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    Highlights—December 16, 2006

  • Yahoo! message board post by Janet Krueger: "Citigroup Cash Balance plan declared illegally age discriminatory". Full excerpt: I just uploaded today's decision from the US District Court in the Southern District of New York in favor of Citigroup employees declaring their cash balance plan illegal.
    It is in the FILES area and is named Citigroupcashbalancedecision12122006.pdf
    Another repudiation of Judge Easterbrook's opinion, as well as confirmation of Judge Murphy's; a good indication we'll win the Cooper appeal *IF* the Supreme Court agrees to hear the case. Interesting reading!
  • Business Insurance: Judge says cash balance plans discriminate. By Jerry Geisel. Excerpts: Rejecting the reasoning of a federal appeals court, a federal district court judge says cash balance pension plans discriminate against older employees. The plans are age discriminatory because when an account balance is converted to a retirement annuity, "cash balance plans are not age-neutral," wrote Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York. [...]
    Judge Scheindlin’s decision comes about four months after the 7th U.S. Circuit Court of Appeals in Chicago ruled in a widely publicized decision involving IBM Corp. that the plans do not violate age discrimination law.
    Since the appeals court ruling, two district court judges in other cash balance plan suits have rejected age discrimination charges, while two judges, including Judge Scheindlin, have found the plans to be age discriminatory in their design. The split in the courts shows that it will be some time before the age discrimination issue will be resolved, said Nancy Ross, a partner with McDermott, Will & Emery L.L.P. in Chicago.
  • WISH-TV (Indiana): Public Hearing Held on Privatization of State Agencies. By Mike Corbin. Excerpts: The big issue at a packed public hearing Friday morning was the question of whether or not some state agencies should go private, more specifically, about IBM's proposed $1.1 billion takeover of the Indiana Family and Social Services Administration. "We think we negotiated a very good contract," Governor Mitch Daniels said. It is a tentative 10 year, $1.1 billion deal with IBM and partners. They would administer state programs for the needy, including Medicaid and food stamps. [...]
    "The problem with IBM is they have no history and experience at all in social services," said David Warrick, AFSCME Executive Director. Some 200 people with additional ideas packed the public hearing. "When employees are not involved as equal partners in any massive reorganization, that reorganization will fail," said Nancy Guyott, Indiana AFL-CIO. [...]
    Some 2,200 state workers are affected by the IBM deal. Officials say they are guaranteed two years of employment at current or higher pay. Union officials say the deal would create more lower paying jobs and the pension plan would not be as good. The federal government must still approve the deal.
  • Associated Press, courtesy of Yahoo! News: Hearing Held on $1B Welfare Contract. By Ken Kusmer. Excerpts: A parade of state case workers, their union leaders, social advocates and others accused Gov. Mitch Daniels' administration of lying, fudging statistics and endangering needy and vulnerable Hoosiers to make its case for outsourcing the application process for food stamps and other public benefits.
    Friday's lone public hearing on a contract to pay an IBM Corp.-led coalition of vendors $1.16 billion over 10 years attracted a standing-room only crowd of about 200 people to an Ivy Tech Community College auditorium. It stretched on for hours to accommodate the dozens of opponents who signed up to speak out against the plan. [...]
    "This meeting, if it does nothing else, tells Governor Daniels that Hoosiers do not want this change," said Robert Butts, a Division of Family Resources case worker in St. Joseph County. He also questioned the proposed contract's plan to move some state workers to the vendors at no less than equal pay and benefits. "Don't tell me about employee protection. I don't believe," Butts said.
  • Yahoo! IBM Pension message board post " Will someone explain this to me?" by Kathi Cooper. Excerpts: Form 8-K for INTERNATIONAL BUSINESS MACHINES CORP, Dec-2006.
    Item 8.01. Other Events. The Company will be asking IBM stockholders to approve amendments to our Certificate of Incorporation at our 2007 Annual Meeting that will lower all statutory supermajority voting thresholds now applicable to the Company under the New York Business Corporation Law.
    Under existing statutory voting provisions now applicable to the Company, the approval of two-thirds of all outstanding shares entitled to vote are presently required to effect each of the following extraordinary transactions:
    • a plan to merge IBM into another company or to consolidate our Company with another company;
    • to dispose of all or substantially all of our assets outside the ordinary course of business;
    • to effect a share exchange under which IBM would become a subsidiary of another company and its stock exchanged for the stock of that other company (IBM's new parent); or
    • to dissolve.
    IBM has never sought to undertake any of these extraordinary actions, and does not anticipate doing so.
    However, as a result of the vote at the Company's 2006 annual meeting on a stockholder proposal that asked IBM to lower all supermajority voting provisions and other considerations, the Board will recommend to IBM stockholders in the Company's 2007 proxy statement that stockholders vote to approve four (4) separate management proposals.
    Approval of these proposals will implement the stockholder proposal in a manner consistent with New York State law.
    The four proposals, if approved, would add new provisions to the Company's Certificate of Incorporation, lowering the existing statutory supermajority voting provisions on the four matters listed above to the lowest possible voting threshold; that is, a majority of all outstanding shares entitled to vote on each matter.
    There are no other statutory supermajority voting provisions now applicable to the Company that can be lowered.
    Full details relating to the amendments the Company will be recommending to stockholders will be set forth in the Company's 2007 Definitive Proxy Statement, which is presently scheduled to be filed with the U.S. Securities and Exchange Commission in early March 2007.
  • "ibmaccountant" comments on IBM's Form 8-K filing. Full excerpt: It'll make it easier make big decisions, like selling the company or any of its major operating units to the private pirates like Lou's boys at Carlyle. The best way to hide any "issues" is to sell and go private.
    The fix is in. The senior management will make millions and be free of the liability hanging over their heads.
    The big item to sell next is IGS.
  • Yahoo! message board post by "sby_willie": "IBM Spirit event". Full excerpt: Found out the IBM Poughkeepsie Spirit "Holiday Season" event was cancelled. For other IBMers: was your event cancelled or even planned to be held?
    The reason given for Poughkeepsie was due to low enrollment. Gee, is this REALLY the truth? And do you wonder why!?
    IBMers in Poughkeepsie and all of IBM are increasingly pressed to make their CLAIM customer "billable hours" targets for the year since it is the 4QTR. Since this event is not customer billable, then how can IBM think that anyone can afford to give up an hour or two to attend this event?
    Maybe it is a case of IBM Poughkeepsie not having enough "IBM spirit". Wrong. IBM Poughkeepsie shows tons of spirit by working hard helping IBM make their profits. It's just that IBM Poughkeepsie and much of the "Global IBM" has the sentiment that they don't have any spare time when at work these days to give to attending an event like this.
    I bet some employees in Poughkeepsie feel that if they planned to attend and their management found out then they would be scrutinized as having "too much time on their hands" or something of the like sort.
    It also could be the case that our present "pale blue IBM" is so Ebeneezer cheap they didn't want to afford any 4QTR money to fund this event anyhow so the reason given was "cancelled due to poor enrollment". (I hope this is not indicative of how the 4QTR results are going to turn out)
    The comment in the note "We apologize, but due to low enrollment this event has been cancelled. No actions are necessary on your part."
    Apologize? For what?
    No actions are necessary on your part? Put a little guilt trip on us for not enrolling? Ok, really, no IBM action plan here? Maybe the action plan should be to "try to show more spirit" for the next time? :)
    Maybe IBMers are really understanding this IBM Spirit program is just a load of internal propaganda to try to boost the sad and plummeting morale in IBM. If morale was so good why do you need to try to reinforce or even build "spirit"?
    If this action taken by IBM to cancel this event is not indicative in general of the low IBM employee morale then what is? One has to wonder what IBM's intentions are of sponsoring this Spirit program really are.
  • Yahoo! message board post by "sby_willie". Full excerpt: Wow. Curbing the Thanks awards... They can't afford to allow Thanks awards now in 4th QTR here. How cheap can this company get?
    Supposedly these Thanks awards are "valued" at $25 although most of the awards IMHO are much less in value than that amount. I guess it might cost more for processing, shipping, and handling than the actual items themselves..typical IBM since Gerstner.
    IBM meet Ebeneezer Scrooge. The way things are going I would prefer to work for Ebeneezer for the New Year.
  • Vault message board post "Holiday Social cancelled!" by "IGS_Consultant". Excerpts: It's always interesting to see how the glowing press coverage of IBM is so out of sync with the reality inside. As has been discussed elsewhere in these forums, IBM will no longer reimburse mobile employees (i.e. employees who do not have IBM offices, and therefore have *no* office expenses within IBM) for broadband access, wireless data card access or a separate wired voice line for their homes.
    More lately, IBM has cancelled all travel unless a client is paying for travel.
    And, now, IBM has even cancelled Christmas (or your other favorite year-end holiday celebration) according to the following notice:
    "As we work to close a strong fourth quarter, we need to focus on meeting our business objectives, including cost management. To this end, we have decided to postpone our Holiday Social originally scheduled for xxxx, Dec. xx. We will reschedule this event early next year as a kickoff for 2007. This action is in line with Corporate direction."
    "I'm sorry to postpone the Social at this late date. I appreciate your understanding."
  • Fort Worth Star-Telegram: American plans to bolster pension plans. By Trebor Banstetter. Excerpts: American Airlines will pump an additional $100 million into its employee pension plans, a move that will help strengthen the airline’s retirement plans. American, based in Fort Worth, had already contributed $223 million this year, which was the minimum amount required to satisfy its funding obligations. The additional contribution is “a strong example of our commitment as a company to invest in the future of our employees,” Gerard Arpey, the airline’s chairman and chief executive, said in a prepared statement.
    He called it “a prudent use of our cash resources.” At the end of the third quarter, American had about $5 billion in unrestricted cash on hand.
    American is the only major airline that still has traditional pension plans for most of its employees. Others, including United Airlines and Delta Air Lines, have terminated pensions in bankruptcy court, significantly reducing retirement income for many employees.
  • The Oregonian: Intel cuts employee education benefits. The company will reimburse only those who attend schools with approved accreditation. By Brent Hunsberger. Excerpts: In an apparent rebuke of for-profit colleges, Oregon's largest private employer says it will stop reimbursing employees for tuition at some schools and will set annual caps on executive MBA programs. Intel confirmed Tuesday that it has decided to reimburse tuition only for students attending universities with professional accreditation accepted by the company. [...]
    Oregon's major public universities and largest private schools won't be affected by the move. But several for-profit colleges no longer qualify for tuition reimbursement, company officials said. Among those on the outs with Intel is the nation's largest for-profit education provider, the Apollo Group Inc., which owns the University of Phoenix. The school operates four campuses in the Portland area -- including one near Intel's facilities in Hillsboro -- and one in Salem.
  • Wall Street Journal: How Backdating Helped Executives Cut Their Taxes. Evidence Suggests Recipients Of Some Stock-Option Grants Manipulated Exercise Dates. By Mark Maremont and Charles Forelle. Excerpts: In a paper that began circulating in recent days, a Securities and Exchange Commission economist concludes there is strong statistical evidence that executives manipulated the exercise dates of their options as part of a tax dodge. And a review of corporate filings turns up some companies with startling options-exercise patterns.
    The new information could open another front in the options-backdating scandal. Backdating already has sparked the broadest corporate-fraud probe in decades, with more than 130 companies under investigation by federal authorities. So far, attention has focused on the practice of retroactively selecting favorable dates to grant options. The new wrinkle involves rigging the dates on which options are exercised, sometimes years after they're granted. [...]
    About three-quarters of the time, executives immediately sell the shares they buy when they exercise options. Under IRS rules that typically apply, those executives must pay ordinary income tax, as well as payroll taxes, on the difference between the stock's value on the date the option was exercised and the option's strike price. The highest federal marginal income tax rate is 35%.
    But for a variety of reasons, including corporate rules that require top managers to own a certain amount of stock, some executives don't sell immediately. Those who hold the shares for at least a year pay a much lower capital-gains tax -- currently 15% -- on any profit between the time they exercise and when they eventually dispose of the shares. That lower rate gives the executive an incentive to exercise the options at a relative low point for the stock: The move reduces the amount of money that would be owed at the ordinary income tax rate, and shifts the difference so it is potentially taxed at the much-lower capital gains rate.
  • Reuters, courtesy of Yahoo! Finance: Guerrilla's Siris sees end of American era. Excerpts: High levels of debt, the war in Iraq and shifting demographics will bring about "the end of the American era," a hedge fund manager said on Tuesday. Peter Siris, who runs U.S. hedge fund Guerrilla Capital Management and Hua-Mei 21st Century, a fund specialising in emerging Chinese companies, said young Americans should study Chinese because fading U.S. influence in the world will require them to invest more money in foreign firms, especially in the Far East. [...]
    He said the U.S. housing market slowdown is not yet finished and will likely deteriorate further as baby-boomers look to down-size. "I'm not very bullish about who is going to buy all those houses in East Hampton, all those extra ski houses in Vail. The housing industry will get hit, and a lot of the baby boomers' net worth is in housing," Siris said. "Consumers will feel poor."
    Siris said the war in Iraq will likely impact the United States detrimentally for the next 50 years.
    Along with fading geopolitical influence, he said the U.S. economy will be challenged by a continuing trend of outsourcing as information-based services are even easier to export across borders than manufactured goods.
  • BusinessWeek: Virtually Addicted. A lawsuit against IBM is reviving debate over whether Web overuse may be classified as an addiction. The answer will have big implications for business. By Catherine Holahan. Excerpts: By his own admission, James Pacenza was spending too much time in Internet chat rooms, in some of them discussing sex. He goes so far as to call his interest in inappropriate Web sites a form of addiction that stems from the posttraumatic stress disorder he's suffered since returning from Vietnam. Whatever it's called, Pacenza's chat-room habit cost him his job.
    After 19 years at IBM's East Fishkill plant, Pacenza was fired in May, 2003, after a fellow employee noticed discussion of a sex act on a chat room open on Pacenza's computer. IBM maintains that logging onto the Web site was a violation of its business conduct guidelines and a misuse of company property—and that it was well within its rights to terminate Pacenza's employment.
  • Forbes, courtesy of MJM Financial: Retirement Rip-Off [PDF]. By Neil Weinberg. Excerpts: True or false: Your 401(k) plan is costing you more than answer that question you're like a lot of Americans.
    Caterpillar had a nifty idea for managing its employees' 401(k) assets. Instead of bringing in an outside investment firm, the bulldozer behemoth set up its own, the Preferred Group of Mutual Funds. Caterpillar then funneled $1.3 billion into it, charging workers fees that were quite ample, if not out of line with averages in the mutual fund industry: 1.12% annually for a value fund, 1.54% for an international growth fund and so on.
    After a decade and a half of this arrangement Caterpillar this year decided to dismantle the in-house shop; the assets will presumably wind up with a mainstream fund vendor. In September lawyers filed a class action against Caterpillar, charging that the company had used Preferred to profit illegally from its employees' retirement accounts, in violation of federal law requiring that 401(k) plans must solely benefit workers, not their companies. A Caterpillar spokesman denies wrongdoing and declines further comment.
    The Caterpillar suit is one of several filed recently accusing big corporations, including Boeing, Kraft and International Paper, of failing to offer employees a fair shake in their 401(k) plans.
  • Financial Times: EU to link labour standards to trade deals. By Andrew Bounds in Brussels. Excerpts: Europe will try to improve working conditions in the developing world by demanding that trade partners meet minimum labour standards in new bilateral trade deals it is planning. Citing agreements with India, South Korea and east Asian states for which he will on Wednesday seek negotiating authority, Peter Mandelson, trade commissioner, said: “I would like to see us make a step-change in how we integrate decent work and the broader agenda of sustainable development into these bilateral agreements.”
    His move will be popular in France and southern European states most nervous of losing jobs to low-wage economies. “The choice is not between fortress Europe and a race to the bottom,” he said at a conference in Brussels, seeking to assuage their fear of globalisation. Such suggestions have already received a cool response from India.
  • Harvard Business Review: The High Cost of Low Wages. By Wayne F. Cascio. Full excerpt: Wal-Mart’s legendary obsession with cost containment shows up in countless ways, including aggressive control of employee benefits and wages. Managing labor costs isn’t a crazy idea, of course. But stingy pay and benefits don’t necessarily translate into lower costs in the long run.
    Consider Costco and Wal-Mart’s Sam’s Club, which compete fiercely on low-price merchandise. Among warehouse retailers, Costco—with 338 stores and 67,600 full-time employees in the United States—is number one, accounting for about 50% of the market. Sam’s Club—with 551 stores and 110,200 employees in the United States—is number two, with about 40% of the market.
    Though the businesses are direct competitors and quite similar overall, a remarkable disparity shows up in their wage and benefits structures. The average wage at Costco is $17 an hour. Wal-Mart does not break out the pay of its Sam’s Club workers, but a full-time worker at Wal-Mart makes $10.11 an hour on average, and a variety of sources suggest that Sam’s Club’s pay scale is similar to Wal-Mart’s. A 2005 New York Times article by Steven Greenhouse reported that at $17 an hour, Costco’s average pay is 42% higher than Sam’s Club’s ($9.86 an hour). Interviews that a colleague and I conducted with a dozen Sam’s Club employees in San Francisco and Denver put the average hourly wage at about $10. And a 2004 BusinessWeek article by Stanley Holmes and Wendy Zellner estimated Sam’s Club’s average hourly wage at $11.52.
    On the benefits side, 82% of Costco employees have health-insurance coverage, compared with less than half at Wal-Mart. And Costco workers pay just 8% of their health premiums, whereas Wal-Mart workers pay 33% of theirs. Ninety-one percent of Costco’s employees are covered by retirement plans, with the company contributing an annual average of $1,330 per employee, while 64 percent of employees at Sam’s Club are covered, with the company contributing an annual average of $747 per employee.
    Costco’s practices are clearly more expensive, but they have an offsetting cost-containment effect: Turnover is unusually low, at 17% overall and just 6% after one year’s employment. In contrast, turnover at Wal-Mart is 44% a year—close to the industry average. In skilled and semi-skilled jobs, the fully loaded cost of replacing a worker who leaves (excluding lost productivity) is typically 1.5 to 2.5 times the worker’s annual salary. To be conservative, let’s assume that the total cost of replacing an hourly employee at Costco or Sam’s Club is only 60% of his or her annual salary. If a Costco employee quits, the cost of replacing him or her is therefore $21,216. If a Sam’s Club employee leaves, the cost is $12,617. At first glance, it may seem that the low-wage approach at Sam’s Club would result in lower turnover costs. But if its turnover rate is the same as Wal-Mart’s, Sam’s Club loses more than twice as many people as Costco does: 44% versus 17%. By this calculation, the total annual cost to Costco of employee churn is $244 million, whereas the total annual cost to Sam’s Club is $612 million. That’s $5,274 per Sam’s Club employee, versus $3,628 per Costco employee.
    In return for its generous wages and benefits, Costco gets one of the most loyal and productive workforces in all of retailing—and, probably not coincidentally, the lowest shrinkage (employee theft) figures in the industry. While Sam’s Club and Costco generated $37 billion and $43 billion, respectively, in U.S. sales last year, Costco did it with 38% fewer employees—admittedly, in part by selling to higher-income shoppers and offering more high-end goods. As a result, Costco generated $21,805 in U.S. operating profit per hourly employee, compared with $11,615 at Sam’s Club. Costco’s stable, productive workforce more than offsets its higher costs.
    These figures challenge the common assumption that labor rates equal labor costs. Costco’s approach shows that when it comes to wages and benefits, a cost-leadership strategy need not be a race to the bottom.
  • The CPA Journal: Social Security Reform. Let’s Not Forget About the Middle Class. By Eric Rothenburg. Excerpts: The May 2006 CPA Journal’s theme of Social Security reform was timely and relevant. It addressed the Social Security insolvency problem, noted the issue of the fund’s being insolvent earlier than most government economists had forecast, and discussed possible solutions. However, the articles were somewhat unbalanced. They were skewed toward high-net-worth individuals and ignored the lower and middle classes.
    First, one must understand why Social Security was created. As a direct result of the stock market crash of 1929 and the subsequent collapse of the U.S. banking system, many people were left with nothing. Their stock market investments, as well as any depository accounts they might have had, evaporated. The government realized that many retired people were left penniless. Social Security was formed primarily for the people who had not saved enough for retirement or who had seen their retirement “wealth” evaporate. Social Security was not formed for the top 20% of people in the United States who earned income and held wealth. It was for the other 80%. [...]
    The Rise of ‘You’re on Your Own’ Government. Unfortunately, many of our government officials today believe in the classical school of economics. If we look at the recent federal tax cuts, we see capital gains and dividend reductions that basically cater to the upper class. We do not see an interest-income deduction that would help middle- and lower-income Americans. In addition, more and more post-Keynesians, including renowned economist Jared Bernstein, have suggested that government tax policy and Social Security policy essentially say “you’re on your own” to the middle class. Remember, in the 1950s through the 1970s, it was the middle class that made the United States an economic world power via productivity gains, consumption patterns, and the like.
    The supply-side theory that many government officials now follow will only cause larger income gaps between upper- and lower-income groups. The middle class is quickly evaporating in the United States. (By middle class, I refer to people in urban areas of the United States whose adjusted gross income is between $40,000 and $150,000.)
  • India eNews: Indians may get social security money on return from US. Excerpt: The US is considering a pact with India to refund social security contributions by Indians on their return even if they had not worked for a requisite number of years, a top official said Tuesday.
    'We have this time very seriously discussed the implications of the totalisation agreement with the Indian government,' said US Under-Secretary of Commerce for International Trade Franklin L. Lavin, who is heading the largest-ever American business delegation to India.
  • India eNews: Over 43,000 Indians got H-1B visa in US fiscal 2006. Excerpt: A total of 43,167 H1-B visas were issued to Indians in the US fiscal year 2006 which ended on September 30. Stating this at a press conference here Friday, US consul general Peter Kaestner said that this was part of the 127,000 temporary work visas that were granted during the same period. [...]
    Overall, a total of 358,734 temporary visas were issued to Indians in US fiscal 2006, a 14 percent increase from the previous year, Kaestner said, adding that during the same period over 30,000 immigrant visas were also granted to Indians. [...]
    Kaestner said that demand for H-1B visas is expected to increase in the years to come. IBM alone, he said, is planning to hire 50,000 IT professionals in the next two years. 'And we expect one-third of these to come from India,' he said.
    Asked whether there was any plan to increase the H-1B visa ceiling from the current figure of 65,000 per year, he said, 'The US administration wants the H-1B visa ceiling to be increased. We hope that the next Congress will do it.'
  • CNET News: 100 years of Grace Hopper. By Colin Barker. Excerpts: For most people who work in IT, the programming language COBOL is as dead as the dodo. Yet Grace Hopper, the woman credited with establishing COBOL (Common Business-Oriented Language) as the language of business, would be pleased to know that 100 years after her birth, the language still underpins many applications that keep modern businesses going.
    This Saturday is the centennial of Grace Hopper, who was born on December 9, 1906. Often referred to as "the mother of COBOL," her contribution to the theory and practice of programming is commonly appreciated as enormous. She is credited, among other achievements, with being the first person to develop a compiled program in an age when computers worked by running programs that were interpreted one line at a time.
  • Associated Press, courtesy of Forbes: Disk Drive Pioneer Al Shugart Dies. By May Wong. Excerpts: Alan Shugart, the co-founder of hard drive maker Seagate Technology LLC, has died, the company said Wednesday. He was 76. Shugart helped pioneer the multibillion dollar hard drive industry, in which Seagate now holds the leading market position. He helped start the company in 1979 and served as its chief executive officer until 1998. [...]
    Born in Los Angeles, Shugart attended the University of Redlands where he earned a degree in engineering physics. He joined IBM Corp. in 1951 and was among the original team of developers there who built the first computer disk drive 50 years ago.
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Families USA: How HSAs Can Drain Your Wallet and Harm Your Health [PDF]. Excerpts: HSAs and high-deductible health plans represent a tremendous gamble for health care consumers: While such plans may benefit people who remain healthy, people who become ill often have a hard time paying for their care. People may forgo care due to cost, only to find that they have a serious condition that would have improved with earlier treatment. Even if people save a significant amount of money in their HSAs, they may not have sufficient funds to pay for care when illness strikes. And lower-paid workers have less ability to save money in HSAs than higher-paid workers.
    Although HSAs and high-deductible plans are often marketed as ways to give consumers “control” over their health care budgets, people who are sick actually have little control over their health care costs. What’s more, after they meet their plans’ deductibles, they often face high out-of-pocket expenses for services that are not covered by their plans and for out-of-network care that, especially in an emergency, may be unavoidable.
  • Washington Post editorial: Inequality and Health Care. Two fixes for middle-class insecurity. Excerpts: The rise of inequality over the past generation calls for a rethinking of tax and education policies, as earlier editorials in this series have said. But it also calls for reform of the health system. Because of a historical accident -- wage controls during World War II drove employers to compensate workers with perks such as medical insurance -- the health system is tied to corporations. This exacerbates inequality.
    In most countries, rising medical costs are shouldered by taxpayers. Because tax systems are progressive, this means that the extra cost is borne by those who can afford it. But in the United States, where health spending per person has doubled since 1975 (after adjusting for inflation), the non-poor and non-elderly are expected to pay their own way. This is most clearly the case for Americans who lack a company health plan and must pay directly out of pocket. It's increasingly the case for Americans who have corporate coverage that comes with high deductibles and co-payments. But even workers who have generous, all-you-can-eat health plans end up paying indirectly, since their wages are held down to offset the cost of the plans.
    This individualistic system goes a long way toward explaining the "middle-class squeeze" so frequently invoked on the campaign trail. Workers' total compensation may be rising, but health benefits gobble up an increasing share of that, so wages lag. Equally, out-of-pocket medical expenses are believed to cause at least 425,000 bankruptcies annually, and one in six working-age adults carries medical debt. [...]
    The health system is a huge problem in its own right, irrespective of inequality. The United States spends almost twice as large a share of its economy on health care as do other rich countries, yet it still has lower life expectancy; it still has 47 million uninsured; and future health costs threaten crippling budget deficits. But the rise of inequality provides an extra reason to tackle the health challenge. Struggles with medical bills and fears of losing coverage are at the root of middle-class anxiety, and that anxiety creates pressure for misguided populist policies that would spread the dysfunction of the health system to the broader economy. So long as a third of the workforce lives in fear of losing access to doctors, nobody should expect the nation to believe that a rising tide is lifting all boats.
  • Washington Post: Senator Wants Universal Health Care Plan. By Matthew Daly. Excerpts: Several business and labor leaders on Wednesday hailed a proposal to provide health care coverage to all Americans through a pool of private insurance plans. A dozen years after Congress rejected a Clinton administration plan for universal health care, Oregon Sen. Ron Wyden offered a plan he said would provide affordable, private health care coverage for all Americans, except those covered through Medicare or the military.
    "Employer-based coverage is melting away like a Popsicle on the sidewalk in August," Wyden said. Wyden, a Democrat and a member of the Senate Finance health care subcommittee, said his plan would "guarantee health coverage for every American that is at least as good as members of Congress receive and can never be taken away."
  • New York Times: Last-Minute Inserts Offer Benefits in Medicare Bill. By Robert Pear. Excerpts: By slipping four sentences into a big bill passed last week, Speaker J. Dennis Hastert secured a major change in Medicare policy avidly sought by a few health insurers, in particular a multinational company with headquarters in his home state, Illinois.
    In the final hours of the 109th Congress, the Senate Democratic leader, Harry Reid of Nevada, also got special treatment for a hospice in his state. The bill did not name the hospice, but specified the Medicare provider number for the intended beneficiary, the Nathan Adelson Hospice in rural Pahrump, Nev.
    Representative Bill Thomas, Republican of California, inserted a provision earmarking $40 million for a valley fever vaccine sought by his constituents, while the Senate Republican leader, Bill Frist of Tennessee, obtained tens of millions of dollars for hospitals in his state.
    These examples illustrate how power is exercised in the final, chaotic hours before Congress adjourns. Obscure provisions of interest to just a few lawmakers were quietly stuffed into a grab bag of legislation, with no indication of their parentage or purpose.
New on the Alliance@IBM Site:
  • Scrooge is alive and well at IBM. Full excerpt: IBM employees are telling the Alliance that Holiday parties and Spirit events are being cancelled at the last minute at many IBM locations, except corporate headquarters.
    According to employees, Fishkill site management bought 7000 lunches and ended up having the vendor donate the food to local charities.
    Events have also been cancelled in Poughkeepsie Charlotte and Boulder. Burlington decided to reschedule the holiday party but now employees have to pay for it.
    In IGS other last minute cost cutting is taking place in Education and Thanks awards.
    A note from an IBMer puts it this way, “If the times are tough I don’t think anyone would have a problem with cutting these expenses if it helps save jobs. But what takes this beyond belief is that Corporate HR made the decision to keep holiday parties at 3 headquarters buildings in Armonk and Somers at an expense of over $100k. Does this mean that the largely executive population deserves this little perk but the peons at other sites do not?"
  • From the Job Cuts Status & Comments page
    • Comments 12/11/06: I am a recent statistic of an IBM resource action in STG, Hopewell Jct. I used to laugh at the whole Alliance thing, but now am thinking of joining. The nonsense at IBM must stop, with resource actions, outsourcing, etc, we must do something. It might start with going to local county executives, John Hall, Elliot Spitzer, Clinton to name a few. I have already started writing to them, but maybe we need more forceful actions...a rally, a town meeting, whatever. What really pisses me off about the whole thing is that I was only given 30 days notice. Then to be told by IBM managers for jobs I applied for, that"We cannot hire anyone". Bulls***!!!
      And the icing on the cake...you ready for this? I was 30 days shy of being able to bridge to retirement...30 days!!! IBM new this, and planned this so I would have to wait 4 years for my pension, if there is anything left. That's my story. I have been reading all the notes here, and I knew I was not alone. Oh, another fallacy of IBM is that cutting people makes them more productive. No it doesn't! Where do they come off with this kind of thinking? More later..... -Jeff-
    • Comments 12/14/06: Around the SDC We(r)st, all I hear is how next year's IGA budgets are ridiculous and more "challenges" keep coming. This can only mean one thing for next year. Yep, they are oiling up the turnstiles! Sammy needs a new home in the Hamptons it seems. BTW, the GR DBA we got is a complete failure. Doesn't know DBA or English. You call that a strategy? -Anonymous-
    • Comments 12/14/06: what i heard about the ricoh transition was that it was scheduled for 12/15/06, but had been pushed back for some reason (unknown). i'm sure that the good folks in management would like to see this done before the holidays, since peoples spirits are high, and there's less chance for an "incident." sort of like the movie "office space." -gadfly-
  • From the General Visitor's Comment page:
    • Comment 12/11/06: For anyone part of the overtime lawsuit that was recently won. I called the lawyers involved last week to make sure I was on the list and she verified that I was. She also indicated in February or March I would be receiving a form in the mail to fill out concerning the case. Then the payout for lost overtime would be calculated and distributed this summer sometime. If you are wondering if your part of the case you can call 415-956-1000 x3393. Good luck to all involved. -Anonymous-
    • Comment 12/14/06: I worked for IBM Endicott a few years back, and IBM sold us off, near the holidays to EIT. EIT is a sinking ship and I left that for a very small company. I started with this little company in November.
      The week before Christmas i received my weekly check in the mail. I open it and found 2 regular pay checks! Being from IBM, I assumed the home office made a mistake and contacted them about accidentally get two weeks pay... I was told, "That's not a mistake...that's your Christmas bonus check! Were glad to have you with us."
      Needless to say I was happy to see the spirit of Christmas still did exist! I'm glad to be done with big, cheap IBM. There is many smaller companies out there that still treat their employees like humans, not just cogs in a machine...
      IBM and it's greedy execs need to change their ways, their deeds on earth could catch up with them! There was a time at IBM that the spirit of Christmas was alive and those were wonderful times, with happy employees and managers...Cheer was all around. Profits were high and loyal employees eager to start a new year at IBM. Today I'm sure this is not the case at IBM. -IBMChristmasGhost-
    • Comment 12/15/06: Spare no holiday party expense for Armonk and Somers, eh? That these sites are treated special and got a holiday party when other sites had theirs cancelled is truly despicable. Getting coal in their stocking would be too good for the IBM executives that are at these sites! They all deserve to be left out in the cold for the New Year with actions like this. -Santa_is_watching-
    • Comment 12/15/06: Here in Ireland people are afraid to join a union.They see more and more multiflex being brought in and less full time staff. You see IBM are doing this because that way they have control without the worry of IBMers joining unions; and they can get rid of staff knowing they are still covered by sub contracted staff. They win we lose. -Anonymous-
  • From the Pension Comments page:
    • Comment 12/11/06: I heard that when Russian law enforcement raided IBM offices over pension theft, that the raid was broadcast live on TV... IBM had better watch out, cheating workers outside the USA may not be given a blind eye, like here in the USA. Humm, I wonder what workers in China, South America, or India will do, when IBM cheats them in some way??? I think that,IBM execs there better have a good escape plan and security best be high at shareholder meetings. IBM cheating the workers around the world, may not be a smart thing to to do. -Anonymous-
  • IBM employees on employee raises
    • Comment 12/14/06: Salary = 93000; Band Level = 7; Job Title = Sr IT specialist; Years Service = 8; Hours/Week = 50 to 55; Your Gender = Male; Div Name = SO; Location = USA; Message = What a waste of 8 years in IBM. Goldman Sachs is handing out big, fat holiday gifts to its employees this year, with an average 25 percent hike in pay per employee, resulting in a record-high compensation package. Goldman's $16.4 billion total compensation package was mentioned as part of this week's fourth-quarter report, in which the firm disclosed a surge in quarterly profit. The package will be divvied among 26,467 employees, resulting in an average annual compensation, with pay and benefits, of $621,906 per worker. -JealousFreak-
    • Comment 12/14/06: Salary = 50k; Band Level = contractor; Job Title = Software Engineer; Years Service = 2; Hours/Week = 40; Your Gender = Male; Location = RTP; Message = 10 yrs experience before joining -Anonymous-
    • Comment 12/14/06: To the person talking about Goldman Sachs, this is from the Daily News --"The merry moneymakers at Goldman Sachs will end the year with $9.5 billion in profits, and they'll divide $16 billion in bonuses - about $622,000 for each employee. We do not begrudge these conquerors of capitalism, but we note two points.
      First: Gov. Pataki and Mayor Bloomberg lavished Goldman with subsidies so it would build a headquarters near Ground Zero. The giveaway grows more obscene as Goldman rakes in ever more money.
      Second: Goldman's numbers offer a vivid example of the growing gap between the rich and everyone else in America. In the city, 1.5 million people live below the poverty line of $16,000 a year for a single parent with two kids. Goldman's bonus pool could raise each of their incomes by more than $10,000. Something is wrong when one firm's bonus pool is big enough to end poverty in America's largest city." -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:
  • "Relativity" by "yeahsure". Full excerpt: I see a LOT of lack of perspective here. Everyone is complaining against a magical place that USED to exist. It sounds like all the whiners at ACN after we went public. Get over it, that place doesn't exist.
    Compare it with TODAY. These "perks" (not the right word) are better than anywhere I have been. Matching, insurance, discounts 70% are better than the other consultancies I have been with.
    The 30% that are worse? Per diems, raises (although I am taking your word for it, as I haven't been here long enough) and vacation. It was a cool benefit to roll over vacation, and when you quit, you got a decent bonus, that sucks here...
    So what's the bottom line? I think I came out ahead, but just barely, but it's no where near as bad as everyone is portraying.
  • "Perspective" by "jb40967". Full excerpt: Maybe you need to broaden yours. The point of many in this board is that why settle for IBM when you can get a lot more elsewhere (consulting or otherwise). We're not comparing the current IBM to a magical place that used to exist. We're comparing the current IBM to a very REAL place that exists ELSEWHERE.
    For example, I left IBM (and consulting) this year but I'm doing exactly the same PM job I had with IBM. I make more money, just got a raise, and I'm entitled to a real bonus. I get 22 vacations days (aside from 7 additional days off since we don't work during the holidays). On average, I work 45 hours a week. I get 100% tuition reimbursement, Retirement matching 2 for 1 ... and so on and so forth. Now those are real perks.
    And I'm sure there are many other companies out there aside from mine that offer the same.
  • "In case you missed it before" by "Wok N Off". Full excerpt: Here is why I stay (at IBM):
    • 10. Grabbing my ankles, bending over, and yelling, "Thank you sir, may I have another" is my favorite activity.
    • #9. Fulfilling career development opportunities to manage offshore resources in my native language 'round the clock abound.
    • #8. My people manager cares about me as a human being...really.
    • #7. I love the travel policy, which is flexible and affords me the most luxurious travel accommodations, be it hotel, auto, and daily living allowances. I appreciate being able to stay at five star hotels, renting a lincoln, eating surf-n-turf at every meal.
    • #6. I am often reminded by caring executives that I should be grateful to have a job here at the greatest technology company that ever existed.
    • #5. I enjoy the freedom and opportunity to innovate, share my creativity, and have my ideas pilfered by any of several willing hyenas.
    • #4. Culture, culture, culture!!! My masochistic tendencies are a perfect fit for my sadomasochistic colleagues, who are diverse, tolerant, and welcoming, thus assuring an appropriate fit for all, whatever your preference (i.e., sado, maso, or anywhere in between...or at the extremes come to think of it). We even reimburse for the leather accessories!!!
    • #3. I am assured of work/life balance cause that's what the policy says.
    • #2. I really enjoy the overhead of IDPs, PBCs, PAs, PDFAs, PDs, PCBs, LSDs, GEDs - did I miss any?
    • and the number one reason I spent more than a few weeks at IBM... the money, the fame, and ultimately-the chicks!
    **Disclaimer** - Any statements made herein and believed are not the responsibility of the author, but rather the idiot that took such author seriously. Author understands that there are many who need this disclaimer and will be patient with such folks, as he will be with the first smart-a** reply recognizing that there are 3 components in #1, but are ultimately all part of the same package.
  • "Some final words before my exit from IBM" by "ubisububi". Full excerpt: Dose, past, present and future IBM'ers:
    I wish you much success and upward mobility, most likely with another company. I recommend heeding the advice on this message board. I was skeptical of the veracity of the postings and had to see for myself. Let's just say that I learned the truth the hard way. I'll miss the IDP's, PBC's, PA's, PDFA's, FSA's, MTF's, and ABC's of IBM.
    Dose, thank you again for your insight. I'm heading over to BAH as a Level III. They matched my salary here, but to me that's the least of it. I'm looking forward to joining a true management consulting firm.
  • "Are we making life miserable for you?" by "civilliberty". Excerpt: I've worked for about 20 years. I have never worked at a worse company than IBM. They have deliberately deceptive remuneration policies - they basically breach the trust of their employees ALL the time. That's why so many people are pissed off. And their appraisal system is out of this world for manipulating outcomes.
  • "From the numbers guy" by "Dose of reality". Full excerpt: Wonder - I agree. The tit for tat on this is a bit tedious. The key point is the general theme that things have been taken away with no consideration for the economics, or impact on staff.
    More importantly, having the cell phone reimbursement of $600 is the equivalent of a $900 reduction in salary due to the tax effect. This is why this type of change is so stupid. It only costs IBM a theoretical 65 cents on the dollar to get you the equivalent in net compensation. Of course, the IBM effective tax rate is a lot lower than the nominal corporate rate, but let's not bring up that rather unpleasant "tax planning/tax minimization" topic. Executives can actually go to jail for some of that. Then again.....might not be such a bad idea!
  • Last week's highlights included a three-part post by a recent new hire titled ""A year in the life of a new hire" by "band6er". This post by "pwned", titled "talk to people who are jumping ship", comments on "band6er's" messages. Full excerpt: Hi band6er, thank you so much for articulating a year in the life of an undergrad at Big Blue. I'm in the same boat as you; came in as an enthusiastic and fresh graduate, now looking for a way out. I'm only 23 years old but feel so jaded and used up. I've talked to friends who work at other companies and none of them have been treated the way I have, so it's not just a case of me being a whiny young kid. This company really does treat its people like crap.
    My advice to you is to attend all the farewell parties that you can. You mentioned the 5 types of team leader that you may be assigned - this type is the one that could actually be very helpful to you:
    "4. Someone who is currently interviewing for other jobs or leaving any day now and doesn't give a crap about the project or you."
    The people who are leaving are often people who have been genuinely screwed over by this company. At their farewell drinks, they're often very happy and generous. They'll even get into long, serious discussions with lowly grads such as myself and provide great career advice :) They give out useful info such as dishing out dirt on which of the PMs/team leads are extra-incompetent both technically and socially(seriously, the lack of people skills of many managers in this company is at an insane level).
    I've even gotten a couple of job offers at their new companies at people's farewell drinks. And they're serious job offers, not "I was so drunk that I was offering everybody the world at my farewell drinks" kind of offers. They've rung me up a few weeks at work after they left and asked me to forward them my CV. The jobs pay a lot more than my pitiful Big Blue salary and for one of the jobs, the work hours are 40 to 45 hours per week with no weekends(I've lost count of the unpaid weekends I've given to Big Blue). I'm currently in the process of checking out how the roles compare to what's out there in the job market.
    And although you say that you're not a good liar, there's really no other choice than to learn how to become a good liar to make the most out of your experience. Writing up BS isn't something that comes naturally to me, so I've asked for tips from co-workers who have the amazing ability to pad out their PDFs/PAs/PBCs/CVs with so much hot air.
    Again, these co-workers who are generous enough to share their time and information are usually the jaded cynics who are about to move on. I've found that the people who resign or leave are treated like lepers by their managers and colleagues who still want to cling to the company like it's the only place that will employ them. Of the RMs, PMs and team leads that I've had that fit this "I'm staying here to climb the Blue ladder" mindset, all have given me very useless advice and support. Honestly, sometimes I feel like they're just reading off one of the executives' "we did well but didn't meet our targets" emails that we get spammed with. They never reveal anything of their own way on how they succeeded because they're so afraid you'll steal their roles out from under them. I've seen fellow grads being denied a rating of 1 because of jealous managers and team leaders, i.e. the people who have spent the better part of a decade just to get to a band 8 and aren't too happy to see people getting promoted faster than they did when they first came in.
  • "also..." by "pwned". Full excerpt: The most important thing to do is to take some time to really figure out what you want from life. I thought it was a really tedious motivational speaker cliche, but didn't realize how miserable I was because I was just drifting around, letting whoever was my current team lead or PM dictate almost every single hour of my week(i.e. doing unpaid overtime for b!+chwork). I had no long-term plan, all I had was "this sucks, I don't want to do this" instead of having a clear view of what kind of role I wanted to do.
    So make whatever work that's being assigned to you a distant second priority to navel-gazing and figuring out what you want. 18 months ago, when I was assigned to my first project, I was overenthusiastic and did the work given to me to the best of my ability and even volunteered for more work. I even tried to network and schmooze and do extra-curricular activities like helping to organize work drinks/team breakfasts and talking up how wonderful this place is to the newer recruits at the grad network functions. And like you said, it didn't matter because I was given a rating of 2 anyway!
    Now I just do the bare minimum, and spend the rest of my time pretending to be super-busy when I'm navel-gazing/reading news sites/sitting at the office kitchen flicking through job ads in the paper, and guess what? I still got a rating of 2!
    Also a big thank you to Dose of reality for helping me and so many others with our wake-up calls! He's right - this place really does give you bad habits and mess with your outlook on life. Good luck with your exit plan, band6er!
  • "Congratulations!" by "Dose of reality". Full excerpt: Thanks for posting, and for the excellent tips and advice regarding job search. I am sure that many will find them very useful.
    Sounds like you have turned the corner, and soon the page, on your career. The fact that you can still articulate your IBM experience the way you have tells me that you haven't become jaded at all, but instead have learned an important lesson about career and company choices. Better now than in your thirties.
    I don't think the idiots running this place will ever come to understand the implications of their grading/curving/compensation policies. You have acted quite rationally. The only suggestion that I would make for the next recruit coming in is that they realize what it is they won't get for their efforts, and just get ahead of the curve. Do the bare minimum from day one, and spend all your time developing skills on IBM's dime - not for us or our clients, but for yourself.
    Or better yet - don't come here at all! Best of luck to you!


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