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    Highlights—January 13, 2007

  • Business Insurance: High court to discuss IBM cash balance plan review. By Jerry Geisel. Excerpt: The U.S. Supreme Court is scheduled to discuss Friday whether or not it will review a federal appeals court ruling that IBM Corp.’s cash balance pension plan does not discriminate against older employees.
    The August 2006 decision by the 7th U.S. Circuit Court of Appeals overturned a lower court ruling that said the plan discriminated against older employees because, when expressed as a retirement annuity, the benefits earned by younger employees are more valuable than the same benefits earned by older employees.
  • Yahoo! IBM Retiree forum: No election package when COBRA ends may result in FHA loss. By "madinpok". Full excerpt: The fine print in "About Your Benefits Future Health Account - USHR117" says: "If, after you leave IBM, you decline coverage under the IBM health plans, you will be allowed to return to the plans if you can show evidence of other health coverage in the interim. If you don't maintain coverage elsewhere in the interim, you will not be eligible for coverage under the IBM health plan and your Future Health Account balance will be forfeited."
    I interpret this to mean that if you have a gap of even one day after your COBRA coverage ends, IBM will exclude you from any future coverage under the FHA plan. I wouldn't want to take a chance and see if they really follow this to the letter, even if they told you in advance that it would be ok if there is a slight gap as you make the transition.
  • CNN/Money: No Big Blues for IBM's stock. Stock Spotlight: IBM is now the world's largest tech services company, but is it still a buy after last year's big run? By Rob Kelley. Excerpts: IBM's been on a tear over the past six months, but it's not the IBM you once knew. This IBM builds your business network from the bottom up, supplies geeks for your tech support department and develops next-generation software. No ThinkPads here. [...]
    But at the same time that the stock's nearing $100 - where it hasn't consistently traded above since late 2001 - some analysts are concerned that growth in the services division may be slowing. [...]
    "[IBM is] showing decent earnings growth, but a lot of that is cost-cutting that's been going on for a while, and people begin to wonder where the limits of that are," he said. "Investors want to see continued strong revenue growth in services."
  • Yahoo! IBM Pension and Retirement Issues message board: Form 5500. (Editor's note: Form 5500 must be completed annually by most retirement plans, including IBM's retirement plan.) By "art_vandalay". Excerpts: Biggest surprise was the continuation of the disappearance of the 10 to 20 years tenured employees. At one point, one third of the IBMers in the US were in that age range. I think those employees are the bread and butter of a company. Young AND experienced. Six years later, we are at 12%. I think the loss of that group of employees has negatively affected the company. I still see many IBM teams that have a few of the 25+ year employees combined with the youngsters. That middle group was critical in bridging what will eventually become an exodus once the pension is frozen in 11 months. Not sure why very many of the older employees will stick around if there pension is no longer appreciating.
    We're down to 127,000 employees in Jan 2005. That is a new six year low. We had over 147,000 four years prior. Those jobs probably went over to India.
    We now have the largest group (33,000+) of 5 to 9 years of tenure employees in the last six years. It will be interesting to see if that translates into more experienced workers, or if they just jettison to other companies once they gain the work experience.
  • MSN-Money: 3 CEOs who ought to go. The case of Home Depot, which richly rewarded its former top exec despite a sagging stock price, should embolden shareholders at other companies to try to rein in CEO pay. By Michael Brush. Excerpts: The targets on the backs of overpaid CEOs just got a lot bigger. That's because Robert Nardelli, the embattled chief executive of Home Depot (HD, news, msgs), didn't go quietly when he parted company with the home-improvement retailer last week. It's hard to avoid notice when your severance package is reported to be $210 million. [...]
    IBM Corp. CEO Samuel Palmisano received $65.5 million in salary, bonuses, restricted stock, options, long-term incentive pay and other compensation in 2003-05. He also has a pension that will pay at least $1.2 million a year.
    Shareholders have not done nearly as well. They are up 19% in the past 12 months, but over the past five years, they are down about 18%.
    At an annual meeting later this year, shareholders will have a chance to tell IBM it wants greater links between Palmisano's pay and performance -- because of a shareholder proposal from a labor union, according to Institutional Shareholder Services. Another shareholder has put in a proposal seeking greater disclosure of executive pay.
  • ZD-Net: Infosys: Offshore outsourcing healthy, turnover creeps up. By Larry Dig. Excerpts: Infosys reported fiscal third quarter earnings and gave a barometer of Indian outsourcing health. The prognosis: Budgets are still rising for offshore outsourcing, but India's leading IT companies still wrestle with turnover and wage increases. [...]
    One of the key issues on the Infosys conference call (see SeekingAlpha transcript) was wage increases and turnover. Although Wall Street worries about turnover, CIOs also worry about it. Wage increases can creep into contracts and turnover can hinder IT project continuity.
  • The Motley Fool: Is CEO Pay Really Out of Whack? By Excerpts: In the wake of Bob Nardelli's departure from Home Depot last week, the idea that CEO compensation is getting out of whack has been creeping up the interest meter again. A certain crescendo was reached in 2003, when Dick Grasso was ousted from the New York Stock Exchange and it was discovered that he was going to get not only $140 million in severance, but an additional $48 million in deferred pay. It's a common complaint, actually: CEOs make too much money for too little results. [...]
    In comparison to some outlandish corporate pay packages, employee salary increases barely cover cost-of-living increases. Union workers are particularly under the gun to give up previously negotiated salary increases. While more highly compensated than the average non-union worker, these people aren't living in the lap of luxury either. [...]
    According to the Corporate Library, the average CEO of an S&P 500 firm made more than $13.5 million in 2005, a 16.4% increase over the year before. While that's certainly no small amount, it's in the area of retirement packages that Executive PayWatch, an AFL-CIO site, says some of the greatest wealth is being transferred from workers and shareholders to executives. Lee Raymond of ExxonMobil tops the list with an annual pension of $8.2 million, followed by Pfizer's Henry McKinnell at $6.5 million.
  • New York Times: Tax Cuts Offer Most for Very Rich, Study Says. By Edmund L. Andrews. Excerpts: Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.
    The study, by the nonpartisan Congressional Budget Office, also shows that tax rates for middle-income earners edged up in 2004, the most recent year for which data was available, while rates for people at the very top continued to decline. [...]
    Though tax cuts for the rich were bigger than those for other groups, the wealthiest families paid a bigger share of total taxes. That is because their incomes have climbed far more rapidly, and the gap between rich and poor has widened in the last several years. [...]
    Economists and tax analysts have long known that the biggest dollar value of Mr. Bush’s tax cuts goes to people at the very top income levels. One reason is that two of his signature measures, tax cuts on investment income and a steady reduction of estate taxes, overwhelmingly benefit the wealthiest households. [...]
    Tax cuts were much deeper, and affected far more money, for families in the highest income categories. Households in the top 1 percent of earnings, which had an average income of $1.25 million, saw their effective individual tax rates drop to 19.6 percent in 2004 from 24.2 percent in 2000. The rate cut was twice as deep as for middle-income families, and it translated to an average tax cut of almost $58,000. [...]
    Mr. Bush and his Republican allies in Congress want to permanently extend that tax cut and almost all of the others that Congress passed in his first term. The cost of doing that would be more than $1 trillion over the next decade, a cost that would hit the Treasury at the same time that the spending on old-age benefits for retiring baby boomers begins to soar.
  • New York Times: Working Harder for the Man. By Bob Herbert. Excerpts: Robert L. Nardelli, the chairman and chief executive of Home Depot, began the new year with a pink slip and a golden parachute. The company handed him a breathtaking $210 million to take a hike. What would he have been worth if he’d done a good job?
    Data recently compiled by the Center for Labor Market Studies at Northeastern University in Boston offers a startling look at just how out of whack executive compensation has become. Some of the Wall Street Christmas bonuses last month were fabulous enough to resurrect an adult’s belief in Santa Claus. Morgan Stanley’s John Mack got stock and options worth in excess of $40 million. Lloyd Blankfein at Goldman Sachs did even better — $53.4 million.
    According to the center’s director, Andrew Sum, the top five Wall Street firms (Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley) were expected to award an estimated $36 billion to $44 billion worth of bonuses to their 173,000 employees, an average of between $208,000 and $254,000, “with the bulk of the gains accruing to the top 1,000 or so highest-paid managers.”
    Now consider what’s been happening to the bulk of the American population, the ordinary men and women who have to work for a living somewhere below the stratosphere of the top corporate executives. Between 2000 and 2006, labor productivity in the nonfarm sector of the economy rose by an impressive 18 percent. But workers were not paid for that impressive effort. During that period, according to Mr. Sum, the inflation-adjusted weekly wages of workers increased by just 1 percent.
    That’s $3.20 a week. As Mr. Sum wryly observed, that won’t even buy you a six-pack of Bud Light. Joe Six-Pack has been downsized. Three bucks ain’t what it used to be.
    There are 93 million production and nonsupervisory workers (exclusive of farmworkers) in the U.S. Their combined real annual earnings from 2000 to 2006 rose by $15.4 billion, which is less than half of the combined bonuses awarded by the five Wall Street firms for just one year.
    “Just these bonuses — for one year — overwhelmingly exceed all the pay increases received by these workers over the entire six-year period,” said Mr. Sum. [...]
    The pervasive unfairness in the way the great wealth of the United States is distributed should be seen for what it is, an insidious disease eating away at the structure of the society and undermining its future. The middle class is hurting, propped up by the wobbly crutches of personal debt. The safety net, not just for the poor, but for the middle class as well, is disappearing. The savings rate has dropped to below zero, and more Americans are filing for bankruptcy than for divorce.
    Your pension? Don’t ask.
    There’s a reason why the power elite get bent out of shape at the merest mention of a class conflict in the U.S. The fear is that the cringing majority that has taken it on the chin for so long will wise up and begin to fight back.
  • New York Times: More $200 Million Parachutes? Don’t Be Shocked. By Gretchen Morgenson. Excerpts: It has been a bit bewildering to watch two failed chief executives in the last two weeks or so waltz away from their companies toting severance packages worth more than $200 million each. But pay experts say shareholders had better get ready for more of the same.
    Last week, Robert L. Nardelli hightailed it out of Home Depot with $210 million, fast on the heels of Hank McKinnell, whose farewell package of a similar amount from Pfizer was disclosed Dec. 21. Both were paid profusely for failure, thanks to contracts struck years ago by the companies’ directors.
    Keep in mind that both packages supplemented pay that these executives received during their tenures. Mr. Nardelli’s $210 million, for example, came on top of the $63.5 million he made running Home Depot for six years. [...]
    Two practices are eroding public trust in the system, he said. The first is the granting of stock to executives who already own so many shares that additional awards cannot possibly motivate them further. The second is to continue giving retirement, severance and change-in-control pay to people who have already accumulated “several lifetimes of wealth.”
  • Washington Post: Not Enough Severance Cuts. By Rachel Beck. Excerpts: Sharper Image found itself in a distinguished spot recently when the board of the troubled retailer did what most of its counterparts in corporate America have failed to do: It cut its former CEO's severance package.
    In an era where bloated payouts are the norm like the $210 million that Home Depot Inc.'s Robert Nardelli is expected to get after resigning from the home improvement retailer few companies are willing to slash the money that they had promised to pay executives when they depart, or in some cases, are shown the door.
  • New York Times: Tax Cuts and Consequences. Excerpts: The tax system in the United States is supposed to mitigate inequality. But a recent report by Congress’s budget agency provides fresh evidence that Bush-era tax cuts have done more to reinforce inequality than to redress it.
    The agency found that in 2004, the latest year for which comprehensive data were available, the top 1 percent of households pocketed 14 percent of total after-tax income in the United States, up from 12.2 percent in 2003. That increase, the third largest in one year since the agency started keeping track in 1979, works out to an extra $128 billion. And yet despite that hefty gain, the effective federal tax rate of the top 1 percent decreased slightly.
    In contrast, the share of after-tax income going to households in the middle of the income distribution fell to 15 percent in 2004, down from 15.4 percent in 2003 — the equivalent of a $29 billion loss. In that time, the share of their income going to federal taxes stayed about the same.
    One of the reasons the rich are getting so much richer than everyone else is that investment income is highly concentrated among the richest Americans and has grown robustly through much of the Bush years — unlike wages and salaries. But the rise in investment income hasn’t caused rich Americans’ income taxes to rise substantially because — thanks to the tax cuts of 2003 — investments are now taxed at about the lowest rates in the code. [...]
    Unfortunately, with the administration having abandoned fiscal prudence for the past six years, it’s practically inevitable that inequality will worsen. The bill for the deficit-financed tax cuts of the Bush era will arrive in the years to come. It’s likely that the costs will be borne by all, even though most of the benefits have accrued to the few.
  • Associated Press, courtesy of Colorado Springs Gazette: New Search Engine for Aging Boomers. By Michael Liedtke. Excerpts: Does surfing the Web exhaust - and even exasperate - older people? The backers of Cranky.com are betting on it. Cranky is a specialty search engine designed to please aging baby boomers by processing every request from the perspective of someone who is at least 50 years old. [...]
    After teaming up with Internet research firm Compete Inc. to identify the 500,000 most popular Web sites among people at least 45 years old, Cranky dispatched reviewers to dig even deeper into the top 5,000 destinations. The reviewers then wrote descriptions about the content and tried to ensure the index contained more direct links to the most meaningful information.
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • San Jose Mercury-News, courtesy of the California Nurses Association: To make health care affordable, attack insurers' greed. By Phil Angelides. Excerpts: The surest way to cut costs, however, is to lighten the real hidden tax on California's families and businesses: the crushing weight of insurance industry overhead and profit.
    Since 2000, health insurance companies have doubled premiums to employers and families, raising them at four times the rate of inflation and faster than the cost of providing health care. As a result, the top seven health insurers are making record profits, triple what they made five years ago. Every year, more than $10 billion of the premiums paid by California businesses and families -- about 14 cents on each dollar of premiums -- are gobbled up in insurer overhead and profits and diverted from the medical care they are supposed to provide. By comparison, the administrative overhead costs in Medicare average about 3 percent. That $10 billion is more than enough to pay for health care for all of California's uninsured.
    But that's only the beginning. Health insurers place an expensive labyrinth of middlemen between patients and health care providers, much of it dedicated to making a profit by dumping costs and risks onto someone else. They force doctors, clinics and hospitals to hire armies of people to deal with insurance claims, eligibility, contracting and utilization reviews. Researchers at the University of California found last year that insurance-related administrative costs consumed about 21 percent of health insurance dollars in California, or about $16 billion a year.
    California law has long barred health insurance plans from spending an "excessive amount" on administrative costs, including executive pay. But that did not stop the Schwarzenegger administration from approving two mega-mergers of health insurance companies that triggered golden parachute pay-outs to executives potentially totaling nearly $1 billion. These huge pay-outs came in addition to already extravagant executive pay. In one instance, the CEO of a health plan was paid $24 million a year in salary and stock options. He also got life insurance totaling three times his base salary; the lease of an automobile; three country club memberships; and tens of thousands of dollars for financial and tax counseling. He even got money to pay his taxes. If that's not excessive, what is?
    If California were to actually clamp down on the excessive overhead and profits of health insurers, limiting non-medical expenses to the rates achieved by the most efficient non-profit health plans, we could save $5 billion annually, an average of about $1,800 a year for a family of four. If we were to take the wasteful middlemen out of the system altogether, we could save an even larger chunk of what we now pay for paper-shuffling and passing the health care buck. If the governor and Legislature are serious about reducing health care costs and expanding coverage, they will have to cut health insurers' overhead and profits -- the hidden tax that's socking California businesses and families.
  • South Florida Sun-Sentinel: Seniors on Medicare pay 10 times more for drugs than veterans, advocacy group finds. By Diane C. Lade. Excerpts: Seniors pay as much as 10 times more for their most commonly prescribed drugs under Medicare than veterans do under their federal drug benefit, primarily because veterans officials by law can negotiate directly with pharmaceutical manufacturers for bulk discounts, according to a new study.
    Families USA, a Washington, D.C.-based nonprofit advocacy group, looked at the 20 top drugs prescribed to seniors and found the lowest prices charged by the top five Medicare plans exceeded the lowest prices with the U.S. Department of Veterans Affairs. The difference ranged from 34 percent for Plavix, used to prevent heart attacks and strokes, to more than 10 times more for Zocor, a lipid-lowering agent made by Merck & Co., according to the report released Tuesday.
  • AARP, courtesy of Physicians for a National Health Plan: Health Care for All: Big Business to the Rescue? As unlikely as it seems, big business may be the force that brings about universal health insurance. By Daniel Gross. Excerpts: “It’s an outrage that any American’s life expectancy should be shortened simply because the company they worked for went bankrupt and abrogated health care coverage. And now we have a company like Ford virtually being bankrupted by the problem of rising health care costs, and yet you’ve got tens of millions of people with no health insurance.”
    These words of frustration weren’t uttered by a union leader standing on a picket line. Instead, they came from billionaire Wilbur L. Ross Jr., number 322 on the Forbes 400, the former chairman of the International Steel Group and a major investor in U.S. textile, coal and auto parts companies. Ross made much of his fortune in recent years by restructuring bankrupt industrial companies, many of which were swamped by the escalating costs of insuring their aging work forces. He sees a need for some kind of government involvement in health care, and he’s not alone. [...]
    The discussion is clearly being prompted by bottom line issues: Soaring health care costs are a major problem for business. Companies in the United States compete against rivals in developed countries (Japan, Germany and France) where the government funds health care, and against developing countries (China, India) where neither business nor society at large is responsible for health insurance. Either way, American companies that provide health insurance are at a competitive disadvantage.
    In 2005 money-losing General Motors spent $5.3 billion to cover the health costs of 1.1 million employees, retirees and dependents. Ross noted that, on a per-car basis, General Motors spends more money on health insurance than on steel. But Old Economy behemoths like GM aren’t the only ones suffering. “Since the beginning of this decade, health insurance premiums for average employers have increased 87 percent, compared with overall inflation of 18 percent,” said Joel Miller, vice president of operations at the Washington-based National Coalition on Health Care (NCHC), a nonprofit alliance of business, unions and consumer groups. These higher costs cut into operating margins and reduce the capacity of businesses to grow.
    Thus far, the response from business has been to pass costs on to employees and reduce coverage. According to U.S. Census statistics for 2005, nearly 47 million Americans lacked health insurance, up from 40 million in 2000. And only 60 percent of Americans had job-based coverage, down from 63.6 percent in 2000—this after five straight years of robust economic growth. [...]
    But now there are signs—including the NCHC report—that business is coming out of its shell and taking a receptive look at universal health care. Among the most vocal is Howard Schultz, chairman of Starbucks, which in May 2004 sponsored the Robert Wood Johnson Foundation’s “Cover the Uninsured Week.” “We can’t be the kind of society we aspire to be when we have 50 million people uninsured,” Schultz told Fortune recently. “It’s a blemish on what it means to be an American.”
  • New York Times: Golden State Gamble. By Paul Krugman. Excerpts: A few days ago. Gov. Arnold Schwarzenegger unveiled an ambitious plan to bring universal health insurance to California. And I’m of two minds about it. [...]
    To understand both what’s right and what’s wrong with Mr. Schwarzenegger’s plan, let’s compare what he’s proposing with the plan he rejected. Last summer, the California Legislature passed a bill that would have created a single-payer health insurance system for the state — that is, a system similar to Medicare, under which residents would have paid fees into a state fund, which would then have provided insurance to everyone.
    But the governor vetoed that bill, which would have bypassed private insurance companies. He appears to sincerely want universal coverage, but he also wants to keep insurance companies in the loop. As a result, he came up with a plan that, like the failed Clinton health care plan of the early 1990s, is best described as a Rube Goldberg device — a complicated, indirect way of achieving what a single-payer system would accomplish simply and directly.
    There are three main reasons why many Americans lack health insurance. Some healthy people decide to save money and take their chances (and end up being treated in emergency rooms, at the public’s expense, if their luck runs out); some people are too poor to afford coverage; some people can’t get coverage, at least without paying exorbitant rates, because of pre-existing conditions.
    Single-payer insurance solves all three problems at a stroke. The Schwarzenegger plan, by contrast, is a series of patches. It forces everyone to buy health insurance, whether they think they need it or not; it provides financial aid to low-income families, to help them bear the cost; and it imposes “community rating” on insurance companies, basically requiring them to sell insurance to everyone at the same price.
  • Washington Post: Many Workers At Wal-Mart Don't Use Its Health Plans. 43% Covered Elsewhere. By Ylan Q. Mui and Amy Joyce. Excerpts: About 90 percent of Wal-Mart employees have health-care coverage, but 43 percent do not get it from the mammoth retailer, relying instead on benefits from a spouse, federal programs or even their parents, according to an internal survey the company made public yesterday.
  • Ventura County Star, courtesy of the California Nurses Association: Healthcare packages all inferior, except for one. By Deborah Burger, RN. Excerpts: With Gov. Arnold Schwarzenegger unwrapping his long-anticipated healthcare package Monday and talk about reform building in Sacramento, Californians may well be wonder if our long healthcare nightmare is finally coming to an end. Sadly, virtually none of the proposals now being touted in the Capitol is universal, strengthens quality of care or reduces rising costs to consumers.
    The sole exception is a single-payer approach, as contained in a bill by state Sen. Sheila Kuehl, D-Santa Monica, that was vetoed by Schwarzenegger in September, but will be reintroduced soon. Under single-payer, one public entity collects all the financing and pays for all medical services through the existing private-care delivery system, with adequate funding for our doctors, hospitals, clinics and other care.
    All the other approaches are fundamentally flawed. They continue to rely on a wasteful insurance industry whose focus is on making money by denying care to those who need it the most and other market-based mechanisms that created the current mess.
  • The Precept Employee Benefits Blog: Governor’s No Pain, No Gain Solution to Healthcare. Excerpts: The Governor’s (California Governor Schwarzenegger's) plan has been publicly scrutinized by many and endorsed by few. When you consider the constituents impacted by his plan, would you expect anything less than the political rhetoric we hear on talk radio and see in print? There is no wonder drug or prescription to cure what ails the “broken” California healthcare system. It is going to take creativity, hard work and compromise.
    For those that argue our current “free market” concept is the solution, WAKE UP. Those that buy insurance today are subsidizing the commitments of the federal government to provide care regardless if the patient can afford it. Uninsured patients have hospital bills dismissed for pennies on the dollar because they do not have a means to pay. You cannot have a successful “free market” with an open-ended commitment such as this.
  • New York Times: Negotiating Lower Drug Prices. Excerpts: From all the ruckus raised by the administration and its patrons in the pharmaceutical industry, you would think that Congressional Democrats were out to destroy the free market system when they call for the government to negotiate the prices of prescription drugs for Medicare beneficiaries. Yet a bill scheduled for a vote in the House of Representatives today is sufficiently flexible to allow older Americans to benefit from the best efforts of both the government and the private drug plans. [...]
    Under current law, written to appease the pharmaceutical industry, the government is explicitly forbidden from using its huge purchasing power to negotiate lower drug prices for Medicare beneficiaries. That job is left to the private health plans that provide drug coverage under Medicare and compete for customers in part on the basis of cost.
    The Democrats’ bill would end the prohibition and require — not just authorize — the secretary of health and human services to negotiate prices with the manufacturers. That language is important since the current secretary, Michael Leavitt, has said he does not want the power to negotiate.
  • Seattle Post-Intelligencer, courtesy of Physicians for a National Health Program: U.S. health care puts profit over people. By JoAnna Garritano. Excerpts: With the resources and ingenuity of the American people, we certainly can do better. Yet, we are fooled into believing that more expensive means better care. The truth is that we spend twice the cost per capita compared with other developed nations, yet are ranked 37th in overall quality, according to the World Health Organization. Americans face higher infant and maternal mortality rates and a shorter life span than our counterparts in other industrialized nations that offer comprehensive health coverage for all their residents.
    Why do we tolerate this unstable and unjust situation?
    The answer: There is still profit to be made maintaining the status quo. However dismal the health care situation has become for individuals and families, the for-profit health care industry still churns out billions in profits. In a democratic nation founded on principles of “liberty and justice for all,” the health and well-being of the many should not come second to the financial benefit for the few.
  • Houston Chronicle, courtesy of Physicians for a National Health Program: We can afford to go for the gold: universal health care. The money is already in the system — let’s just do it! By Ana Malinow. Excerpts: Advocates for children and elected officials are meeting this week in more than 35 cities nationwide with the admirable goal of increasing children’s health insurance coverage. Unfortunately, the centerpiece of their discussions — the state programs for low-income children (S-CHIP and Medicaid) — offers little hope of universal care for children.
    As a physician, I know that the best way to provide comprehensive, universal care to children is to provide it to all Texans: through a single-payer “Medicare for All” system for the state.
    Because I am a pediatrician who faces the reality of our state’s health crisis day in and day out, I know intimately the futility of such band-aid programs. The advocates who fight to maintain and defend them do great work to promote child well being: I benefit from their efforts every day. But despite good intentions, the efforts of incremental health system reformers have failed to herald meaningful steps toward universal coverage — either for children or for our nation as a whole — because they do not address the reason so many Texans are uninsured in the first place: skyrocketing health care costs. Even S-CHIP, the largest coverage expansion in a generation, made only a small dent in the number of uninsured children because the government program could not keep up with eroding private coverage. Although 5 million children have been added since 1997, the number of uninsured children still stands at 9 million. [...]
    There is an alternative. Our current system allowing private insurers to cover the healthy and profitable while screening out everyone else allows one-third of our health spending to be diverted to needless bureaucracy and paperwork. Eliminating the private insurance companies and replacing them with a single public payer would save more than $350 billion per year, enough to provide coverage for all of the uninsured. Combined with what we’re already paying for health care, this is sufficient to provide comprehensive coverage to everyone without any additional spending. [...]
    I propose that child advocates at this week’s town hall meetings stop supporting changes that are guaranteed to fail. I propose that we stop thinking of universal health care as “pie in the sky,” as institutional forces once called the abolition of slavery, women’s right to vote and the Civil Rights Act. We can have whatever kind of health care system we want. We don’t need to spend more money, we already spend enough. We don’t need to sacrifice quality or ration care any more than we do now. [...]
    Child advocates this week and our new state and federal legislators should stop looking for piecemeal solutions and instead support a system where everyone pays into it equitably and every one takes out according to medical need; a health care system that excludes no one and is accountable to the people it serves; a health care system that is comprehensive and just, because that is what we as Americans, young and old alike, deserve.
New on the Alliance@IBM Site:
  • IBM Pay for Skill, Performance, Retention, Merit? By a North East IBM employee
  • Rebuild the Middle Class—with Unions. By John J. Sweeney. Excerpts: Maybe the loudest message from the recent congressional election was that regular folks have had enough and are ready to take back economic power from the corporate elite and radical right wing.
    Working America has seen wages stagnate, costs soar and wealth and privilege become more concentrated in the hands of fewer and fewer people. This has not been an accident. The pro-corporate and anti-union policies of the Bush administration and its congressional rubber-stampers have deliberately favored the wealthy and corporate interests over working people.
  • From the Job Cuts Status & Comments page
    • Comments 1/11/07: IBM RTP - SWG will lay off developers and testers across all brands as jobs are being offshored to India. -Intheknow-
    • Comments 1/11/07: In response to -IntheKnow- "IBM RTP - SWG will lay off developers and testers across all brands as jobs are being offshored to India." Please don't fish for comments, if you're 'Truly In the Know", tell us what brands and put a timeframe on your facts (1st, 2nd, 3rd, 4th Qtr). -MightBAffected InRTP-
    • Comments 1/12/07: Hello Intheknow....how about some details? When, how many, etc. These blanket rumors are getting old -notknowinnuttin-
  • From the General Visitor's Comment page:
    • Comment 1/6/07: "Get ready in 2007 to go beyond your comfort zone and trade your bad feet for a pair of Rollerblades and skip the elevator for a bungee cord." What kind of bone head advice is this from an IBM executive? I want to know what I need to do to advance in my career, make more money, and feel more secure. Sad that this is the only advice this bone head has to offer. How much money is IBM paying him as an executive for this advice? -Anonymous-
    • Comment 1/9/07: No surprise here. IBM didn't make it in the TOP 100 companies to work for (survey by Fortune Magazine). http://money.cnn.com/magazines/fortune/bestcompanies/2007/full_list/ -Anonymous-
    • Comment 1/11/07: "CEO Samuel Palmisano received $65.5 million in salary, bonuses, restricted stock, options, long-term incentive pay and other compensation in 2003-05. He also has a pension that will pay at least $1.2 million a year. Shareholders have not done nearly as well. They are up 19% in the past 12 months, but over the past five years, they are down about 18%. At an annual meeting later this year, shareholders will have a chance to tell IBM it wants greater links between Palmisano's pay and performance -- because of a shareholder proposal from a labor union, according to Institutional Shareholder Services. Another shareholder has put in a proposal seeking greater disclosure of executive pay."
      I had no idea Sammy plundered the company like this. $65.5 million to provide leadership to a workplace for honest hardworking working employees? Sammy should go to confession and beg for forgiveness for all the sins he has committed. What a disgrace to humanity. I'm ashamed to be called an IBMer. -Anonymous-
  • From the Pension Comments page:
    • Comment 01/10/07: Help me understand how I'll be affected by the December 31, 2007 ending of the old retirement plan? Here's my situation...my anniversary date is December 8. On December 31st 2007, I will have 29 years of service (1 year short of have the full 30). Do I lose out on full retirement? I'll be 54.4 on December 31, 2007 -Anonymous-
      Reply from Janet Krueger: I would suggest you write a letter to the IBM Pension Plan Administrator with your question. The address is:
      IBM Employee Services Center
      5411 Page Road
      Durham, NC 27703
      Include your employee number and full name. While you're at it, you might also want to ask for an estimate of how much your vested earnings are today; that is the absolute minimum IBM can give you; anything over today's vested earnings can be taken away tomorrow. Be aware that IBM has not yet filed an official plan amendment with details of how the plan freeze will be implemented. This means they are free to change any and all details right up until the implementation. There has been much speculation on exactly what those details are and/or will be. For summaries of those discussion, I would suggest you go to www.ibmemployee.com and look at the summaries starting from the first announcement over a year ago. Hope that helps! Janet Krueger
    • Comment 01/11/07: Well I got another 2 today for the 8th year in a row. No matter what I've ever done it's always the same. The kicker is a guy I work with who comes in 1.5 hours late, and I mean every single day, is a total screw up, misses meetings, falls asleep at his desk, got the same rating as me. Now that's a slap in the face. I guess I should not complain I didn't get a 3 but I will continue to look for employment this year until I can get out. -Anonymous-
    • Comment 01/12/07: How would you like to have this as a mandatory statement in your PBC? "I will demonstrate effective teamwork by putting the team's success above personal interests." I wonder what that means....We have been required to include this in ours for the last two years. -gadfly-
    • Comment 01/12/07: After being a consistent 2 & 1 all my career, I had a 3 in '04 due to a change in jobs mandated by IBM and was out for 6 mos in '05 with a major med prob and another 4 was given. Didn't know I could appeal due to medical reasons. Back in '04, my Eng Code was taken away so my salary was maxed out too. Thanks IBM. Will see what '06 PBC holds for me. Three 3's in a row and guess I can start packing the desk up. Review should be in the next week or so. -Anonymous-
  • Raise and Salary Comments
    • Comment 1/6/07: Salary = 33000; Band Level = 4; Job Title = Acct Rec CSR; Years Service = 13; Hours/Week = 45 - except qtr close / yr end; Your Gender = F; Div Name = 53; Location = RTP; Message = We are the ones that collect the billions of dollars for IBM. We are the ones that pester the crap out of the Client Exec and the ITS reps to help us push the stubborn cust. we are also the ones put in those same names to get incentives to help us collect. We incent everyone to help pay IBM and we get told to be happy you have a job. We are also the ones that get the crap beat out of us because the 2nd line has a big bonus riding on how much we collect. In our dept, it is all about numbers, did you make and how much did you collect for me today? -Anonymous-
    • Comment 1/8/07: Salary = 64K (w/o bonus); Band Level = 7; Job Title = Technical Services Professional-Advisor; Years Service = 7; Hours/Week = 40+(since it is required); Your Gender = Female; Div Name = IGS; Location = Poughkeepsie; Message = Obviously underpaid for my band. Had a "bump" 2 years ago because I was under paid and still seems like I am below what I should be getting paid. Been a 2+ employee since I joined. Still got 1% increase last yr, can't wait till this year. NOT! Something's got to give. -Anonymous-
    • Comment 1/9/07: Salary = $60k; Band Level = 7; Job Title = Advisory I/T Specialist; Years Service = 7 yrs; Hours/Week = 50; Your Gender = Male; Location = NYC; Message = NEGOTIATE YOUR SALARY WHEN YOU JOIN THE COMPANY!!!! I graduated with an EE degree and spent my first year at General Motors making $44k/year. I received a 10% raised and left the company making $48,400/year. I left GM because I was unhappy socially out in the midwest. In 1999, I was hired as a band 4 making $36,000/year but the important thing to me was that I was with a great company and back on the East Coast. Due to me being naive and thinking that my drive and determination would allow me to make up my salary lost within a few years I joined IBM. Well, no doubt about it. My drive and determination did enable me to go from a band 4 all the way to a band 7 in a matter of 5 years. However, my pay did not keep up. I am literally making $13/month more then the minimum for my job family. And only about $10k/year more then what I left my old job in 1999 for. I enjoy my job and the direction my career is taking but something has to give with the pay, damn it. I have a good manager and I've actually spoken to her about it. She agrees with my assessment and told me she will do whatever she can do to ensure that I receive a healthy raise in 2007. I am anxious to see what comes of this. -Motivation Dwindling-
    • Comment 1/10/07: FWIW, here is a snapshot of the info posted so far:
      • Band 7: 23 respondents, avg 73K, std deviation 13K.
      • Band 8: 25 respondents, avg 95K, std dev 17K.
      • Band 9: 14 respondents, avg 116K, std dev 20K.
      • Bands 4-5-6 and 10 have too few respondents so the numbers would not be reliable. -Anonymous-
    • Comment 1/11/07: Salary = 146000; Band Level = 9; Job Title = Research Staff Member; Years Service = 8; Hours/Week = 40; Your Gender = Male; Div Name = Research; Location = Yorktown Heights, NY (Watson); Message = Likely paid less relative to other RSMs with similar experience. Got big raises first couple of years; then no raise for next couple of years. Have got raises last two years. -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:
  • "PBC" by "SouthRoute55". Full excerpt: ****Venting Alert **** I had a PBC review last week my manager really pi$$ed me off, he was really attacking me, all my results were (1's &2's i.e. exceeded expectation and outstanding) but he still gave me a very hard time, I was really annoyed with his stupid questions : what did you do to increase IBM revenue generation (FFS they charge a fortune for me every day)?? Why is utilisation so high?? (cuz I didn't take any hols this year !!) Is my give backs good enough (I do graduate selection, review CVs, participate in all the women in blue meeting , publish a newsletter as give backs .. and he still want more??? when am I supposed to do my job if I do amore give backs!!
    Then he summed it up by saying we have to compare your results to everyone who is your grade and see if you are worth these ratings...that really annoyed me and I just snapped I just told him exactly what I thought of this PBC process (not a good thing I know but as I am leaving I didn't care)!!
    I thought having excellent client feedback and high recommendations from my colleagues I should sail this review, stupidly enough I was even hoping for a pat on the back, or a little thank you for my efforts, but all he manage to do is make me feel very small- insignificant and not good enough !!
  • "It's a sad state of affairs" by "civilliberty". Full excerpt: My commiserations. IBM is it's own worst enemy. It really doesn't need anyone to invent bad stories about them because nothing is worse than the truth about this company.
    It's that attitude from IBM that makes me glad to no longer work for them. I got re-dundant (though I did have the option of taking up an assignment post notification which could have kept me employed there) but was smiling all the way to the bank knowing that things could only get better post-IBM, which they have done. I'm now more challenged and doing more work worthy of my experience and earning more as a contractor - I consider the redundancy as a promotion to something better.
  • "Do you remember IGSFinance?" by "wonderaboutibm". Full excerpt: Must have been going on a year ago that he was the scourge of this board (although I secretly miss his pungent comments.) Now MAYBE he was a big put-on -- you never know on an anonymous board -- but that isn't important. He embodied a mindset that I think is driving the IBM management.
    How does IBM rationalize this idiotic cost-cutting? Because it is their limited mindset.
    A couple years ago, IGS turned much more brutish as a place to work. Employees were reduced to skill bundles that could be "replenished" or "made redundant." It was for us the beginning of the end.
    Well, you say, the business environment is better? True, compared to the bad old days, but leopards don't change their spots. The employee outlook remains dreary because those in power continue to have a pretty dreary attitude toward us.
  • "They even try to cost-cut on milk" by "civilliberty". Full excerpt: I remember one of my colleagues who worked in another area (a unix systems admin) telling me that IBM stopped providing fresh milk for coffee tea etc and moved to UHT milk to cut costs.
    The guys revolted and every morning went down to the local coffee shop from then on, until IBM came to it's senses and re-instated the milk - guess they multiplied the amount of time a trip to the coffee shop takes by the number of people and factored in the amount of bad will to the overall cost and worked out it wasn't worth the cost savings.
  • "Classroom training --- 5 days+?" by "usedtobepwc". Full excerpt: Hi - Anyone know what happened to those guys in L&K/training - curious as there has been nothing about this for a while - are IBMC back to 5 days classroom yet or did it never happen. Did L7K even survive. thx
  • "The limits of free association" by "Dose of reality". Full excerpt: Yes - L7K has been cited as the sole reason why the analysts are now jumping on the IBM bandwagon. It is worth at least 10 billion in market cap.
  • "classroom training" by "thinker123". Full excerpt: L7K is around today and still kicking. A new version of it was just started in Bangalore this past year though.
    Some folks in GBS got classroom training this year (they attended IBM GBS University events for their respective Practice Areas).
    I was one of the folks told to pursue it (outside of the GBS U's since I had to attend as a presenter), but then told it had to be directly applicable to current job role (always a condition - tough for me to meet since my role is unique)... when there were no travel/expense restrictions (I cannot remember when travel restrictions were last lifted for education), and contingent upon 2nd line management approval (was impossible this year for various reasons).
    Overall in my many years at IBM --- other than the initial classroom training I received paid for by IBM, I've attended classes I had to pay my own lodging/transportation for but otherwise received no other classroom training by IBM.
    Lastly - all that said, officially, I've seen 5 days of classroom training per year mentioned as available/important for everyone at BIS/BCS/GBS every year... the official policy for this has not ever gone away.
  • "Can someone explain" by "Subwoofer". Full excerpt: In my IBM offer letter, there is language to suggest that on my first day of active employment I will receive a copy of IBM's Drug Free Workplace and Drug and Alcohol testing policy. Does this mean I will only receive the standard policy that explains why someone may be tested for potential alcohol or drug use or does this mean I will be tested irrespective of any signs or symptoms of substance use?
    In previous employment, I went thru the testing drill prior to receiving an offer letter. The IBM scenario seems backwards. Looking forward to your comments and feedback. Thanks.
  • "Drug Policy repost" by "Dose of reality" Full excerpt: Yes, you are right, the IBM drug policy is @$$-backwards, but not the way you think. We do extensive drug testing. It is critical to have an understanding of an applicant’s tolerance and reaction to the entire arsenal of drugs that are used to control staff. Here are a few of the drugs that you can expect to sample during the test:
    • Compusux – Dulls your sensitivity to having money taken away from you without notice.
    • Burostrain – Causes you to look forward to opportunities to spend hours keying information into various vintage administrative systems
    • Utilizamax – Generates an overwhelming urge to charge hours to clients regardless of project need or benefit to you
    • Loyalorest – Makes you sing the praises of the company whenever you hear anyone saying anything unfavorable about
    • IBM Puckeron – You should be able to figure this one out (hint – has to do with a color, an olfactory facial feature, and another unmentionable body part)
    • Pacifon – Will cause you to want to take any assignment that is offered to you – it is used in conjunction with:
    • Homisbad – Makes you want to stay as far away from home for as long as possible
    • Superate (also known as rochesotel) – Significantly lowers your minimum requirements for humane living conditions.
    There are more, but you should get the idea. If you are taking any illicit drugs, you are definitely IBM material. I wouldn’t worry about being screened – I would worry about what happens after you accept.
  • "You're talking about apples and oranges" by "Bobbruno". Full excerpt: Employee satisfaction at IBM GBS is one thing - the financial results of IBM as a whole is something completely different.
    I agree that mistreating what's supposed to be your best shot for the long-term is not the way to generate long-lasting value, but you're not considering a few things:
    • Analysts don't care about long-lasting value - they check immediate results only. That's probably the main reason we get treated the we we do - they just don't care, and even mighty Sam Palmisano might get chopped off should he treat us any different;
    • This board is about GBS, and most of us are or want to think they are management consultants - that's not at all IBM's main business. IBM is in the Hardware, Software and IT Services businesses. Management consulting is something we were thinking they wanted to get in when they bought PwCC - we were WRONG! My point here is that we're complaining because a company that's strategized and designed to do simple, repetitive, PREDICTABLE services sucks at management consulting - it's supposed to! Wake up and smell the coffee - either move to AS, SO, ITS or simple package implementation or move away;
    • As much as we'd like to think that we're the revenue generators for IBM, that's not the case - we were marketing budget back in 2002 and 2003, and now we're cannon fodder. IBM's making money alright, the way it always did - by selling stuff, keeping tight controls on every spending and squeezing all the value they can from average-or-below-average people. The smart ones can get dumber, move to a sales or finance position or get out - you won't get recognized at IBM by being a good consultant. You might even get some recognition by being an incredible specialist or an amazing architect, but in the end you'll have to turn that into sales.
    Therefore, the analysts are right and so are we. But if you think you'll see any of that money, you're wrong - it goes to stockholders, then executives, then sales. We get at most scraps, usually not even that.
  • "And now a better analyst view..." by "wonderaboutibm". Full excerpt: See http://money.cnn.com/2007/01/12/markets/spotlight_ibm/index.htm?postversion=2007011205. Gotta hand it to money.cnn.com; they have good articles. The referenced URL is a basically balanced view of IBM stock. My favorite quotation follows:
    "[IBM is] showing decent earnings growth, but a lot of that is cost-cutting that's been going on for a while, and people begin to wonder where the limits of that are."
    Couldn't have said it better myself. When WILL earnings growth come from actually selling more?
  • "Cost Economics" by "Dose of reality". Full excerpt: For most cost cutting initiatives, there will tend to be a negative impact on revenue. The extent of that impact is greater, the longer the company has been indulging itself, as the low hanging fruit and waste that tends to be completely favorable has long ago been used up.
    The impacts can be in lower material or resource quality, less effort, or more direct as in decreasing spend on activities that generate revenues. But the key point is that there are virtually no cost reductions that are revenue neutral in the long run when the actions and reactions of those external stakeholders that are involved in the revenue or cost side of your business model are factored in.
    The reason they work to increase profits is that the cost reduction is immediate, while the revenue reduction impact is timed release. The reasons for the delay are twofold:
    • First, revenue that you earn today is based on customer buying decisions that were made months or in some cases years ago. Take an extreme case - you could fire half of the team working on an engagement, and it would be weeks before revenue would be impacted. On the cost side, you could cut the salary of everyone on the team 7%, and it would be months before any of them walked out the door. Even if their productivity dropped 30% from "I don't give a $h1+ syndrome", revenue would not be impacted.
    • The second factor working in the cost cutters favor with regard to deferred revenue impact is the Frog Boiling phenomenon. Having cell phone privileges taken away will not in and of itself cause someone to look elsewhere for another job, but it will immediately improve the bottom line. Given inertia, and the relative immateriality of these independent actions as compared to the sum total of the comp and benefits package (or in the case of the pension plan scam the lack of a palpable impact), the company can get away with an endless stream of temperature increases. Employees get used to the new benchmark, and the nickel and diming can just continue.
    The only real impact is on the decisions of new applicants to replace the jumping frogs. As long as the recruiting machine can continue to obfuscate and misrepresent the environment and culture, the full revenue impact can be deferred indefinitely. That is why any competent job applicant should research the culture and HR philosophy of a target company before deciding to join. This is much more important than the starting salary, the company name, or the feigned friendliness of the interviewers.
    As far as Wall Street is concerned, the only place that any of this has in the valuation process is on the estimation of growth rates. This is a rather unscientific science, and more often than not the analysts rely on company supplied information. They also fail to consider that the source of previous earnings growth is cost cutting, and cost cutting can not continue forever - it is mathematically impossible. However, they are happy to continue to project based on historic trends.


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