changed.
- The Journal News (Rockland and Putnam Counties in New York): IBM
wins appeal in age discrimination lawsuit. By Julie Moran Alterio. Excerpts: IBM Corp. has won a major
victory in a class-action lawsuit that accused the Armonk-based computer giant of breaking federal age
discrimination laws when it made pension changes in the 1990s. A federal appeals court in the Southern
District of Illinois ruled yesterday that IBM created plans that were "age neutral." The decision
overturns a 2003 ruling that found IBM illegally hurt the fortunes of older workers when it switched many
U.S. employees into cash-balance plans from traditional pensions in 1999. IBM will now be off the hook
for $1.4 billion in damages in the case. [...]
Randy MacDonald, senior vice president of human resources at IBM, said yesterday that the
ruling means the company's 1999 moves were fair and legally permissible, adding that this removes any stigma from
the cash-balance conversion. "What this ruling does is it further reaffirms IBM's longstanding workplace practice
of making decisions that have a great deal of integrity and that have a strong ethic," MacDonald said.
Kathi Cooper, the 55-year-old former IBMer who filed the case, said she is considering her
next steps, which could include asking for a review by the entire slate of judges on the bench or an appeal
directly to the Supreme Court. "I totally disagree with the court's ruling. That's my prerogative. It's not
said. Fellow IBMers are reaching out to urge her to continue the fight. "I'm already getting e-mail and phone
calls. They are hurt and disgusted. They are at the end of their ropes. Their pensions have been slashed,
and now they've been told they've been slashed legally," she said. [...]
Yesterday's ruling caps seven years of uproar over IBM's pension change. During that time,
employees have spoken before Congress about their outrage over a reversal of Big Blue's promised benefits;
protesters picketed annual meetings, which one year featured a speech by the Rev. Jesse Jackson; and an effort
to unionize workers was born. Linda Guyer, an IBMer in Endicott and president of the Alliance@IBM, part of
the Communications Workers of America, said she's planning a letter to members about the ruling. [...]
One of the worst parts about losing IBM's appeal, Cooper said, was that she believes the
judges confused the laws governing pensions and 401(k) plans. "I'm hurt and angry because I do not feel that
it is a correct interpretation of the law," she said. [...]
The appeals court ruled that cash-balance pensions should be compared more accurately with
401(k) plans. With a 401(k), a younger worker who starts saving early will have a greater nest egg at retirement
than one who starts later because of the value of interest. Karen Ferguson, director of the Pension Rights Center,
a worker rights group in Washington, agrees that the court may be wrong.
The concept of cash-balance plans dates to the early 1990s when companies were looking for
a way to extract surplus money from their pension plans without paying a penalty tax, she said. Terminating a pension
plan to create a 401(k) would be pricey because of the penalty. Instead, companies came up with the idea of a hybrid
cash-balance plan that mixed traits of traditional pensions and 401(k)s. This is noteworthy, she said, because companies
benefited from the switch to cash-balance plans. The ruling seems to suggest that the plans should be treated like
401(k)s, which circumvents age discrimination laws that govern traditional pensions, she said.
- Associated Press, courtesy of Tampa Bay Online: IBM
Prevails in Age-Discrimination Case.
By Brian Bergstein. Excerpts: IBM Corp. did not commit age discrimination when it changed its pension coverage
in the 1990s, a federal appeals court ruled Monday in an influential case that Big Blue had agreed to settle
for up to $1.4 billion if it had lost the appeal. The case involved 140,000 older employees who were affected
when IBM converted to a "cash-balance" plan, which gives workers virtual accounts that can be
cashed out for a lump sum when they leave the company. [...]
The plaintiffs in the IBM case sought to force the company to make up for what they said
they lost in potential benefits after IBM adopted the cash-balance plan in 1999. In 2003, a federal judge agreed
that the plan amounted to age discrimination because it unfairly penalized older employees. While IBM negotiated
a possible settlement, it pressed its appeal with the 7th District U.S. Court of Appeals in Chicago, which found
Monday that the plan did not discriminate because it gave every employee the same credits.
"All terms of IBM's plan are age-neutral," the judges wrote. "... Removing
a feature that gave extra benefits to the old differs from discriminating against them."
The lead plaintiff, Kathi Cooper of Bethalto, Ill., said she wanted to keep pursuing the
case. She said she was confident that IBM's move was illegal, noting that it wasn't until last week that
Congress officially said otherwise. "I don't consider this a dead end," said Cooper, who spent her career
with IBM before retiring last year at age 55. "I do not consider this fight over." [...]
IBM executives said they were gratified by the verdict. "In the end, I think our integrity
and our ethics prevailed," said Randy MacDonald, IBM's head of human resources. [...]
While the verdict could remove the huge settlement cloud from IBM, it figures to have little
impact otherwise on the company. Armonk, N.Y.-based IBM has stopped offering pensions to new workers; after next
year, IBM plans to freeze pension-benefit accruals altogether. Instead IBM is enhancing its 401(k) plan.
- MarketWatch: U.S.
appeals court rules in favor of IBM pension. By Jilian Mincer. Excerpts: "Litigation
cannot compel an employer to make plans more attractive," said the ruling. "It is possible, though,
for litigation about pension plans to make everyone worse off. After the district court's decision, IBM eliminated
the cash-balance option for new workers and confined them to pure defined-contribution plans." [...]
Cash-balance plans were first implemented in the 1980s, but most conversions from traditional
pensions to cash-balance plans occurred between 1990 and 1999. By 2003, there were 1,200 cash-balance plans in the
U.S., covering more than seven million workers, according to the Pension Benefit Guaranty Corp. The conversions,
including IBM's, have resulted in a number of age-discrimination lawsuits. One of the mains issues with a conversion
is "wearaway;" some workers earn additional benefits while others don't. A traditional plan typically
multiplies years of service by average salary and therefore escalates rapidly in value in later years. In contrast,
a cash-balance plan grows by small annual increments, based on a worker's pay. Most employees whose companies convert
from a traditional pension to a typical cash-balance plan would have been better off with the original plan, according
to a 2005 Government Accountability Office report.
- Seattle Post-Intelligencer: Pension
Reform: Write a check. Excerpts: A few days before Congress
voted on pension reform, we had a suggestion: "Just go home." We figured doing nothing was better
than a poorly crafted law. This is where we say, "We told you so." President Bush is expected to
sign the pension reform legislation into law this week.
Karen Ferguson, director of the Pension Rights Center, said Congress considered the measure
for two years and yet enacted the 900-page bill without "serious debate" or considering amendments to
improve it. [...] "While the bill contains a handful of positive provisions that help some workers," Ferguson
said, "it also contains provisions that allow plans to break pension promises, and, rather than strengthen
the private pension system, are likely to weaken it." And guess who will end up with the final bill for all
this malarkey? Why ask? Just write a check.
- In a Yahoo! message
board post, "screwedbyibm" comments on the decision. Excerpts: Always amazes me when company
management thinks it needs to decide human resources issues in a court. Not only does it look bad, regardless
of the outcome, but it also sends a message loud and clear that it's not a place anyone should ever aspire
to work. It used to be that IBM management was savvy enough to deal with employee issues within the company
and with the employees and without having to sue its own employees.
And, believe it or not, there are some companies that think employees are worth something
and that they actually contribute to making the organization a viable, growing entity. Check out Valero or Proctor & Gamble
sometime. Both companies understand what it means to have happy employees (and not just a happy executive suite).
Look at the share price if you don't think it makes a difference.
It's clear from this court action that IBM wants little to do with employees at all and
prefers to "see them in court" rather than live up to its prior commitments. Quite frankly, not living
up to your past promises is deceitful and unethical.
Try breaking promises with your kids, spouse, significant other or friends and
professional acquaintances and see how long you last before changing your tune. You will either change
your tune or your friends won't be around very long.
IBM has decided not to change its tune so the downward spiral is inevitable. And don't
kid yourself, IBM is a lousy investment when compared with almost every other fortune 500 company over the past
- In a Yahoo! message
board post, "sby_willie" comments on the decision and on Randy McDonald's e-mail. Excerpt: "Vindication" is
sure a strong word. A better term would be "not found to be guilty" by the 7th Court of Appeals.
If IBM thinks it is totally innocent then why did it agree to a partial settlement for subclasses 1,2 and 3
pending their successful appeal? If they felt that strongly they didn't do or interpret anything incorrectly
or wrongly then why did they agree to pay anything in the first place?
Does it seem like coincidence that once the US Senate passed the pension bill that the
7th Circuit finally responded? It's like the US Senate made the job of the 7th Circuit that much easier to rule
on a decision by their passage of the bill.
- In a Yahoo! message
board post, Janet Krueger comments on the decision. Excerpt: This is
not over; the court clearly did not understand the major differences between a defined benefit plan and a
defined contribution plan. If anyone doubts the seriousness of those differences, just ask the United Airline
pilots. If they had had a defined contribution plan they would be receiving 100% of the benefits they earned.
Instead they are receiving 50%.
The plaintiffs' legal team will most likely be requesting an en banc review and, if that
fails, cert by the Supreme Court. I will post more information as soon as it is available.
- In a Yahoo! message
board post, "fhawontcutit" points out that the appeals court ruling
relied on proposed U.S. Treasury regulations that were never implemented. Full excerpt: From
the ruling: Our conclusion that "benefit accrual" (for defined-benefit plans) and "allocation" (for
defined-contribution plans) both refer to the employer's contribution rather than the time value of money
between contribution and retirement has the support of regulations that the Treasury Department proposed.
(Appropriations riders have prevented the Treasury from taking final action on the draft regulations, but
they still help to inform our understanding of the statute.)
These were the Treasury regulations that were withdrawn? The ruling points to Treasury
regulations that never took effect?
- Yahoo! message board post
by "madinpok". Full excerpt: I thought that was strange, too. The regulations
were blocked by congress, I believe. And just because a regulation is issued, it does not mean it is
correct and it could be challenged in court. So for the appeals court to look to a regulation that was
never put into effect as a way of clarifying what was intended by ERISA seems extremely bizarre to me.
- Yahoo! message
board post by "fhawontcutit". Excerpts: From Ellen
Schultz's June 16, 2004 article titled "Treasury Withdraws Proposed Pension Regulations":
The Treasury Department yesterday withdrew proposed regulations on cash-balance pension plans that critics
claimed discriminated against older workers.
Look what happened right after the (June 2004) Treasury announcement: Minutes after the
Treasury's announcement, Rep. John Boehner (R., Ohio), chairman of the House Workforce Committee, announced
a July hearing to discuss solutions for cash-balance plans. "Unfortunately, the ongoing uncertainty about
cash balance plan conversions is undermining the retirement security of American workers and jeopardizing
employers' willingness to continue offering defined benefit plans to their employees," he said in prepared
- BenefitsBlog: Seventh Circuit Opines:
IBM's Cash Balance Plan Not Age Discriminatory Under ERISA.
Excerpt (From the Appeals Court ruling): (7) "Litigation cannot compel an employer to make plans more attractive
(employers can achieve equality more cheaply by reducing the highest benefits than by increasing the lower ones).
It is possible, though, for litigation about pension plans to make everyone worse off. After the district court’s
decision IBM eliminated the cash-balance option for new workers and confined them to pure defined-contribution plans.
. . Whether that is good or bad (for employees or society as a whole) is not for us to say. What we can and do conclude,
however, is that the decision may again be made freely, governed by private choice rather than legal constraint."
|News and Opinion Concerning the Pension Reform Bill
- Springfield Republican: Pension
reform bill upsets union. By Jo-Ann Moriarty. Excerpts: "I am not
disappointed the pension bill passed," said Christopher Roos, of the Feeding Hills section of Agawam,
the president of Local 1035 of the International Brotherhood of Teamsters. "But I am very disappointed
that the 'red zone' provision was still in the pension bill."
He and Frank Rossi, the president of Local 404 of the IBT in Springfield, opposed the amendment
in the 907-page bill because they said that it allowed the possibility of forcing veteran workers to have to choose
between a cut in their retirement benefit or working years beyond what they had planned.
Karen Ferguson, an attorney with the Washington, D.C.-based Pension Rights Center, said
that the "red zone" provision puts at risk the full retirement benefits for "older, longer-service
rank-and-file workers." [...]
All of the key players in the Senate knew that these cuts are wrong, wrong, wrong, but in
the end they must have concluded that they simply could not say no to an extraordinarily powerful business-labor
juggernaut determined to allow companies to reduce their pension liabilities at the expense of long-time workers," said
Ferguson yesterday. "Although the business-labor coalition claimed that these cuts are necessary to save underfunded
multi-employer plans from collapse, they never were able to document this claim." She added that the ultimate
vote of 93-5 was "one more triumph of bad politics over good policy."
- Boston Globe: Experts
say new requirements could hurt pensions. By John Crawley. Excerpts: Legislation approved by Congress could
help undermine the future of traditional pensions if companies balk at tougher rules for maintaining them,
financial and other experts say. [...]
Coleman said the dust has to settle but the new pension law will likely increase costs for
business, which she noted would not make sense for some. Rep. Earl Pomeroy, a North Dakota Democrat and former state
insurance commissioner who opposed the pension bill, agreed. He said the funding demands will be too stringent and
unpredictable. "I felt what was needed was a balanced approach that addressed solvency concerns and do it in
a way that focused on keeping pensions in the work place," Pomeroy said. "I think this balance is lacking."
He and others expect the response to pension changes and new accounting rules later this
year will be more companies ending pensions by halting accruals of new benefits. IBM, Sears and other brand name
businesses have taken this step and sweetened 401 (k) and other options, which are generally less expensive and
less risky for employers.
He and others expect the response to pension changes and new accounting rules later this
year will be more companies ending pensions by halting accruals of new benefits. IBM, Sears and other brand name
businesses have taken this step and sweetened 401 (k) and other options, which are generally less expensive and
less risky for employers.
- Yahoo! message board post by "old_school_blue".
Full excerpt: Actually, IBM is a lousy investment compared with CD's, interest bearing checking accounts, or even putting
your money under a mattress. In Jan 2002, IBM traded for about $120.00. Now, it is under $80.00. That means that even
with the old 15% discount, it was still a bad place to have any money invested.
IBM still has a rotten record for bringing the technology that it develops to market. What
ever happened to millipede? Every time IBM spins off or sells a division to another company, they become much more
successful. This indicates that the problem is all the way at the top.
It seems fitting that a company that has the integrity to steal from its employees, and cheat
on its taxes would lose value while doing it. But, executive stock options are not based on any current market price.
Just look at the insider trading link on the Yahoo page for IBM
. They don't really care if the stock goes up. They
get their booty just for hanging around. What a bunch of bums!
- Wall Street Journal: Coming
Soon to a Workplace Near You... By Ellen E. Schultz. Excerpts: Is a pension
change coming to your workplace? If you're one of the roughly 18 million employees in the private sector still covered
by a traditional pension plan, the odds that your employer will change to a "cash balance" pension plan have
These new-style pensions have been controversial because when employers switch to them, the
pensions of older workers are reduced -- in some cases significantly. This has led to lawsuits and proposed legislation
to slow the plans' spread, causing some employers to hesitate about changing.
But last week, a federal appeals court ruled that International Business Machines' cash-balance
pension didn't violate age-discrimination laws. Just days before that, Congress approved a measure that would deem
cash-balance plans legal. While the ruling will be appealed, and the bill has yet to be signed into law by President
Bush, employer groups say the recent actions are a green light for employers to change their pensions. [...]
How can a cash-balance plan reduce my pension? Traditional pension benefits
build up fastest in the later years, so as much as half of a person's pension may be earned in the final five years
on the job. When this older formula is frozen and the employee's pension grows only with the annual credits and
interest, the pension in retirement can be 20% to 40% lower than if the prior formula had remained in place. And
your pension can be reduced even further. Some companies lowball the opening account balances, giving someone an "account" worth,
say, $100,000, even if the frozen pension is worth $120,000. As a result, you'd have to wait until your annual
pay credits and interest build your "account" back up to $120,000 before you'd begin building any additional
Are cash-balance plans better for younger workers and job-hoppers? Fans say
cash-balance pension plans are better for younger and more mobile workers because these workers can build up a better
benefit than under traditional pensions, and take it with them when they leave. But last year, the Government Accountability
Office concluded that most workers -- regardless of age -- get lower retirement benefits when their employers switch
from traditional pension plans to cash-balance plans. What's more, as with other kinds of pensions, people must remain
on the job for five years before they're "vested" in the benefit; otherwise they get nothing when they leave.
The GAO says more than one-third of workers in both traditional and cash-balance plans fail to vest, making cash-balance
plans no better for job-hoppers than traditional pensions. As for portability, most companies automatically cash out
pensions with values below $5,000, effectively already giving young mobile workers pension portability.
Why do employers change to cash-balance plans? Companies can save money and boost profits.
Under accounting rules, companies calculate how much they expect to pay out in pensions over the lives of their employees
-- including amounts workers haven't earned yet -- and then reflect that amount as a liability on their books. Changing
to a cash-balance plan reduces a company's pension obligation, and the savings get added to earnings. Most companies
that have adopted cash-balance plans have large, older work forces.
- In a Yahoo! message board post, Janet Krueger comments on the following question: Are you saying that the
NetBenefits website is incorrect when it gives you a monthly payout amount when calculating a payment
BEFORE age 55 for those with a CB plan? In other words, if I resign at age 44 (with 24 years with the company)
I cannot start collecting a monthly payment until age 55?
Ms. Krueger responds: Most experts on ERISA law, don't understand why/how IBM decided to promise
vested employees an immediate annuity. Contrary to the stated belief that ERISA does not allow pre-age 55 annuities,
there are many ex-IBMers under the age 55, including me, collecting monthly pension checks...
What ERISA says is that if you choose to offer a new form of payment, such as an immediate
annuity, you cannot take that option away. So, while most companies only allow you to collect a monthly check after
you turn 55, IBM allows you to start collecting the month after you leave the company. This has been true since at
least 1991, although the option has not always been obvious on the pension selection form.
One thing you do need to be aware of is that for CBers, IBM calculates the monthly annuity
options off the virtual cash balance based on then-current interest rates. As other posters have observed, this means
when the interest rate goes up, your monthly annuity goes down... So don't rely on the listed monthly amounts unless
you are planning to leave in the near future.
- Providence Journal: Profiting
from new serf mentality. By Froma Harrop. Excerpts: "As Workers'
Pensions Wither, Those for Executives Flourish: Companies Run Up Big IOUs, Mostly Obscured, to Grant Bosses a Lucrative
Benefit." This headline comes to us not from the communist Daily Worker but the orderly pages of The Wall Street
Journal, the chronicler of capitalism -- or, as it used to market itself, "The Daily Diary of the American Dream."
It's not news that American executives have put ordinary workers' benefits on a diet while
they go for a fourth helping. What makes this redistribution of corporate wealth special is its brazen and unblushing
quality. We are not talking here about some stock-option deal where the top guys are rewarded for increasing shareholder
value. In this case, the money gushing into the executive suite is simply being siphoned through holes drilled in the
workers' paychecks. Here's an example, courtesy of The Wall Street Journal:
General Motors has long complained that its "legacy costs" have made the automaker
dangerously uncompetitive. By "legacy costs," it means the health benefits and pensions that it promised
its workers and retirees. In an effort to ease those "burdens," GM recently announced it would end pensions
for 42,000 of its salaried employees.
But guess what The Journal discovered. It found that the fund for those middle-class pensions
was actually bulging with $9 billion more than was needed to honor them. The real problem, it turns out, was GM's executive
pensions, which management had been supersizing even as it demanded cuts from the lower-downs. GM's executive-pension
obligations, we learn, are $1.4 billion.
General Motors is not the only company to have built up extravagant pension deals for the privileged
few. Executive-pension liabilities have hit $3.5 billion at General Electric, $1.8 billion at AT&T, and $1.3 billion
at Exxon Mobil and at IBM. "Sometimes a company's obligation for a single executive's pension approaches $100
million," The Journal reports. [...]
It's painful to observe a growing serf mentality among ordinary Americans. Working folk seem
afraid to complain about greedy executives or tax cuts for the rich, lest some big-money politician accuse them of
waging "class warfare." They fall sway to right-wingers on the radio, who tell them to get on their hands
and knees and thank Wilbur Ross for giving them a job. Workers should understand that this doesn't have to be. The
rules of this unfair game are made in Washington. And until they change the rule-makers, nothing will get better for
- MarketWatch via NewsEdge Corporation: Work:
the new retirement plan. Excerpts: In a recent New Yorker cartoon, a financial planner is talking to an old man. "Have
you given much thought to what kind of job you want after you retire?" the planner asks the old man. Yes, work
-- for many Americans -- is the new retirement plan. Americans may need or want to work longer. But do employers
want older employees? The answer, unfortunately, is a tad murky, according to a new Center for Retirement Research
at Boston College report. Some do and some don't. Specifically, small employers, those with 100 or fewer employees,
and large employers, those with 1,000 or more employees, as well as "young" organizations are generally
less fond of older workers be they white-collar or rank-and-file. [...]
The not-so-good news is this: Older workers may be equally or more productive, but employers
also seem them as expensive. In fact, four in 10 employers say older workers are more expensive than someone younger.
Morison thinks that's simply a case of getting what you pay for. "If you're paying for skills applied and performance,
then you get what you pay for," he said. "Older workers often justifiably cost more in salary. If pay is
based predominantly on seniority, then older workers may be overpaid -- and should be willing to take a realistic
cut in pay if they choose to work in retirement." [...]
Morison said employers could reduce the cost of hiring older workers if they focus on Medicare-eligible
prospects. "The cost picture changes dramatically for working retirees who have reached the Medicare eligibility
age or who have already retired with health benefits covered," he said. "Providing a bit of supplemental
coverage for workers in this category is much cheaper than providing more extensive benefits to younger employees.
A smart company hires the other guy's well-benefited retirees."
- Wall Street Journal: Xerox
Will Fund More Job Cuts With Tax Benefit. By William M. Bulkely. Excerpts:
Xerox Corp. said it expects to use part of an unexpected tax benefit of more than $400 million in the third quarter
to lay off an undetermined number of workers. The big maker of printers and copiers disclosed the plan in its quarterly
Securities and Exchange Commission filing. It said the restructuring will probably cost $125 million to $175 million
by year's end.
- Reuters, courtesy of the New York Times: GM
Trims Future Pension Obligation. Excerpt: General Motors
Corp. on Tuesday said it had trimmed its future pension obligations by $3.9 billion and lowered its expectations
of health care spending for retired workers by $19.3 billion. The world's largest automaker, which is in the midst
of a sweeping restructuring, said in a U.S. regulatory filing that it had cut estimates as 34,400 of its U.S. hourly
workers took buyouts and early retirement offers.
- Inc. Magazine: Court Sides With Biz
on Disability. By Bobbie Gossage. Excerpt: The Supreme Court rules
that businesses can reject employee disability benefits when their doctor disagrees with the treating physician.
- Los Angeles Times: Executive
Pensions Could Raise Ire. New SEC rules require detailed disclosures.
The numbers may be shocking, experts say. By Kathy M. Kristof. Excerpts: But what's most likely to shock investors
are pension and deferred-compensation accruals that will appear in readable form for the first time in next year's
proxy statements, some experts say. "Instead of finding out about all this stuff years later when someone retires,
we are instantly going to know the 'holy cow' factor" of pension promises to executives, said Joshua Lurie, vice
president of executive compensation and business development at Salary.com in Waltham, Mass.
As standard pension programs for rank-and-file workers increasingly have been terminated to
cut corporate expenses, hefty executive pensions have become a hot-button issue with some activist investors. [...]
In addition, companies must provide a second set of charts that will reveal precisely how much
each of their five most highly compensated officers have accumulated in their individual pension and deferred-compensation
accounts. In many cases, those numbers will run into the tens of millions of dollars, predicted Patrick McGurn, executive
vice president of Institutional Shareholder Services, a firm that provides guidance on corporate governance issues
to big investors. "That's going to be the area that produces the stunned-silence moments," he said. "Those
numbers could be eye-popping."
- South Florida Sun-Sentinel: Distrust
runs deep with this retiree. By Ian Katz. Excerpts: George Griffis
wishes he could believe AT&T and BellSouth. Griffis, a retired BellSouth construction supervisor living in Plantation,
depends on a $1,668 monthly pension from the company. Now that AT&T is buying BellSouth in a deal expected to close
this fall, Griffis, 74, worries that AT&T won't honor BellSouth's pension plan. AT&T insists that it will,
and BellSouth says its pension plan is overfunded.
But you can't entirely blame Griffis for his skepticism, which reflects the public's growing
distrust of big business. He knows what he sees: Companies laying off workers and cutting benefits at the same
time they give bonuses worth tens of millions of dollars to top executives -- whether they deserve them or not.
Not so many years ago, Griffis says, he would have taken AT&T and BellSouth at their word. "It
was more like family then. It was an honor, a privilege to work for a company like that." Like many of his retiree
friends, Griffis laments the lack of loyalty in big companies today. He spent 37 years as a phone worker, starting
with what was then Bell of Pennsylvania when he got out of the Army in 1955. In 1969 he transferred to Southern Bell
- Kiplinger's Personal Finance Magazine: The
death of the retirement safety net. Americans are quickly
losing retirement security as companies stop offering pension plans. Here's what you can do to patch together a retirement
that's just as safe. Excerpts: Pension checks may one day be relegated to museum exhibits along with buggy whips,
telegrams and other artifacts of days gone by. The number of employers offering so-called defined-benefit plans
peaked in the mid 1980s, when pensions covered one out of three private-sector workers in the U.S. By the end of
2003, pension coverage had slipped to less than one in five. [...]
Most companies that are altering their pension plans are either implementing a "soft
freeze" or a "hard freeze." A soft freeze is what IBM put into place in early 2005 when it closed the
plan to all new hires. Existing employees continued to accrue benefits. In January 2006, IBM turned down the
temperature another notch, moving from a soft freeze to a hard freeze. As of 2008, there will be no further benefit
accruals in the pension plan, but all benefits earned as of that date will be preserved. IBM's 125,000 current
retirees, former employees with vested benefits and employees who retire prior to 2008 will not be affected.
|News and Opinion Concerning Health Savings Accounts, Medical Costs and
Health Care Reform
- Associated Press, courtesy of the Washington Post: Unknown
Benefits Lurk in Health Policies. By Ellen Simon. Excerpts: If you have cancer, you may have health insurance
coverage you don't even know about. I did. I'm covered by UnitedHealthcare, the nation's second largest insurer.
As a standard benefit in all its employer programs, the company offers something called Cancer Resources, a
program that will pay for patients' cancer treatment at one of 21 top-flight cancer centers around the country.
It will even pay for patients' travel expenses and a daily per diem if the center they choose is more than 50 miles
The problem: A UnitedHealthcare patient could have cancer for a year and still not know
about the program. Even experts _ including experts who've had cancer and spend all their time working on
issues around cancer _ didn't know about these benefits because different insurers handle notification differently
and sometimes leave it to employers to publicize details of health plans. [...]
I found out about Cancer Resources when, a year after I was diagnosed, I made an appointment
with a geneticist at Memorial Sloan-Kettering Cancer Center. "We don't take UnitedHealthcare, but you may have
a dormant policy called Cancer Resources," said the administrator at the genetics program. "Call and check." To
awaken this "dormant" policy, I called UnitedHealthcare, which gave me another number for Cancer Resources.
I explained my case to a nurse there. Since my appointment was cancer related, it was covered, she said. My Cancer
Resources card would be arriving shortly.
| New on the Alliance@IBM
- IBM Pension Lawsuit FAQ about Cooper v IBM (Updated 8/8/06)
- From the Job Cuts Status & Comments
- Comment 8/05/06: I was a loyal IBMer for many years and loved my job, however I got screwed in a layoff
by evil managers. I was a solid "2" yet it was time for evil managers to get even with me.
They set me up for the layoff and there was nothing I could do to save my job. Fortunately I got a good
job with a competitor of IBM and life is good. It is a wonderful feeling to work for managers who you
can trust. What a relief to get out of the stressful cloud of evilness that exists with IBM management.
My advise to current IBMers is as follows. Sam is evil and has instilled an evilness among his management
team. Prepare your resume and develop your skills and get ready. When your number is picked for a layoff
there is nothing you can do. -A former loyal IBMer-
- Comment 8/05/06: In Austin--Management told us that STG will have 30% cuts. All the contractors
are already gone. Many projects have been cut, or extremely pushed out. -Anonymous-
- Comment 8/08/06: I haven't heard of any lay offs in SWG (Software Group) just in STG
(System Technology Group) I think that is a misquote on the board but then again I could be wrong. -Anonymous-
- Comment 8/09/06: Looks like another round of contractor cuts are hitting Austin this
afternoon. No word on numbers yet but at least 20 more have been given notice in addition to the 90 or
so let go 2 weeks ago.. I wonder if they learned from 2 weeks ago that leaving a message on a machine
or telling someone's wife isn't the way a professional company works. There are now just 2 of us left
to do the work of 6. Needless to say, things are getting very broken in our department. -Anonymous-
- Comment 8/09/06: I was just told in a meeting that they had a resource action at the
Tucson IBM site. Contractors and IBM regulars were let go. Everything is a mess. -Anonymous-
- Comment 8/10/06: I know of people at IBM who are being put on the measured mile after
being offered a separation agreement with claims that they are not a team player; though their work is
not lacking, they are accused of not being in the fold and therefore punished because they voiced to
management their complaints about poor management and lack of respect among employees who work for the
company. Firing people who have a voice is becoming common place at IBM.
Offering up a separation agreement to employees has become a way to get rid of those who
try to do the right thing at a value-based company. Times when values are tested is the time it is discovered
how much the company believes/respects in its self-professed values. Given the way IBM manages people,
says enough about how much they value their values, which turns out to be not enough to put a stop to offering
separation agreements to employees who speak the the truth. That clearly stifles the right to free speech in a
country that values free speech so much. I really think the public ought to know how IBM does business. I am a
current IBMer and do not reveal my name in fear of retribution. -poughkeepsie-
- Comment 8/11/06: Every dept I worked at in Boulder has 50% of their team's jobs sent
to either India or another country. In one case, an entire group supporting the same software was cut.
- From the General Visitor's Comment
- Comment 8/05/06: Other people have mentioned the sale of offices in the US. Here in the UK IBM have
already done it, selling their 2 largest sites in the UK, Warwick/North Harbour, and leasing back small
parts of it. To IBM, this has meant a immediate saving on location costs. Bottom line numbers look good.....
But this is yet another example of short sightedness for IBM management. Unfortunately for them, they
didn't think about that the space left for actual IBM employees was not enough. We don't have a desk
to sit in, we don't have a car parking space. As a cause of this, we are being forced to work from home,
but IBM won't pay for broadband at home, mobile phones, the tools and ergonomics for the home working
We're meant to be doing technical cross training, a more "long term" benefit
to IBM, but that's difficult to do over SameTime, on different locations, and even if we get a desk in
the building, we would be sitting in different offices. To give an example, according to IBM figures, we barely
have 1 desk for 2 people in North Harbour now, and in extreme cases where people have been allocated permanent
desks, 80 desks between 400 people!!
But the execs still get their own floor of NHbr, their own fixed desks, for doing what..!?!?!
The only saving grace, because of the new working environment, many 1st line managers are not being allocated
an office. This means they will be back on the shop floor for the first time in many years for some. It'll be
good to see in reality what they really do on a day-to-day basis :) Another well thought out decision by IBM management
- Comment 8/05/06: Some interesting reading if you go to marketwatch.com and look at the
insider trading for IBM. Sam received the following huge stock awards (among others): 05/08/2006 - 151,945
shares; 02/01/2006 - 56,134 shares; 03/08/2005 - 240,898 shares; 02/24/2006 - 250,000 shares. Just 4
days of stock awards for a total of 698,977 shares. If you say these were sold at an average of $75 per
share, this is a whopping $52.4 million in a period of 27 months. This does not even include options
exercised or the numerous other stock awards in two or three digits. Also looks like May 8, 2006 was
an early holiday for the Senior VPs, and this is not an all inclusive list: Sanford 21,456 shares; Rometty
21,456; Rosenberg 16,792; MacDonald 23,231; Horn 16,792; Moffat 23,321; Kelly 23,321; Mills 26,120; Zeitler
- Pension Comments page
- Comments 07/31/06: Consider the following when you are cashing your next pay check , or your next pension
check. In 2005, Sam Palmisano received: $1.68 mil salary, $5.18 mil in bonuses, and $9.25 mil in stock
options. Also if he were to retire he would receive $75,000 per week,,,,, yes PER WEEK. On 8-1 I will
receive my $1,560 pension check after 38 freaking years. Just think about his earnings the next time
you cash your check. Lovely! -Anonymous-
- Comments 08/08/06: With the passage of the new pension law (and the reinforcement of
today's ruling in Coopers), IBM is now free to terminate the pension plan for current employees. No
requirement hold to the announcement last January. No requirement to maintain the early-retirement adder.
No requirement to provide a supplemental matching for older employees. No requirement to maintain a retirement
medical plan. Anyone feeling comfortable? -Anonymous-
- Comments 08/08/06: It's very clear that IBM employees need employment contracts with
the IBM company now! This court reversal on Cooper vs IBM makes it very clear why IBM employees in the
USA need pension and benefit promises by IBM, made legally binding, in contracts.. IBM executives have
protected their pensions, with special compensation. Now we need to protect ours and form a strong union,
for the sake of our own families and futures. -Anonymous-
- Comments 08/09/06: Bad call by the Appeals Court! IBM was unscrupulous in the way they
redefined it's pension plan and by the way it is socking it to it's large number of retirees through
rising health costs, particularly since they placed their retirees in their own "pool" rather
than use all IBMers as a pool. -Anonymous-
- Comments 08/09/06: Randy MacDonald feels that because a court has ruled in IBM’s
favor and reversed the Cooper vs. IBM pension age discrimination ruling, that IBM, “a value-based
company”, has been vindicated…. It is NOT a vindication of IBM or Randy MacDonald, as most
people and IBM employees see it. IBM values are now in question.
What are IBM’s values today, here and now? They are not the same values the Watson’s
had, that is for sure! Today’s IBM should not act if they are. Pirates of the Caribbean had better values
than IBM does now. Don’t think your character is vindicated Randy, because some judge was swayed your way,
by the company lawyers. Reality is that IBM and you stole pension money from your own employees and retirees.
Not a legacy to be proud of, no matter, what a judge says.
Loyalty is a two way street. When a company cheats its own employees, loyalty is diminished,
as it should be. No double talk by IBM stuffed shirts will change the facts; IBM has become too greedy for its
own good and will betray its work force and country wrong or not, just to win. IBM no longer holds any moral high
ground, rather the ground nearer the center of the earth. The reality is that, the great and good IBM, is dead.
It is time for IBM employees and retirees to be loyal to themselves and families first.
Blind loyalty to the IBM Company is an old notion that needs to die, now. In this day
and age, good and decent companies are less common, the old blind loyally mentality no longer applies. Young and
old need contracts. IBM has proven that the company can turn on any employee or group of employees, for the sake
of improved profit. Common decency is no longer a factor…you need to defend yourselves and families. Contracts
are the best means of protection, if you still plan to continue employment with IBM -Anonymous-
- Comments 08/09/06: That letter from Randy was a real slap in the face to IBM employees.
It was almost like a "HAHA, screw you, IBM employees!! We won, screw you!! HAHA!! NANA-NANANA!!" It
was really disturbing. The prudent and wise thing would have been to say NOTHING. What could be the purpose
of rubbing salt in this wound? What is there to gain by that e-mail? -Anonymous-
- Comments 08/09/06: Comments 08/08/06: Wow! Another crazy ruling.. are our judges on
crack? I suggest that these judges' pensions be cut 40% and then maybe he or she would understand, along
with all judges of their age! There is nothing ethical about what IBM does to IBMers retirements, while
the executive have pensions that grow with every employee benefit cut! If what IBM has done to older
workers pensions is not age bias, what would be??? So, if you cheat older workers of different ages equally
out of pension money, that's legal? As long as one 55 year old is not cheated more than another 55 year
old? This ruling makes no sense. This was a class action of which groups of people were discriminated
against. Not if on individual was cheated more than an other! If this does not fire up IBMers to understand
why a contract is a must with these immoral crooks nothing will! Alliance@IBM is needed now, more than
Reply: You're right; the ruling makes no sense; that is why the Cooper legal team is requesting
a review by the full circuit court (there are 17 judges there, and only 3 created this ruling.) Failing that,
they will ask for a review by the Supreme Court. If either body agrees to do a review, there is a good chance
we will win, as Judge Murphy's ruling was much more legally sound than Judge Easterbrook's. Time will tell. -Janet
- Comments 08/08/06: Hi, just a couple of very quick questions:
- The settlement / judgment
was the first time I've seen it mentioned, that the 'cash balance' isn't vested / guaranteed. According
to the judgment, if IBM experiences a downturn, these 'cash balance' 'hybrid' rights, aren't guaranteed.
Is that correct - these minimal benefits aren't guaranteed even under ERISA?
- IBM executives are affected
exactly the same, right? So if they have 20 - 50 -100 million in their cash balance, they are JUST as
exposed as the typical IBM US employee, with say, $50,000 - 100,000 - $200,000 or less in their (unprotected)
account? Thanks!! - feeling stupid-
Reply: Don't feel stupid; this is complicated and not very many people understand just
how much freedom IBM has, without a union contract, to cut back benefits.
- Once you reach your 6th year of service, your cash balance is vested. The problem is that the formula used
to calculate it can be changed (ie IBM could decide to only credit the balance with 2% of your salary
each year instead of 5% and/or to no longer add interest credits.) This means your cash balance could stop growing
for many years of employment.
- IBM executives are still covered by a very rich traditional pension plan. Sam
will receive a pension worth over $10,000 per DAY when he retires. A big difference between him and
the regular workers is that he has a CONTRACT protecting his retirement benefits! -Janet Krueger-
- Comments 08/10/06: What price loyalty? -Mad-
- Comments 08/10/06: I just love seeing Randy's face on my new pension estimator and always
seeing these lovely letters from him showing how he cares for us screwed employees. Randy you are more
hated than Sam and all the cronies driving you. -Anonymous-
- Comments 08/10/06:After reading this, I am once again very thankful that I am out of
there and also that I was young enough to start another career. This does not surprise me at all. And
if anything ever gets to the Supreme Court, how do you think they would rule now that Bush has that pretty
well stacked? The only thing to do is vote in November. I belong to the Alliance and also am now in a
union at work that is in pretty good shape so I will retire with a pension of 50-70% of my salary and
medical benefits. But I hate to think about what will happen to our kids. I think in the long run that
all of these companies will experience a major setback. They're doing now exactly what they did decades
ago when workers decided that they had to have unions in order to be treated somewhat fairly. I see that
happening again. (Or maybe something like the French Revolution?)
IBM, and Randy, may be vindicated now, but there are a lot more of 'us' than there are
of 'them' and eventually people will realize that they can't sit back and let the greed of a few ruin
their lives. I admire everyone in this union who takes the time to organize and to stand up to Corporate America.
We might have lost a battle, but eventually, we will win the war. The country cannot go on like this. We are hurting
our own children. The days of the dot.com millionaire stock options are done. Companies NEED to provide employees
with benefits, pensions and decent wages. We can't do everything overseas or the country will just collapse
and I don't think anyone--even this current administration, wants that. Hang in there and ignore Randy. Randy
has his own problems.-gladtobeout-
- Comments 08/11/06: Old MacDonald had no conscience..e i eit I oh! He stole our pensions
and thinks he can crow! e i EIT oh! Now he fears our union will grow! E I EIT oh! Old MacDonald sold
his soul! E I EI Oh! For that he will go below! E i EIT oh! When Old MacDonald needs IBM employees help,
their answer will be NO! E I EIT Oh! -Anonymous-
- Comments 08/11/06: Who is IBM's / Randy's PR person? Randy's memo to all IBMers (and
seen by the world) is making this an "IBM versus employee" war. An "us against them".
He is slapping employees in the face. He could have instead written a professional memo with "just
the facts, Ma'am" and certainly leaving out the phrase "To be sure, today's ruling is important
vindication for IBM". If/when this is overturned on appeal, IBM will look like a total donkey. Who
let Randy send this email out? The board? Sam? I can't believe that Randy is just some loose cannon and
wrote this on his own. Any company should have such a message blessed by their legal department - are
they out to lunch? All this memo did was make the divide wider between those who have (top brass) and
those who don't have (employees). Which is why we have courts and unions - so on to the appeal! -Anonymous-
- Comments 08/13/06: Someone asked why Randy used the words and sent the letter with the
word VINDICATED. He chose his words carefully. Anyone who has studied Latin, knows that the words VINDICATE
and VINDICTIVE have the same root, Latin root "vindicta", vengeance, from vindex, vindic-,
surety, avenger. See vindicate.
Vindicate - to exact revenge for, avenge. Vindictive - Disposed to seek revenge; revengeful.
Marked by or resulting from a desire to hurt; spiteful. So thank you Randy for trying to hurt us. But
do you know just what you do when you purposely try to hurt? You empower us.You only made yourself look small,
stupid and petty.-ibmer-
- IBM employees on employee
|Vault Message Board Posts
to you my foot!" by "wonderaboutibm". Full excerpt: No training = IBM-sanctioned cost control.
I would accept short term restrictions on training budgets, but when it grinds on year after year without
cease, it wears thin. IBM simply no longer believes in investing anything more than absolutely necessary
in its people assets-- and usually is more than satisfied with a net drop in employee skill level.
planet do you come from?" by "wonderaboutibm". Excerpts: In response to your generally
positive comments, let me restate the following indisputable facts:
- Utilization rates are so high, sometimes 100% or over, that it is impossible to get any quality training on
company time. Certainly heavy-duty training that could temporarily take all one's energy and attention is frowned
upon at best and usually blocked by the management.
- Education budgets, especially if they involve any kind of travel, are actively discouraged. As I write this,
IBM mgmt is sending out various memos all with the same theme: expenses must be reined in to make Q3
numbers look better. We have heard this siren song before.
- "Education" by "Frank_Reality". Full excerpt: Unfortunately, education in many
parts of IBM is not available. The issues are:
- Workloads and billable hour targets are too high to allow the time to get education.
- Even if you put
the education in your IDP and it's added to the expense plans, cost reduction pressures prevent such
- Education often requires travel. Travel is one of the first things that get cut when reductions
- Education necessary to qualify for a promotion to a higher band such as classes required
for certification are often not available due to political reasons - e.g. you can't get it because you
aren't the crony of the right manager.
Of course every year for the past 5 years I've heard the promises of granting more education,
yet every year is no better than the last. The net is if you want/need education, you have to get it on your own
time and on your own dime. The IBM philosophy of treating your personnel as liabilities to be bought, sold, abused
and then discarded at the whim of management explains a lot.
- "True" by "CandorSense".
Full excerpt: It amazes me how short sighted our leadership has become. If you don't train people now, they
cant be ready later . . . I know, Duh. But it still rankles me that we will invest 6 billion in the Indian
crapper but zero in our own existing people, the one who built the business in the first place so that there
is even 6 billion to flush.
baby" by "wonderaboutibm". Excerpts: Let' counterpoint:
- Your utilization rate may be 85%. I have a unit utilization rate in the low nineties. I have associates whose
individual utilization rates are 100 to 104%, unbelievable as it sounds. 85% is actually low.
Do some basic math, buddy. At 92% expected utilization, that is 1914 hours a year, leaving
166 hours in the mythical 2080 hour year. Let's see ... most IBMers get 3 weeks' vacation a year and
net 11 days holiday. That takes up all but 2 hours of the 2080. Now drop the utilization to 85% -- as you say
yours is -- and voila, there are another 146 hours available. You must be one lucky dude.
So, in my case, unless I bill significant overtime -- not a possibility on my account,
incidentally -- I can afford 2 hours a year for training, illness, bench time, and all else. That is,
unless I forego vacations and holidays, (for what incentive?) You have further leeway, another 3 1/2 weeks actually,
but training, bench, illnesses could easily overwhelm that too.
The real subtext is that, for consulting organizations, the 40 hour workweek is a laughable
construct. Many large IBM accounts assume the average billable time will be 44 to 48 hours a week, and
that is how the high utilization requirements against a 2080 hour work year with all that "nonproductive" overhead
will be met. I am not naive enough to believe in the sanctity of the 40 hour week, but neither am I stupid
enough to kill myself for no benefit except "making utilization." Oh, and I am all for building skillsets
-- I am doing it all the time, but certainly not with IBM's encouragement.
- Coworkers have forwarded me explicit written instructions forbidding any travel associated with
travel. MS -- it's a matter of written fact that travel is being discouraged, especially with the window-dressing
for Q3 now in full gear. Your L&K situation may be for you a fortuitous exception, but remember to cringe
every time you open your mailbox. L&K could be planning to send one of those infamous memos itself any day
now. Watch your back.
- I am not sure where you meant to go with the "political" comments. True, there are "politics" everywhere,
but the politics plays out against a cultural tone. That cultural tone has deteriorated markedly at IBM since
2000, and the "politics" has degenerated likewise.
Part of the cultural breakdown has been because of "stagnant careers" -- mine
included -- since 2000. At root the problem is that GBS really is not growing, for reasons I think are well-discussed
on this board, and therefore internal personnel mobility (needed for keeping staff sharp) is severely crimped.
You seem to think the individual employee can resolve such dilemmas on their own. The cannot: we can and do do
what we can, but is the organizational dynamics is negative, working from below has obvious limitations.
I can survive at IBM because I can find diamonds in the rough -- people and projects I
like. But I know I would be better off elsewhere, and I am investigating.
is not working" by "Dose of reality". Full excerpt: The day when "networking" became
the pervasive number one career tool. i.e. stated way to get ahead, was the day that American corporations
lost the ability to promote and take advantage of the best and brightest in their organizations.
The correlation between one’s ability to network, and one’s ability to lead
and make company-enhancing management decisions is null at best, and more likely negative. When you promote
super-networkers, you are promoting people who spend the majority of their time trying to bootstrap themselves up
a career ladder, instead of developing skills that will increase sales, increase organizational effectiveness, or
reduce costs. It allows otherwise average management talent to attain positions of power that they neither deserve
nor are capable of executing well.
Witness the dolts that are ruining this company.
Travel Policy, the Reality" by "IGS_Consultant". Full excerpt: Keep in mind that the
IBM travel policy, as draconian as it is, is the *best* you will ever do. It is not at all unusual for individual
projects to establish stricter policies. For example, I have a colleague that traveled to China that was
required to fly in economy. I've been on many projects where a specific hotel was dictated, at a price
way below the already ridiculously low IBM rates. Meal limits, although well below even GSA rates, are often
made lower yet by projects. It's not unusual for projects to request rental cars be shared, in some cases
by four employees.
IBM partners are all too willing to both negotiate away reasonable travel policies to sell
a contract, and often try to "balance the budget" on the backs of IBM consultant serfs. The partners,
of course, are exempt from having to endure their own rules.
Job Interview: Psychological test and business case study?" by "James2008". Full excerpt:
I am going to attend an IBM job fair and was told there would be Psychological test/Capacity test/Business
case after the introduction. Could anybody enlighten what the Psychological test/Capacity test/Business case
would be and how should I prepare for them? I am looking for a business/IT consultant position. Thanks a
test explained" by "Dose of reality". Full excerpt: As with most things at IBM, this
test is not what it appears to be. The psychological test actually consists of just one question: Are you
nuts? Don't worry - it is not a trick question, and there are no wrong answers. It's a bit of a conundrum,
but let me explain. If you answer no, then IBM will simply believe that you are sane enough to be trusted
in front of a client. If you answer yes, then IBM will know that you are crazy enough to actually want to
Now the problem comes when you try to reconcile those two answers. If you are sane, then
there is no way that you will want to work here, and if you are crazy, there is no way that a client will want to
work with you. However, don’t fret – your unacceptability to our client base will in no way disqualify
you from being hired. We do it all the time. It is more important to have a cheap body than an effective consultant.
Witness all of the new hires we have in.
The capacity test is a test of your tolerance for abuse. It starts out slow with a few easy
thumbscrew tests, then it turns to mental and stress tests. There are a number of options that the tester can execute,
depending on their own interests:
- You will be asked to enter some numbers in a spreadsheet (Lotus 1-2-3) and save the data. Every time you save
the data, a new worksheet will open up asking you to enter the same information a different way. Every once in
a while, the spreadsheet will close on its own and you will be required to start at the beginning. We are testing
your capacity for tedious work – a skill that you will need in both client work, as well as to comply with
all the bureaucratic administrative work at IBM.
- The pain appreciation test – just practice saying, “thank you ma'am, may I have another”
- We may test your sensitivity to and capacity for unpleasant sensory experiences. You will be put in a room with
a well-past middle-aged woman, who has aged anything but gracefully, was hideous when she was young, and spends
half her salary trying to keep from becoming more hideous. The smell of peroxide will overwhelm you, and she will
be wearing the same yellow polka dot bikini that was worn by that woman in the yogurt commercial that is getting
a lot of airplay now. If you can spend 10 minutes in the room without passing out, or losing your lunch, you pass.
BTW, we call this the GR test, so if they give you a choice, and you don't have a strong stomach, I suggest you
pass on this one!
The business test is probably the easiest of the three. You will be asked to spell the word
business – but here is the trick. The question is not given orally, it is written down on the test paper.
I think you should be able to figure out what to do.
We give this business test question to all our new recruits in _______ (India) to make sure
that they are not just business ignorant SQL-writing tech-heads that are totally clueless about what clients
need in their operations. As you might expect, the failure rate in ______ (India) is around 60%.
But seriously, we are taking anyone with a pulse. If you can string two sentences together,
and got higher than a combined 850 on your SATs, you can pass any standardized test that we might give you. All
you need is general test taking abilities. Of course, if you are lucky, something else will come along so you don’t
have to take this job. Good Luck!