Throughout the IBM Pension heist, Ellen E. Schultz, a Pulitzer Prize winning investigative reporter with the Wall Street Journal, exposed IBM's and other companies shenanigans that have cost retirees millions and millions of dollars, while enriching corporate executives.
Ms. Schultz has just published a book that every IBMer should read: Retirement Heist: How Companies Plunder and Profit From the Nest Eggs of American Workers. Many IBMers are aware of the "cash balance heist" of 1999. However, IBM has been stealing money from the pension plan dating back to 1991, well before the Gerstner era.
Eye-opening. This book is a must read for all in a pension plan. I thought that any retirement money was sacrosanct, and as Ellen Schlutz points out, it really isn't. Also, there is very little in the way of oversight and regulation that safeguard the pensioner from the accounting devices that are still legal under present laws.
To be sure, the Employee Retirement Income Safety Act of 1974 made clear that pension assets are to be managed solely for the benefit of participants. But Schultz describes how companies still managed to use the money to pay for severance packages and parachute payments to executives, among other things. Some companies simply sold pension assets for cash. Now pensions are collectively 20% underfunded. ...
Forbes: First, what are some companies that have cut employees' pensions and benefits?
Schultz: The companies I looked at included IBM, Verizon, AT&T, and I could keep going. Cooper Tire. General Motors. It's safe to say that most of the companies in the S&P 500 have done some version of this.
Forbes: And what did they do?
Schultz: Companies began cutting benefits because doing that enabled them to keep the money themselves, and it also boosted their earnings. Cutting harmed employees and retirees, but it boosted the pay and pensions of top executives.
During the '90s when accounting rules changed, this coincided with the trend toward awarding executives' pay that was based on performance. Let's say you reduce pensions by $100 million, that's essentially $100 million that gets added to profit. It's paper profit, but it affects earnings the same way as earnings you get from selling trucks. So executives were rewarded.
Forbes: Don't pension payments for thousands of workers dwarf the amount paid to executives?
Schultz: Not necessarily. Look at Massey Energy (Editors note: now part of Alpha Natural Resources). Last year, they had a huge Big Branch mining disaster. Dozens of miners were killed. The CEO was pushed out. He was given a retirement package that was worth $55 million. And the total payout for the coal miners, for black lung, traumatic workers' compensation (which means severe injury) and pensions and health care, that all came to $37 million, and that's for thousands of people. True, their costs will be ongoing, but it does put the magnitude into perspective. ...
Forbes: If someone has a question about their pension, who can they call?
Schultz: The Pension Rights Center in Washington can refer people to a lot of resources. There really aren't too many others that a person could go to. If they're in a union, their union really ought to be on the ball and be able to tell them how healthy their plan is and explain the benefits. There are also some nascent groups including the National Retiree Legislative Network, a fairly new group of people who are mostly retired salaried managers and employees who banded together to compare notes, share concerns and lobby their congressmen to tighten some of these rules and protect them better.
Skarka's financial predicament isn't the result of investment losses or runaway spending. He is among millions of Americans who encountered an unexpected risk to their retirement: their employers. Over the past two decades, companies have cut pensions, slashed retiree health coverage and killed other benefits. Many have reduced their contributions to 401k's as well. ...
Cutting benefits provided employers with an additional windfall: income. Because the benefits are recorded as debts on a company's books, reducing the debt generates paper gains, which are added to operating income right along with income from selling hardware or trucks. Thanks to these accounting rules, which all companies adopted in the late 1980s, retiree plans have become cookie jars of potential earnings enhancements: Essentially every dollar owed to current and future retirees -- for pensions, health care, dental, death benefits or disability -- is a potential dollar of income to a company. ...
Many companies, including AT&T, converted their pensions to so-called cash-balance plans, which slowed the growth of benefits for older workers and, in many cases, froze them altogether for a period of years. Skarka, 64, who left the company in 2003, says his pension would have been $50,000 a year, but is only $18,000 because of the pension changes. His $1,500 monthly pension was further reduced by $500 a month to pay for his share of retiree health benefits, leaving the South Thomaston, Maine, resident a monthly pension of just $1,000. ...
Employers' ability to generate profits by cutting retiree benefits coincided with the trend of tying executive pay to performance. Intentionally or not, top officers who green-lighted massive retiree cuts were indirectly boosting their own compensation.
As their pay grew, executives deferred more of it. Supplemental executive pensions, which are based on pay, also ballooned. These executive liabilities account for much of the "spiraling" pension costs many companies complain about.
This widespread career contentment may be the result of survey respondents feeling that the things they find most critical to their job satisfaction are being fulfilled. These factors include having a boss that does not micromanage (70 percent), having a good salary and benefits (62 percent) and having opportunities to receive training in new technical skills (61 percent).
I remember when Lou Gerstner gave a rah rah speech saying that "we wanna be leaders", and that our friends were Mo and Mentum. The people in the feed from Japan were simply confounded by this neologism. People walked out of that conference saying "Oh my god, what kind of a loser did we get now?"
So my take is that IBM had within it the seeds of recovery sown before Gerstner ever came, and that he contributed little to their fruition. He simply did not understand the computer business. He got a lot of money to leave, though. About 25 million was rumored to be his reward for not much of a contribution. Nice work if you can get it.
I called my doctor's office (in Boulder) and she said she's received dozens of calls from IBMers asking about coverage. She also had received a list of IBM patients from VSP that would no longer be covered.
She said that her office is trying to negotiate with IBM but that the reimbursement provided by Anthem is very, very low so she isn't confident that she'll make any progress.
I've decided to forego the coverage and up my HCRA allowance.
Busicom held the rights to the 4004 in 1970, but released them to Intel in 1971. Intel then offered the world's first processor for sale, and 40 years later that world is a very, very different place. ...
And so to review Intel's 40-year journey from the 4004 to today, The Reg contacted two Intel Senior Fellows who have been responsible for a good chunk of how their company's offerings have grown from the 2,300-transistor 4004 to the over-two-billion-transistor 2nd Generation Intel Core i7-3960X released Monday morning. We spoke with Steve Pawlowski, who has been intimately involved with a good portion of Intel's microarchitectural development since the early days, and Mark Bohr, who heads up Intel's process architecture and integration efforts.
This attack on the standard of living of IBM's service employees is unacceptable and demeaning. In fact many support workers have received very little in pay increases over the years.
Last year IBM had record net income of $53 billion and free cash flow of $8 billion. IBM is not a company in distress.
There is no need to decrease the pay of hard working IBM employees.
Please send emails this week to the following list of IBM management asking them to reverse this decision to cut pay and band levels. An injury to one is an injury to all!
Please send letters to:
Despite opposition in some corners and lukewarm reception in others, a wholesale repeal of the law by Congress may be unlikely. Lawmakers may find it unpalatable to abandon the entire effort, given the fact that critics of the law have not agreed on one comprehensive proposal that would offer coverage to anywhere near the 50 million Americans who are still without coverage. Even if the law goes into effect, an estimated 20 million will still be without insurance. “It’s hard to completely reverse course,” said Drew E. Altman, the chief executive of the Kaiser Family Foundation.
The Supreme Court announced on Monday that it would review three challenges to the Affordable Care Act, the 2010 health care reform law championed by the Obama administration and opposed by conservative groups nationwide. The Supreme Court is expected to rule on the constitutionality of the law - and the controversial individual mandate that requires taxpayers to obtain heath insurance - in June, as the 2012 campaign season is in full swing. ...
Pharmaceutical company Pfizer, which has considerable stake in the outcome of the case, sponsored the fundraiser, along with lawyers and law firms involved in legal challenges to the health care reform law, according to the nonprofit advocacy organization Common Cause.
Paul Clement, a lead attorney who will argue before the Supreme Court in March on behalf of 26 states that challenged the law, sat between Scalia and Thomas during the fundraising dinner. Clement's firm, Bancroft PLLC, was listed as a "silver" sponsor of the dinner. ...
Democrats in Congress have asked Thomas to recuse himself from any cases involving the health care overhaul because his wife, "Ginni" Thomas, has worked for several high-profile conservative groups that oppose health care reform, and Thomas failed to report that his wife earned nearly $700,000 from the Heritage Foundation from 2003 to 2007.
Gingrich, who has been under fire recently for his lucrative consulting business, left the health-care think tank earlier this year to run for president. But his time there exemplifies the former Georgia congressman’s post-legislative career as a well-paid consultant and policy guru, a role that earned him and his companies tens of millions of dollars over the past decade. ...
Gingrich has been criticized in recent days after Bloomberg News reported that he earned as much as $1.8 million in consulting fees from Freddie Mac, a quasi-public corporation that many conservatives blame for the housing crisis. After first suggesting he was hired for a short time as a “historian,” Gingrich has since acknowledged acting as a consultant for the mortgage giant “over a long period of time.” ...
The center has listed scores of firms and industry groups as members over the years, amounting to a Who’s Who of the medical field, from GE Healthcare to the American Hospital Association to Wellpoint, the nation’s largest health insurer. The think tank also drew funding from employers with sizable health-care costs, such as Detroit’s Big Three automakers, records show.
Just as Walmart and other retailers shook up the prescription drug business by offering $4 generic drugs, the industry now aims to apply its negotiating and marketing clout to tackle problems that vex consumers and the health sector: unpredictable costs, a lack of primary care doctors and inefficient management of chronic illnesses, whose costs drive the majority of health care spending. ...
Primary care doctors fear retail clinics will skim off the healthiest patients, leaving them with more complex or older patients, with no corresponding increase in reimbursement from insurers or the government. They also worry that the expansion of retail clinics into caring for patients with chronic illnesses will further fragment the care such patients receive. In a statement, the American Academy of Family Physicians says a better answer for such patients is "the development of a health care system based on strong, team-based … care."
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
In 2007, the last year captured by the data, 44 percent of families lived in neighborhoods the study defined as middle-income, down from 65 percent of families in 1970. At the same time, a third of American families lived in areas of either affluence or poverty, up from just 15 percent of families in 1970. ...
Much of the shift is the result of changing income structure in the United States. Part of the country’s middle class has slipped to the lower rungs of the income ladder as manufacturing and other middle-class jobs have dwindled, while the wealthy receive a bigger portion of the income pie. Put simply, there are fewer people in the middle. ...
Sean F. Reardon, an author of the study and a sociologist at Stanford, argued that the shifts had far-reaching implications for the next generation. Children in mostly poor neighborhoods tend to have less access to high-quality schools, child care and preschool, as well as to support networks or educated and economically stable neighbors who might serve as role models. ...
The isolation of the prosperous, he said, means less interaction with people from other income groups and a greater risk to their support for policies and investments that benefit the broader public — like schools, parks and public transportation systems. About 14 percent of families lived in affluent neighborhoods in 2007, up from 7 percent in 1970, the study found. ...
William Julius Wilson, a sociologist at Harvard who has seen the study, argues that “rising inequality is beginning to produce a two-tiered society in America in which the more affluent citizens live lives fundamentally different from the middle- and lower-income groups. This divide decreases a sense of community.”
The findings stem from an analysis of the candidates' plans conducted by The Tax Institute, based on scenarios affecting four families at multiple income levels suggested by Bloomberg News. It examined the tax plans of President Barack Obama and four Republican candidates with the most detailed tax proposals: Cain, Perry, Romney and Huntsman.
Unlike the proposals of his potential Republican rivals, Obama's plan would raise taxes for the wealthy family in the study and would prevent tax increases for the other three households.
The self-styled reform candidate left out a small detail. He made a great deal of money from Freddie Mac for many years, and he was deeply tied to its power structure.
In his latest book, “To Save America,” Mr. Gingrich slams the companies as “so thoroughly politicized” and “irresponsible” that they should be replaced by smaller companies, without government backing, that “focus on making a profit, not manipulating politicians.” In an October debate of the Republican presidential candidates, he suggested that Representative Barney Frank be put in jail for being close to Freddie’s lobbyists.
In a debate earlier this month, however, he was asked what he did in exchange for $300,000 from Freddie in 2006. He said he advised the company, “as a historian,” not to make loans to people without a credit history. That’s a nice sum for fortune-cookie wisdom, but it turned out to be just a fraction of his inside deal. This week, Bloomberg News reported that Freddie Mac paid him between $1.6 million and $1.8 million in “consulting fees” over eight years beginning in 1999, ostensibly to help design a program to expand home ownership, among other policy matters.
The real reason he was hired, as company officials make clear, was to act as a liaison to conservatives on Capitol Hill. It wasn’t technically a lobbying job, but in 2006 Freddie needed help with rising Republican anger at the companies, and the former speaker of the House had the right credentials. That’s typical of the mortgage companies, which over the years have handed out large paychecks to many of the biggest names in Washington, from both parties, in hopes of staying on everyone’s good side.
Mr. Brown, a freshman who harnessed populist Tea Party anger to win the seat once held by Edward M. Kennedy, has taken more money from the financial industry than almost any other senator: all told, more than $1 million during the last two years, according to data from the Center for Responsive Politics.
Of the 20 companies that accounted for the most campaign donations to Mr. Brown, about half were prominent investment or securities firms like Morgan Stanley, Fidelity Investments and Bain Capital. His donors include such blue-chip names as Gary Cohn, the president of Goldman Sachs, and the hedge fund kings John Paulson and Kenneth Griffin. ...
Ms. Warren’s relentless manner and withering attacks on predatory lenders have won her enemies from Wall Street to Washington, where as a member of an oversight panel she helped usher in the largest expansion in decades of federal oversight of the financial industry. Now Mr. Brown’s support for the industry — and Ms. Warren’s battles with it — are becoming a defining issue in one of the most hotly contested Senate races and a magnet for special interest money.
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