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Highlights—July 20, 2013

  • Wall Street Journal: Is Wall Street Losing Confidence In Fortress IBM? By Spencer E. Ante. Excerpts: IBM has long been a sure bet for meeting Wall Street’s earnings expectations, but next week it could once again leave investors blue. ...

    “43% of CIOs we surveyed in June 2013 indicated they use IBM mainframes, which represents the lowest level in the seven quarters we have tracked this data,” Ms. Huberty wrote.

    Although mainframes themselves account for only a slice of IBM sales, Sanford C. Bernstein has estimated that the hulking machines contribute more than 20% of IBM’s revenue and 40% of company profit after taking into account the related services, software and storage that clients typically purchase along with the machine.

    Selected reader comments follow:

    • Joe Hill wrote : IBM employees have lost confidence in CEO Rometty. Morale is rock bottom and customers have lost valuable IBM partners in the job cuts. The number of jobs cut in the June bloodbath has reached 3200. All in the name of Roadmap 2015, nicknamed Roadkill 2015 by employees.
    • DarthVaderMentor wrote: All too good to be true, “fairy tale finances” management con jobs always have an unhappy ending for brand blinded sucker investors. If you’re not near an exit, or heading for the hills, then you are exposed and it’s your fault. Yours alone.
    • Tom Watson wrote: Many problems with the company – shocking accounting practices, channel stuffing, general managers managing upwards and don’t want to listen to real issues, meeting/beating EPS for a decade on the back of cost cutting and share buyback as opposed to by growing revenue. Crash and burn strategy on acquisitions – 125 acquisitions in 10 years and not a single CEO from acquired company is still there! I think investors need to vote with their feet.
    • Goldman_has-it_correct wrote: Goldman might have it correct when they downgraded IBM for the short term, however long that is. The company is bloated with executives and senior management and has lost its focus in being innovative and profitable for the shareholders. Buying companies does not guarantee success in any business if you do not have a “viable” plan to continue with the business and how you will integrate it with your existing products. Any fool can buy a company and lay off the employees you acquire—it doesn’t take any particular talent or skill to do that. There likely needs to be a complete change of the old IBM guard at the top to fix the problem. July 17 is approaching and will no doubt tell us all if this company is going to sink or swim.
    • This is NOT your father's IBM wrote: IBM has no vision, no plan other then to meet the 2015 roadmap. Customers are leaving due to lack of Client focus. IBM sells well but does’t deliver on what it sells. IBM spends more money on controlling their new inexperienced staff then investing in innovation. IBM rapes and pillages third-world countries to take advantage of tax breaks and once the tax advantage is over, off to another poor country to hire thousands of people who once sold used cars. IBM is an old, antiquated company that is more of a bank then a IT company. It would shock investors to know how many customers have moved away and how many are planning on moving.
    • 30 year IBMer wrote: Customers. partners, employees, and shareholders should vote with their feet. IBM is now nothing more than a financial holding company run by greedy tyrants with rock bottom employee morale and working conditions
  • IBM Pension and Retirement Issues message board: "Re: Is Wall Street Losing Confidence In Fortress IBM?" by "test2btrue". Excerpts: This is what IBM counts on "No matter what you do to an employee, they will continue to perform?"

    It is a question on how do you define "Doing the best you can?" When I worked for IBM, I had defined it not on doing my job but coming up with creative ideas and approaches which saved money and expenses with no negative impact on employees. Improvements in processes and short cuts without employee termination. Going the extra mile whether asked to do so or not by my executive.

    As IBM changed its approach and treatment of employees - like firing 11 in my function and then spreading the work to the remaining group requiring that we work 55 hours to accomplish the same tasks, my approach also changed. I was no longer creative or willing to go the extra mile but just do what I was told to do "as best as I can do"

    I also saw others changing their approach as well - Doing the best they can do on the things they were asked or told to do by their manager and nothing more. So I can understand the CEOs comments that it is the employees who are at fault and not the executives who changed the environment to one that destroyed loyalty and creativity. The Watsons understood the importance of employee loyalty, moral, and creativity but current IBM management does not. The Watsons did not fire employees even in the Depression but cut their and executive salaries. Not the case today.

    IBM is no longer an exceptional company but a company whose sales and / or profits will continue to fall especially when they run out of employees or benefits they can take away from employees. A company is only as good as its employees. The IBM executives have loss the moral, motivation, and support of its employees.

    Talk to an Apple employee and see the difference. Call an Apple Tech for help and you speak to an American and not someone in a foreign country.

    From a retired IBM manager.

  • Wall Street Journal: IBM's Unexceptional Exceptionals. A Lot of Work Goes Into Big Blue's Earnings—but Not Necessarily the Most Inspiring Kind. By Rolfe Winkler. Excerpts: If International Business Machines engineered products as well as it engineers its earnings, maybe its revenue growth wouldn't be so anemic. ...

    IBM said earnings per share for the full year will now amount to at least $16.90, up from guidance given last quarter of at least $16.70.

    That figure, though, isn't calculated according to U.S. accounting standards—in colloquial terms, it is effectively "earnings before bad stuff." It ignores, for instance, a $1 billion charge in the second quarter for "workforce rebalancing." Include that charge, as well as other costs like amortization of intangible assets arising from IBM's acquisitions, and the company's forecast for 2013 earnings per share based on U.S. accounting standards actually falls to at least $15.08 from at least $15.53.

    IBM is both a serial acquirer and a serial cost cutter. In other words, these charges are a regular feature of how IBM does business. This raises the question: Why are they treated as one-time items? Just because tech rivals like Oracle also publish an earnings-before-bad-stuff figure doesn't mean it makes sense.

    IBM also boosted its earnings per share in the second quarter with the help of a lower tax rate and by buying back shares. Holding those two constant with where they were the prior year would have reduced quarterly earnings by 23 cents a share, or 8%.

    Investors won't complain about IBM paying lower taxes while buying back stock. But it would inspire more confidence if the company could boost earnings by boosting its business.

  • Wall Street Journal: IBM Struggles to Lift Revenue. Computer Giant's Second-Quarter Net Falls 17% on Restructuring Charges, Weaker Hardware Sales. By Spencer E. Ante. Excerpts: International Business Machines Corp. posted a fifth-straight quarterly decline in revenue, underscoring the challenge Chief Executive Virginia Rometty faces getting the technology giant's sales growing again.

    IBM remains a key provider of computer hardware, software and services to big corporations and governments around the world. But the Armonk, N.Y., company faces new competitors who rent computing power and software over the Internet, and has to find new sources of revenue as growth in some key emerging markets slows. ...

    IBM's shares rose steadily in recent years to a record high in March, but stumbled after missing Wall Street's earnings expectations in the first quarter for the first time in nearly eight years. IBM blamed the shortfall on its failure to close more than $400 million of hardware and software deals in the quarter.

    Following its last earnings report, Ms. Rometty used an internal video message to deliver a companywide reprimand, saying the technology company needed to move faster and respond more quickly to customers.

    The company also moved to cut staff and costs. It excluded that cost in projecting it would earn at least $16.90 a share this year, up from an earlier forecast of at least $16.70 a share.

    Selected reader comments follow:

    • IBM is now like a hedge fund that also owns and manages the companies whose stock it owns. They continue their now over decade long strategy of arbitraging cheaper foreign labor and shedding high cost labor in the US and EU but with a stagnant revenue stream in an ever expanding IT world. IBM was no. 1 in the world but now 50.

      Add the mega Cloud trend to this which absorbs all kinds of processing and storage at the consumer or data center level into commodity arrays of internet connected servers and storage and you can see the higher margin IBM piece part offerings of software and hardware dwindling even with its own offering of Cloud as a partial offset.

      Unless IBM changes strategy soon they are going to pay the price of endless cost reductions in a context of no organic revenue growth...what cannot continue will not at some point.

    • IBM no longer focuses on creating the WOW! experience for their customers. IBM's focus is on cost cutting and profit enhancement, and not on creating more value for the customer. Eventually, even the most loyal customers drift away. If they are not busy creating new products and services to generate new business, their cachet as a high-tech company will evaporate. You can't buy your way into technological leadership.

      Their first question should be, "What jobs or functions are our customers doing that they absolutely hate to do?" and then figure out how to do those jobs for them. They could ask themselves the question, "If this or that resource were absolutely free (compute power, storage, printing, data transmission, data analysis, ultra-large-screen super graphics, etc.), how would the world change? What would people do differently? What would people do that they cannot do now?

      Walt Disney called it Imagineering. Whatever. It's thinking outside the box. Start every strategy session with, "what if...".

    • Over past 10 years IBM (and others) chose to dumb-down and approach each customer as a part on a conveyor belt. They now find they're competing with like-minded but lower cost competitors. Customer Executives now understand technology innovation as being lower cost of IT operation; regardless of whatever rhetoric or catch-phrase their using that day. Will we see tech leadership again? and don't mention Apple as their top selling products are phones, music devices and portable computers none of which they invented.
    • Dirty little secret about IBM is customers feel the need to choose IBM services but don't want IBM. Most vulnerable value proposition. Disclosure: I compete with IBM, and use this to advantage for large contracts
    • But with all that said, the stock buyback program has been a huge success...for insiders (and former CEOs)...take a look at their stock sales in the past 6-12 months!
  • Burlington Free-Press: IBM won't say how many jobs lost, state reviewing the matter. By Dan D’Ambrosio. Excerpts: IBM has told the state how many employees were terminated at its Essex Junction facility last month but is asserting the information is confidential because it would cause the company “competitive harm” if released.

    Labor Commissioner Annie Noonan said late Tuesday that IBM is citing an exemption in Vermont’s Public Records Act protecting trade secret and competitive business information as the reason the number of employees terminated should be kept confidential. The company also asked for the opportunity to provide further information if the Labor Department disagrees with IBM’s assertion.

    In response, the Labor Department has given IBM until noon Thursday to provide “any legal justification or other information” to support its confidentiality claim. ...

    In a press release, the Labor Department said that while it agrees that the names of individuals who lost their jobs are exempt from disclosure, the department “is not convinced that the total number of affected employees, as reflected in the notice, must be withheld from the public under Vermont law.” ...

    Employment at the IBM plant in Essex Junction has been on a downward spiral since December 1994, when 300 employees were let go in the first cuts ever made at the facility. From 2001 to 2007, the head count at the plant dropped from 8,500 to 5,700.

    IBM no longer releases the number of employees at any of its plants, but the best estimates put the number at around 4,000 in Essex Junction. The last time the company confirmed the number of people it had let go was in June 2008 when it cut 180 employees. Additional cuts followed in January 2009, but IBM refused to disclose an actual count of employees who had lost their jobs, estimated at about 200.

    Lee Conrad, national coordinator of Alliance@IBM, said Tuesday IBM has been “stonewalling” on job cut numbers nationwide for years.

    “They’ve not been transparent at all,” Conrad said. “They don’t release the U.S. figures any more. Frankly this doesn’t surprise me. The citizens of Vermont should be outraged that IBM is thumbing their nose at them, saying ‘We’re not going to tell you our figures.’”

  • Burlington Free-Press: IBM drops objection to releasing number of jobs lost: 419. By Dan D’Ambrosio. Excerpts: In the end, IBM blinked, telling the state Department of Labor Thursday it had no objection to the number of employees in Essex Junction who lost their jobs last month being released — 419 — as long as their names were kept confidential.

    The Labor Department had already agreed that the names of the employees qualified for an exemption from release under the statute requiring IBM to notify the state of mass separations of 25 or more employees. IBM had first asked for confidentiality of not only the names, but also of the overall number, prompting Gov. Peter Shumlin to advise the company on Wednesday to “tear off the Band-Aid” and release the number.

    Labor Commissioner Annie Noonan gave credit Thursday to Shumlin’s remarks for influencing IBM’s decision to release the number. ...

    Lee Conrad, national coordinator of Alliance@IBM, an employee group based in Binghamton, N.Y., also gave his “kudos” to Shumlin and the Labor Department for pressing IBM to release the number.

    Alliance@IBM has estimated that about 3,300 IBM employees in the United States and Canada have lost their jobs as a result of the separations made by the company in June. In a conference call with analysts on Wednesday, IBM said it took a $1 billion charge for “workforce rebalancing” in the second quarter.

    Conrad said he sent an email to 25,000 former and current IBM employees and Alliance members on Thursday, thanking Shumlin and the Labor Department for “standing their ground” and getting the numbers released. ...

    The cut of 419 workers in June represents about 10 percent of the workforce in Essex Junction by the best estimates. IBM does not release the number of people who work at the facility, but most observers believe it is now around 4,000.

    The first layoffs in Essex Junction, since the plant’s opening in 1957, came in 1994, when 300 employees were let go. The drastic reduction in the workforce in Essex Junction, however, came between 2001, when the plant hit a record high of 8,500 workers, and 2003, when the employment level had dropped to 6,200 workers.

  • Seeking Alpha: IBM And The Media Attempt To Obscure Its Declining Business Results. Excerpts: Background: I used to be a math nerd. I still recall the excitement a smarter, nerdier math nerd in my junior high school class expressed when he and I visited one of our math teachers in his office after school and discussed International Business Machines Corporation's (IBM) new 360 mainframe computer. It was a wow, as was everything about IBM in those days. It led the universe in patents issued. It was the glamour stock of a glamour period for growth stocks. It was famously conservative in its spending and delivered unparalleled customer service. Its stock traded in triple digits. There was no end to its growth. It had no debt and had no need to pay investors a dividend, as all its earnings were retained to go back to winning the future for technology, which everyone knew it would lead. ...

    IBM is now a different beast from that which it once was. Its sales have been anemic for some time. Yet it is so committed to earnings "growth" that it overtly asks us to ignore basic arithmetic and basic accounting principles, in order to create a false picture of its operations, as I will attempt to show below based on Wednesday afternoon's earnings release.

    This behavior is opposite to its prior image and antithetical to its obligations to investors. Worse, because no analyst has missed the reality of a downturn in IBM's businesses, the only people fooled by clever press releases and fawning media attention will be casual retail investors who believe the headlines that IBM had a good quarter and is truly doing better than the smart money had expected.

    In fact, IBM has had a poor quarter and a poor first half, but just does not want to admit it. ...

    By the way, getting the lowdown via the web on exactly what this famous workforce rebalancing (itself an Orwellian-sounding term) actually consists of is like pulling teeth. IBM's 8-K does disclose that on April 18, 2013 (the date of its Q1 earnings release), it stated that as opposed to 2012, when it took its workforce rebalancing charges spread out across all four quarters, it was going to take these charges this year primarily in Q2. So I went back to IBM's Q1 earnings press release and found almost nothing related to that topic. Then I gave up. Presumably "workforce rebalancing" is little other than Newspeak for layoffs.

  • The IT Jungle: What Is IBM Going To Do With Its Systems Business? By Timothy Prickett Morgan. Excerpts: I don't pull the intuition card very often, but in this case, I can feel it in my skinny little bones. Something is up at IBM, and I think we can expect to see some big changes in its systems business in the coming months. This is not just a hunch, but the reading of the executive tea leaves combined with a hunch and observations of IBM for over three decades now. You get a feel for when Big Blue is ripe for change if you have been doing this long enough, and we have a new CEO who has to hit her numbers and a rapidly changing IT market.

    It doesn't get any riper than this.

    So over the next few weeks, I am going to think this through and try to help us all figure out what IBM might do--and will not do--with its systems business, which has come under pressure in recent years from direct competitors and indirect ones peddling new ways of computing. This is a thought experiment done in the absence of data, and you should think of it that way. As I have said before, you have to be careful of making long-term predictions because the projections tend to follow straight lines, not the curvy, side-to-side and up-and-down stuff that comes from real living. ...

    With Power Systems revenues dropping in synch with the Unix market overall, I am also made a little nervous. I would not be at all surprised if IBM sold off its chip fab in East Fishkill and outsourced Power and System z chip manufacturing to the buyer. I would not be surprised if IBM outsourced a lot of the manufacturing of all of its systems. Then again, another possibility is to do these things and then buy Advanced Micro Devices, thereby gaining a microserver business and an X86 and ARM processor business to boot. And it can tell Intel to go to hell and start competing against it.

  • Net(net): IBM CEO Ginni Rometty: Failing Fast. By Steven Zolman. Excerpts: In a previous blog post, I took great pains at articulating my 10 Reasons Why Ginni Rometty would fail as IBM’s new CEO. In the post, I mentioned the poisonous sales culture (you live by the sword, you die by the sword), which is at the center (of blame) for this and last quarter’s missed performance targets. Another concern was the ‘garage sale’ of business units that would inevitably have to come if IBM were to meet its targets. As we have recently learned, IBM appears to be in the process of selling its server business to Lenovo, and it has long been rumored to be preparing its services business for sale as well. It seems Ginni may be failing faster than even I had predicted.

    Read: Top 10 Reasons Why Ginni Rometty Will Fail as IBM’s New CEO

    As most of you know, IBM missed its quarterly numbers again, much like Oracle, blaming the performance miss on a lack of hustle and execution from their sales organization and citing sales that slipped into the next quarter. What’s interesting about that, is that it’s the second quarter in a row that IBM has used the same tired excuse. This makes me wonder what happened to those sales that slipped from Q4 to Q1 last quarter. Why didn’t they show up in Q1? If anything, Q1 should have experienced some over-performance as a result of missed sales from Q4. So, the explanation doesn’t seem to hold water unless there were significantly more slips in Q1 than there were in Q4. Either way, it seems to be a wonky excuse. ...

    Due to missed targets, and poor performance results, IBM will now “reposition” the business, which undoubtedly means IBM will more aggressively lay off its employees. In the Rometty era, it appears misaligned, clueless executives and sales people with no technical prowess reside in the safest bastions, while super smart, US based customer support people, and technology heavy product innovators and developers are the ones most likely to be let go. IBM is much like a desperate housewife, clinging to more glorious days gone by and trying to hold on to the past by getting plastic surgery to improve surface appearance, avoiding at all costs a seemingly declining future, and losing its soul in the process. Ginni is now the plastic surgeon that keeps performing the procedures to strip the company of more of its soul, while trying in vain to improve its shallow appearance. In the end, soul matters, and health is not just skin deep, and it seems that the signs now indicate that the market feels the same way.

    Selected reader comments follow:

    • This again is so typical of IBM. I had 8 years at IBM, promoted to run the PLM business unit. I was extremely successful in making our numbers only to find out on a conference call that IBM sold this business unit back to Dassault Systems. All 262 employees were told they no longer had a job with IBM and was offered “A comparable job with Dassault Systems.” I kept the letter offering me a job, however once on board, the job description rapidly changed. We were all told we could not come back to IBM for 3 years. This is how IBM operates, no consideration for it’s employees, just a hike in quarter results… What a disgrace, Mr. Watson is turning over in his grave many times over with how the company has changed, no respect for anyone anymore.
    • The answer is not to keep cutting staff number, or more jobs to cheaper countries, which seems to be the current position of “very” senior management in IBM.

      Skills are being lost, in fact I would say lost for good. People in Brazil, India, Eastern Europe etc are OK, but what they lack is the historical knowledge. You cannot just lose 30 years experience and say that a resource being paid less in India is now able to deliver the same service.

      The only people that are going to win are Rometty and very high level management on 7 figure wages.

      IBM, mark my words, is going to give way and implode at some point. Once people realise the terrible way in which it is managed.

    • As you have probably noticed by now, your prediction of increased layoffs was absolutely correct. IBM is now laying off thousands worldwide.

      I remember how proud I was to be part of IBM when I was first hired a few years ago as the result of an acquisition. There were a few rough spots, but I figured those were just growing pains and we would soon be on our way to a productive and rewarding future. Unfortunately those rough spots were just the beginning. The IBM experience became a slow-motion train wreck as I watched our once-productive team increasingly burdened with useless reporting requirements and worthless “training”. Of course no internal charge code was provided for all this unproductive time. We were expected to bill it all to the client. Where we were once focused nearly 100% on client tasks, we were now spending two or more hours each day on internal busy-work that added no value for the client. Not surprisingly, the client soon terminated their contract with IBM.

      The priorities of IBM management are upside-down. IBM’s stated values of “Dedication to every client’s success”, “Innovation that matters, for our company and for the world”, and “Trust and personal responsibility in all relationships” now seem hollow and hypocritical. Instead of “dedication to every client’s success”, the only thing that management is dedicated to is gaming the system by any means possible to artificially boost earnings per share. Who would want to be a customer of IBM knowing that service to the customer is only an after-thought, a necessary evil to be accomplished at the lowest possible cost; that their primary value to IBM is a resource to be milked for every possible dollar in order to support the almighty stock price?

    • Correct article on all fronts, kudos to the author. The ’10 Reasons’ article is just as accurate, perhaps even more so. I know because I spent over 25 years working for big blue and watched the place erode beneath my feet like a limestone rock under rushing salt water. The place is eat up with executives who are nothing but corporate politicians looking out for their own careers and wallets. It’s nothing more than a financial engineering holding company in major decline. Working at IBM as a rank-n-file technical person had become all but career suicide. If you have technical skills, get out asap. I was most pleased, and consider myself very fortunate, to have found employment where they actually value their employees as ‘people’ and not ‘resources to be discarded in order to prop up quarterly EPS.’ IBM has Wall St. totally bamboozled but that, too, will end soon. Sadly, when the end nears, IBM executives will take their spoils and run, leaving the employees, clients and remaining shareholders in the mud. Classic case of ‘The Emperor Has No Clothes’.
    • Sadly I have to agree. IBM is forgoing technical people and experience all to save a few $$ at the expense of IBM customers.

      What should be happening is building those technical skills to deliver excellence to the customers and sell the culture of excellence, not cheap nasty and “all we care about is the share price”.

      IBM seriously needs to look at the level’s of management. There are too many levels of management in all areas.

      The sales teams are in disarray. IBM keeps changing the products sales people are selling, keeps changing the incentive plan to the point that the sales teams are no longer interested in selling, as they do not know what they will be selling in 6 months time or even if they do sell they will actually get any recognition. Let alone the changes in expenses, so much so if sales want to build a relationship with the client, they have to do it out of their own pocket. So why would you even try to sell at IBM?

    • Interesting comments about how IBM has lost its customer focus. At a recent event, IBM spent the majority of time detailing how their sales force presents their products (services, intelligent systems, analytics, etc.) to clients by detailing where and what business problems this addresses, the quantifiable benefit and how IBM is now offering ‘outcome-based’ pricing that ties the cost of the solution to specific performance goals laid out and agreed upon by IBM and the client prior to beginning the effort.

      I agree that employee abuse appears egregious – there appears to be a lot of B-school theory-based management using data mining and modeling. These drive the w/w cross-IBM cuts that claim ‘everyone’ must suffer – so let’s hack away. Ginni’s quote saying ‘everyone must work harder’ implies that she and her executives think there remain a lot ‘slackers’ in the ranks. A feeling that I have heard/seen from even low-level managers.

    • Employee morale is at the lowest point in my 15 years and talking to others it’s at the lowest point in 30 plus. Things that have changed for the worse since I joined:
      • Pension plan taken away.
      • No free soft drinks.
      • No office supplies.
      • No free water.
      • Yearly bonuses cut from averaging 8 percent to averaging 2 percent
      • 401 k plan changed so we only get the match one time at he end of the year.
      • Basically just a pay cut of several hundred to a thousand dollars for every employee.
      • Skipping performance based raises this year.

      I’m sure I’m missing some others. Very little new hiring in the past 8 years but lots of RAs More work for those of us remaining and no incentive to work harder.

      I think IBM is actively trying to get high performing and high paid developers to quit. I got a retention plan a while ago and was highly motivated for about a month until IBM made another one of these awful employee "FU" moves.

    • For a simple process the layers of teams, geographies and people is insane. Making a simple task, so difficult to accomplish. This model is not only not efficient, it is time consuming and worst of all, in all that chain, there is nobody who sees the big picture of the process or even if they do, they don’t care to share it. Low morale and this thing of a global organization it is one of the most unproductive ways to work.
    • My career with IBM was a case study in casting pearls before swine. While I’m sad that they couldn’t see what they had in me, I’m ecstatic to no longer be trampled upon by less visionary, less transformative beings. Thanks, IBM, for punching my ticket to the smarter planet!
  • Worcester Telegram: To stop losing share, IBM must see itself as customers, competitors do. By Peter Cohan. Excerpts: As your company grows, you must maintain the ability to see it through the eyes of customers and competitors. But most companies become internally focused as they get big, and they lose their outside-in perspective.

    One example of this is IBM. On June 15, I wrote a Forbes post pointing out that IBM was getting smaller. Revenues fell by 2.3 percent, even though its market–corporate technology spending was growing at 4.7 percent. ...

    But one of the things that Mr. Gerstner tossed out of IBM in order to save it was a core value under Thomas Watson : Respect for the individual. Before Mr. Gerstner, IBM paid below-market salaries but its benefits -- including medical, tuition reimbursement, career opportunities, and reimbursement for moving expenses and the taxes owed on those expenses -- were great," said Mr. Perone.

    However, under Mr. Gerstner and after, IBM management was focused intently on making its quarterly earnings per share targets. IBM achieved this through $126 billion worth of share buybacks.

    "IBM bought back two of every three shares. This reduced the denominator of the EPS calculation and helped get IBM's reported numbers closer to the desired target," said Mr. Perone.

    Fred Zimmerman, a professor emeritus of engineering and management at the University of St. Thomas, explained that IBM’s financial value had plummeted. More specifically, its tangible net worth – the value of its hard assets (excluding the accounting value of its patents and brand) less its liabilities – was negative $14 billion.

    But that only got IBM part of the way there. For the rest, IBM scrambles before each quarterly earnings report to cut costs.

    "IBM says on its web site that it offers employees tuition reimbursement, but it does not have a budget for this line item, so employees do not get it. There were also layoffs -- in Manassas, Virg., where I worked, the number of employees fell from 28,000 in 1982 to 2,000 today," said Mr. Perone.

    Then there is the shift of costs onto employees. Mr. Perone explained,

    "Today, employees work from home. IBM will not reimburse them for buying a printer, for their Internet connection, for their office supplies, or for the cost to drive to clients. And most people go four to five years without getting a raise," he said.

    If winning depends on retaining and motivating top talent, then IBM's attitude towards people suggests that it ought to be losing market share. After all, the most talented people should be able to get jobs at leading technology pillar companies and the most exciting start-ups.

    The only people likely to put up with this Office Space-like treatment are those who can't get jobs elsewhere and those approaching 65 who or are just trying to hang on long enough to retire.

  • CNBC: Tech earnings preview: IBM, Intel and eBay. By Jon Fortt. Excerpts: We're about to get more detail on exactly how bad the mobile and cloud disruptions are for some of the titans of tech.

    At IBM, one of the best stories in tech investing has hit a bit of a snag. In the first quarter, revenue came up short by 5 percent, and profit missed, too—IBM turned in $3 per share, versus the $3.05 expected. For the second quarter of the calendar year, the Street wants $25.4 billion in revenue, $3.77 in EPS.

    The problem wasn't so much the revenue, since Wall Street has been willing to stomach top-line whiffs in the past. The problem was the profit. IBM has given investors a multiyear EPS road map that relies mostly on its software and services businesses, and its ability to buy back stock at the right times.

    IBM put the blame on currency headwinds in Japan and some deals the sales reps couldn't close.

    As a guy who watches a lot of these companies in the tech space, I've got to admit some skepticism. The deal slippage excuse? Sounds a lot like what Oracle said in the third quarter, but results still managed to disappoint in the fourth quarter.

    And those currency headwinds in Japan? Still there. I'm expecting another so-so revenue performance from IBM, with job cuts and buybacks picking up some slack for the bottom line.

    We'll know it's serious if IBM has to do a broader reorganization to cut costs and bolster non-GAAP EPS.

  • The Register (United Kingdom): IBM, Accenture play blame game over $1bn project blowout. Sueball guns locked and loaded. By Richard Chirgwin. Excerpts: IBM and Accenture are sniping at one another in public over just who should take the blame - and the fall - for the $AUD1bn blowout of a project to provide the Australian State of Queensland's Department of Health with a new payroll system.

    The project kicked off in 2007 with a budget of just over $6m. It's now expected to cost up to $1.25bn to complete, a failure that has led the State's government to run a Commission of Inquiry into the affair.

    That inquiry is due to report by the end of July, and looks set to spark a rolling lawyer-fest on a scale that Cecil B de Mille might find worthy of attention.

    Former Queensland Premier Anna Bligh told the inquiry the former government chose to negotiate a settlement with IBM rather than risk litigation. However, it looks like the vendors surrounding the project will be more than happy to unleash their lawyers as soon as the commission delivers its report. ...

    Through its counsel, IBM appears to be girding for a battle against pretty much everyone, just in case: the Queensland Government, the commission of inquiry (which Big Blue repeatedly cautions should not make adverse findings against it), and Accenture.

  • I, Cringely: So that’s how H-1B visa fraud is done! By Robert X. Cringely. Excerpts: Read the indictment. It’s short and quite entertaining. The gist of the crime has two parts. First Mr. Cvjeticanin’s law firm reportedly represented technology companies seeking IT job candidates and he is accused of having run on the side an advertising agency that placed employment ads for those companies. That could appear to be a conflict of interest, or at least did to the DoJ.

    But then there’s the other part, in which most of the ads — mainly in Computerworld — seem never to have been placed at all!

    Client companies paid hundreds of thousands of dollars for employment ads in Computerworld that never even ran! ...

    This is alleged H-1B visa fraud, remember. In order to hire an H-1B worker in place of a U.S. citizen or green card holder, the hiring company must show that there is no “minimally qualified” citizen or green card holder to take the job. Recruiting such minimally qualified candidates is generally done through advertising: if nobody responds to the ad then there must not be any minimally qualified candidates.

    It helps, of course, if nobody actually sees the ads — in this case reportedly hundreds of them.

    When Mr. Cvjeticanin was confronted with his alleged fraudulent behavior, his defense (according to the indictment) was, “So let them litigate, I’ll show everyone how bogus their immigration applications really are.” Nice. ...

    Employers are posting jobs that don’t really exist, seeking candidates they don’t want, and paying for bogus non-ads to show there’s an IT labor shortage in America. Except of course there isn’t an IT labor shortage.

    Selected reader comments follow:

    • In 2009, it was almost impossible to get a job in the IBM Global Business Services when your assignment ended because they only considered Indian resources – so you were stuck “on the bench” until you died of old age or they fired you because you had “no” skills. Recently due to the exposure of fraud and federal investigations, GBS is cutting loose those Indian resources. These days the mantra is to use more remote Global resources in Mexico, Brazil, Philippines and elsewhere. US resources are back on the bench or fired. IBM toads (executives and managers) are exempt from following the IBM “Business Conduct Guidelines” when it comes to perpetuating job fraud and labor scams in the US. The labor shortage is nothing more than another Big Blue scam. Thanks for posting your warning Cringley!
    • In the Bay Area, one of America’s largest companies has just opened a software center; its employee base is roughly 90+% East Asian Indian (they employ several hundred people). These H1-B’s (or ex-H1-B’s who have obtained citizenship or green cards) get hired as “full-time” (mostly), while non-East-Asians are hired (mostly) as contractors. I can’t verify this, but I have heard that some significant number of the H1-B’s (or former H1-B’s) at this company are grossly incompetent, with internal, ethnic-based nepotism and favoritism run amok.

      The entire hiring scheme should be looked into there as a major fraud, perpetrated on the US Government and qualified American tech workers. Instead of looking into this (they were alerted), we continue to hear more deception from the likes of Bill Gates, John Chambers, Mark Zuckerberg, etc. etc. about how we need more H1-B workers. What’s really scary is that a lot of these H1-B are incompetent coders, and yet are working on software projects that are critical to necessary American infrastructure.

      The tech sector has been hallowed out by decades of H1-B abuse. I personally know highly-qualified IT workers who end up talking to – guess who? – Indian recruiters, for almost every tech job that they find!! I have personally seen RFP’s for Quality Assurance positions (and many others) that demand requirements that are in NO WAY necessary for the job. I have seen people who trained H1-B’s (who literally knew NOTHING when they came here), positioned above the American IT workers who trained them, even though they are not nearly as qualified as the American tech worker that they are now “managing”. It’s a pathetic and sad thing to behold.

      Just imagine, if the current H1-B proposals are made into law, H1-B spouses will ALSO be able to gain immediate employment. Dumping this many new into a challenged California economy is little more than a betrayal of QUALIFIED American workers (no matter their ethnicity).

      The entire H1-B scene, as currently existing, is a SCAM of major proportions. We should be publicly vilifying and JAILING American executives and their helpers who engage in this fraud. What’s maddening about this is that the issue of providing (or, not providing) citizenship to the large number of “illegal” agricultural workers is used as a “cover” to sneak in more H1-B’s, especially from India and China.

    • Not surprised at all. Speaking of ComputerWorld, it is filled with ads clearly not intended to be read. Each has a number, probably used for compliance reasons. Employers should be required to make a good faith effort to hire American workers before being allowed to use programs like the H-1b. The ComputerWorld ads are about as blatant as it gets without actually saying “Americans need not apply”.
    • Thank you Mark for your perspective on this subject. One of the things that bothers me about this story is it is the first story like this I’ve heard. I find it highly unlikely this is the only case of abuse of the H1B system. Anyone who is working in the IT industry knows what has happened. How many friends do you have who have lost their jobs? I know of kids graduating college with degrees in IT and Engineering and can’t find work. I am very much in favor of immigration. The cultural diversity is one of the things that makes our country great. We need however, to have visa and immigration policies that do not hurt our people and our economy. What is being done with H1B does not serve the common good.
    • Just in case anyone here has not seen this yet, watch as immigration attorneys from Cohen & Grigsby explain how they assist employers in running classified ads with the goal of NOT finding any qualified applicants. . A direct quote (at 1:42 in the video): “Our goal is clearly NOT to find a qualified and and interested US worker. In a sense, that sounds funny, but it’s what we’re trying to do here.” http://www.youtube.com/watch?v=TCbFEgFajGU
    • I’ve heard that the Silicon Valley companies, when they want H1B workers, hire similar middlemen to take out help wanted ads that will not find the “intended” audience. But instead of not actually running the ads, they actually do. They’re just run in a Penny Saver like publication that is only distributed in the poorest sections of the East Bay where no software engineers will ever find them. I thought all of this was well known within the industry.
  • Yahoo! IBM Employee Issues message board: "Re: 30 days to find another position in the company: Really?" by "bobsutton203". Full excerpt: When you have been tagged as an RA the normal hiring process is amended. There is a management review at a higher level than your immediate chain that is tasked with making sure RA designees are not hired by another part of the company unless there is an extremely rare case of business need. When the CEO of IBM has determined that X employees must be fired this process insures that X stays X otherwise the numbers don't work and the execs cannot preserve their EPS target bonuses.

    IBM has morphed into a form of hedge fund that is continuously buying and selling parts of the company to preserve the EPS target however, like socialists, they eventually run out of other peoples money; in this case they run out of parts to sell as the company shrinks over time.

    IBM used to be the largest company in the world; it is now 50 and headed lower by the day as more and more of IT becomes a commodity and that will be accelerated by Cloud computing which make most of IBM's piece part offerings into commodities more cheaply supplied as central service offerings from the cloud than sold at higher margins to private data centers.

  • Yahoo! IBM Employee Issues message board: "Re: 30 days to find another position in the company: Really?" by "netmouser". Full excerpt: I was in Global Services and was denied an internal IBM job within the CIO office that the hiring manager said I was a fit for (I have Sametime chat transcripts) and she really wanted me. The game rule was that the receiving department HR would only take me if I was "on loan" via contract (and stay officially with my current group), and my group would not approve it unless it was a transfer and they got rid of me. Another person who was in a twin job for years with that group lost it.

    I wore down senior IBM HR to find out why they would not approve the job transfer, and why the other person lost the job they sat in, and finally was told that both jobs were marked for offshoring. There you go. No hope and you really have to dig, but if you do you eventually find out the truth - I'm actually surprised that HR told me that - that the job is being filled already by some cheaper foreigner.

  • Glassdoor IBM reviews. Selected reviews follow:
    • Old fashioned, company still living in 1990” Anonymous Employee (Current Employee). Pros: Working from home most times. Very slow and relaxing. High Salary—if you negotiate well. Not too much competition or pressure as they really don't have a strategy or goal.

      Cons: To start with, they live at least 20 years in the past. They have no idea of recent developments in technology. Highly irritating products like Lotus Notes, Symphony and whatnot. IBM tries to ape any product out there which is famous and used e.g. they have their own version of Google Analytics called 'Tea Leaf'. Nothing wrong with copying, but instead of giving a differentiating factor, these products are highly unusable and cost about 10 times more than the original. A bit mad.

      A lot of brainwashing. So basically they make products that no one is interested in, force employees to use them because no one else will use them, and then brainwash you into thinking it's good just because it's IBM made. In addition, you are expected to think greatly of IBM employees just because they are part of IBM (some people here are really really skill-less).

      The worst thing I found here is the amount of monthly lay-offs. Anyone on bench even for a short while is laid off. Projects think they do you a favor by employing you from bench even if you are overqualified. Weird.

      IBM is a slowly dying organism because of its ancient technology and attitude. It is a bit difficult to be part of this organism and not feel like you are dying with it in your career. I am trying to get out, but don't want to make another rash decision like IBM.

      Advice to Senior Management: Serious changes needed to the management layer like in Gerstner's time. We really need something extremely drastic, else this slowly dying stinking organism may not ever have a chance. I wish there was some way to know the exact extent of this before joining.

      I don't think the CEO is actively leading this company. We hardly ever hear from her. No messages, nothing.

      No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.

    • Most focused IT solution provider on the planet, but very demanding” Senior Solution Architect (Current Employee), Poughkeepsie, NY. I have been working at IBM full-time for more than 10 years. Pros: Incredibly broad solution portfolio. Company capable to do any project, any size, anywhere. There is a suitable job for everybody. International job opportunities. Staff empowered to be creative and innovative. Cons: Too many executives and far too many "program management" roles. Management out of touch with client needs and only managing on metrics. Education hard to get because of expense controls. It is more about who you are than about what you know and what your capabilities are; almost like a TV show. Advice to Senior Management: Managers should actually manage. Reduce the number of execs. Better mechanisms to reward the really good people and shake out the folks who only worry about their personal ego and wallet. Yes, I would recommend this company to a friend.
    • unstable, low morale” ASIC Engineer (Former Employee), Austin, TX. I worked at IBM full-time for more than 8 years. Pros: Coworkers are friendly. People are very nice. Cons: Upper management too greedy and only trying to profit themselves. Advice to Senior Management: Upper management should treat employees like people. Compensate good employees to retain talent. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Self promotion valued more than contribution to project” Anonymous Employee (Former Employee), Littleton, MA. I worked at IBM full-time for more than a year. Pros: Flexible work schedule. Online training and resources readily available. Cons: Very bureaucratic and legalistic. Unrealistic schedules with too few resources. High stress, long hours. It's all about how well you promote yourself to management, not how well you do your work. Advice to Senior Management: Shave off the layers; departments are too top heavy and out of touch with workers and workloads. No, I would not recommend this company to a friend.
    • Overworked and under appreciated” Anonymous Employee (Former Employee). Pros: Experience learned during the time there. Cons: No life. Treated like a robot and not a person. Advice to Senior Management: See people as people. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • IBM Germany has lost the ability to motivate and keep top talents” Director, Service Delivery (Former Employee), Eschborn (Germany). I worked at IBM full-time for more than 10 years. Pros: Highly professional people; well structured; extremely valuable brand, highly regarded and recognized. Cons: Hence the business results are not coming in as expected the company has turned into a "spreadsheets driven restructuring program" where it is better to lose top talents than keeping them (as the reduction target is all what counts). Advice to Senior Management: Stop the downsizing and get back to a clear future of growth. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Should focus on be more agile” Project Manager (Current Employee), San Jose, (Costa Rica). I have been working at IBM full-time for less than a year. Pros: Reputation and brand name. It looks nice on your resume. Cons: Bad communication from management. Important things happening in the company are not well communicated by management; Is not clear how to grow in your career. Advice to Senior Management: Should improve communication and open door policy. Yes, I would recommend this company to a friend.
    • Work with the smartest company with the smartest people.” Associate Partner (Current Employee), New Brunswick, NJ. I have been working at IBM full-time for more than 3 years. Pros: IBM is not an easy place to work but I'm not looking for that and if you are then it's not for you. It's hard work, everyday. Challenging. Big company clients with big real world problems. If you want a challenge, want to work with some of the brightest minds, and shape the future of business then IBM is right for you. Cons: Its not easy to get promoted from within. Having done it myself though I can say it's at least possible. Advice to Senior Management: Change the balance towards promoting from within those with the skills clients need most. Accelerate promotions as needed to retain the best talent. Yes, I would recommend this company to a friend. I'm optimistic about the outlook for this company.
    • Not the 'People-oriented' company it once was” Anonymous Employee (Current Employee). I have been working at IBM. Pros: There are still a lot of good people there. Cons: Their management style has become much less strategic in nature and much more geared to short-term stock results than long-term objectives. Advice to Senior Management: Quit worrying about your stock options and take better care of your people. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • My experience with IBM was disappointing” Resource Deployment Manager (Former Employee), Chicago, IL. I worked at IBM full-time for more than 10 years. Pros: Brilliant minds. Dedicated employees. Several positions allow home based offices. Cons: No raise for 10 years. No chance for advancement. Direct management and second level management had little power. Zero budget for training or even work related expenses. Advice to Senior Management: My advice isn't for upper management, because frankly they do not care. My advice is for the college graduate. Do not look to IBM for a career. Give them 2-5 years to build your resume then get out. Do not give them your loyalty, personal life or dedication. Do the best job you can do while you are there, learn everything you can, then go find a company that appreciates employees and balances that with 'needs of the business'. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • IBM job status has been declining over the years” Project Manager (Current Employee). I have been working at IBM full-time for more than 10 years. Pros: Recognition of ever working at IBM, however your training/experience will be very limited to a specific skill. They offer no general skills training, unless you're willing to take on-line courses on your own time (not paid).

      Cons: There is limited/no opportunity to learn new skills and transfer within the company. 'Resource Actions' (RA/Layoffs ) are all too often to my liking. For new hires that are expecting to retire at IBM...that is not happening anymore. I was told "you're too old for IBM to invest new SAP skills in; customers wouldn't be willing to pay your elementary skills/experience level afterwards." Management levels at IBM are currently too top heavy. More manager levels in GBS Group than needed. AMS Group are clueless in outsourcing, losing proposition. SWG isn't pricing their Services attractively. Hardware is facing lots of competition. The recent company profits have been earned only through high priced Services contracts and patents.

      Advice to Senior Management: Involve current employees more, by inviting/paying for on-site meetings, exchange of ideas, etc. Currently, there are too many on-line discussions and conference calls where participants voices are never really heard or acted upon. The entire "wholesome of IBM" has been lost over the decades by IBM Management and lost the sight due to meeting the next analysts' earnings expectations. IBM is too focused on growing the Top 100 S&P clients and forget everyone else. Too much IBM attention has been focused getting US customers services from overseas. These overseas employees do not have the same ambition and drive as US based employees, hence the service delivery is often delayed and judged poor because of the country ethics and employee availability.

      No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.

    • Great Boss...Huge Travel” Anonymous Employee (Former Employee). I worked at IBM for more than 7 years. Pros: I had a great boss. In the huge company craziness, he was always willing to support and guide me. Cons: Make friends at the airline, hotel, and rental car. You will see them often. I had a colleague that put all his personal items in storage and did not own a car or rent a house...it was the 100% traveler, literally.
    • Once a great place, now struggling and cutting North America-based jobs” Anonymous Employee (Former Employee). I worked at IBM full-time for more than 10 years. Pros: The best thing about IBM are the employees. IBMers are some of the brightest, most innovative, and hardest working people I've ever had the pleasure of working with. Salaries and benefits are some of the best I've seen. Cons: Jobs in the US are becoming few and far between and opportunities for advancement are shrinking. Talent and experience are being lost at an alarming rate through layoffs and people leaving the company. Employee morale is at an all time low. Hours are long, resources are few, work/life balance is poor, and there's no confidence in job security. Management is inconsistent—brilliant in spots, embarrassingly clueless in others. Advice to Senior Management: There's a real question out there as to who is driving the bus at IBM these days. Lots of confusion over strategy and direction. Management needs to step up and start providing that direction. Three pieces of advice: 1) Communicate to your employees and let them know what's going on (not the IBM way of doing things I know but it's the right thing to do). 2) Do a better job of working for your clients -- they deserve better than what they're getting from IBM. 3) It would be nice to see a company headquartered in North America actually have some jobs there. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • All Hail Big Brother IBM!” Field Services Representative (Former Employee), Syracuse, NY. I worked at IBM full-time for less than a year. Pros: This is a name brand Global Worldwide Recognition Company.

      Cons: A vastly over-rated, outdated & antiquated, gigantic behemoth of a company that can't adapt to change very easily and uses employee application software, hardware, and documentation from the 1980's era which is more difficult to use than the actual job you're doing.

      Their insulated company culture is full of employees who are used to being told how to think and not to question authority and uses excessive inside company jargon "newspeak" and recursive acronyms automatically assuming that you know what they're talking about without defining what they mean and most of their own employees don't even know what they mean.

      After you experience the friendly New Hire Employee Orientation Phase the first week and then begin the tortuous Employee Training phase the 2nd week where the "trainers" teach in a very egocentric narrow-minded manner, you're subjected to being treated like a child who shouldn't talk back to their parents in a military boot camp atmosphere that uses fear and intimidation as motivational techniques like you're a child back in grammar school. After I one day apparently asked too many questions in a training seminar I was taken to a private room by two of the trainers who asked me for feedback about how I thought that I was doing. At the end, one of the trainers menacingly said to me, "I'm watching you!". If you offer suggestions to them, their attitude is, "Why talk about things like that because IBM is never go to change anyway!"

      You even sometimes attend "Lunch & Learn" classroom training where you can't even take a real lunch break away from the training; but must endure stomach indigestion during your training session lunch breaks. Even though they say that they openly solicit questions and comments during the Training Phase I don't recommend speaking up too much to them otherwise you will let them know that you have an open mind and can actually think for yourself and aren't going to blindly swallow their company business culture.

      I was hired by IBM to be a Field Services Representative by an IBM Service Delivery Manager and began work on April 22, 2013 and rushed out too fast to their Training Class in Boulder, Colorado after only 1 week where most of the other trainees have already been out in the field for over 1 month or more. After arriving at the Hyatt House in Boulder, Colorado, I couldn't even access the WiFi Access Point or the IBM Intranet with their company supplied IBM ThinkPad, even though I could access the WiFi Access Point with my own Dell Notebook computer.

      I called the IBM Help Desk and the Hyatt House Help Desk and neither one could figure out why or help me. When I mentioned this to my trainers, they didn't help me either; but they told me that I was supposed to "take ownership of the problem". I finally figured out how to access the IBM Intranet from the Hyatt House Hotel in Boulder, Colorado after 3 days; but I was already too far behind the rest of the other trainees and didn't even pass the first test that was administered after 1 week.

      One of the conditions for qualifying for this job was to relocate from where I was previously living in Binghamton, New York to Syracuse, New York. I agreed to do this and I asked my manager if I could be compensated for my moving expenses, but he replied no. I moved into my Syracuse, New York apartment located at High Acres Apartments and Townhouses after signing a 1 year lease paying $965/month on Saturday, May 26, 2013, to Memorial Day, Monday, May 28, 2013, with my manager's approval. On June 7, 2013, my manager informed me that he was terminating my employment with IBM because he didn't think that I would fit into the "IBM Business Culture".

      I informed my landlord's leasing office immediately; but they told me I wasn't able to break the 1 year lease unless I moved out immediately. I asked my former landlord at High Acres Apartments in Binghamton, New York if I could move back to my former apartment; but they said that I couldn't because I was now unemployed. Now I'm obligated to pay High Acres Apartments & Townhouses in Syracuse, New York 12 months x $965/month = $11,580. I am only receiving $268/week from the US Department of Labor EUC (Emergency Unemployment Compensation) Program.

      Is that a nice way to treat new employees right after attending their New Employee IBM Orientation and Training? Now I know why Bill Gates once turned down a job working at IBM in Endicott, New York. IBM abandoned the city that put them on the global map too, so that should tell you what your hard work for this company will get you - a "pink slip. So my advice is, "Run Away!" as fast as you can! IBM. UBM. We all BM for IBM!

      Advice to Senior Management: IBM's motto is supposed to be "THINK"; but if you do express your real true thoughts out too loud then you're fired, so my advice is to keep your thoughts to yourself.

      No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.

    • IBM India , Security & Privacy Division” Consultant (Current Employee) Bangalore (India). I have been working at IBM full-time for more than 3 years. Pros: Flexible working hours, work from home facility. Better prospectus if you join in Bangalore. Cons: Stagnancy from profile prospective, mostly your profile will get ruined. No financial growth or career growth. Market adjustment is not done. Variable pay is almost nil. Advice to Senior Management: Please ensure that policies in India are at par with market standard. Please ensure that the candidate is paid as per market standard while hiring. Yes, I would recommend this company to a friend. I'm optimistic about the outlook for this company.
    • Boring place to work” Technical Solution Architect (Current Employee), Costa Mesa, CA. I have been working at IBM full-time for more than 8 years. Pros: IBM has great benefits - full medical, vision, and dental. They also match up to 6% on 401K contributions. There are no company's for wellness visits. Cons: The morale of the employees is very low. One bad quarter ends up resulting in layoffs. There is no training for employees and almost no career development. Advice to Senior Management: As part of their normal work, technical employees tend to analyze things and look beyond face value. These types of employees need more than an empty pep talk to feel as though they are valued and a part of a team. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • One of the best companies to work for worldwide” Senior Consultant (Current Employee), Calcutta (India). I have been working at IBM full-time for more than 3 years Pros: One of the best work culture, looks after employee welfare. India does not necessarily get the best part of the projects. Cons: Currently it is losing out on projects. Still going strong in the US. Advice to Senior Management: Please focus on winning new projects. Yes, I would recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Mixed Bag” Advisory Engineer (Former Employee), Burlington, VT. I worked at IBM full-time for more than 10 years. Pros: Very flexible work life balance, good vacation benefits and health benefits. Cons: Management is stingy with raises, continuously tries to reduce benefits for longtime employees. Constant fear of layoffs. Advice to Senior Management: PBC system is terrible, subjective and relative reviews based on arbitrary goals. Should be objectively based. Don't make employees sign business conduct guidelines you do not follow yourselves. Not sold on the company's long term strategy (eschewing hardware in favor of services/software, barrier of entry into the other fields is low and others do it much better), cannibalizing the stock for the sake of earnings per share seems stupid as well. No, I would not recommend this company to a friend.
    • Exhausting culture coupled with regular cutbacks and reductions” Anonymous Employee (Former Employee), Armonk, NY. I worked at IBM full-time for more than 8 years. Pros: - Historic company—felt a genuine surge of pride the first time I received a badge. - Very smart, very driven people throughout org. - Excellent online internal resources. Cons: - Layoffs, layoffs, layoffs—feeling of "who's next?" is pervasive throughout organization. - Lack of trust in leadership. - Shortage of managerial courage. If something doesn't go as planned, enjoy the show as "leaders" scurry out of the way and try to assess blame. They preach work-life balance, family first, the importance of self-development, etc. ... but these are given extremely low priority when it comes to day-to-day. Performance appraisal and compensation programs are absolute embarrassments. Unless you're a 'superstar' or know someone, it is not unusual to go years (literally) without an increase. Advice to Senior Management: Your front-line managers need to be monitored better. The culture they are setting is appalling. No, I would not recommend this company to a friend.
    • Learn, grow, leave” Marketing (Former Employee). I worked at IBM full-time for more than 10 years. Pros: - Competitive pay and benefits; - Training available for select roles (e.g. technical/billable positions); - Strong corporate support of employee volunteerism and community-based charities. Cons: - Limited support of internal processes, systems and tools, sometimes resulting in frustrating, antiquated and inefficient processes/procedures; - Aggressive focus on cost/expense reductions in recent years, including significant off-shoring of North American/Western European/Australian positions. Advice to Senior Management: Reintroduce respect for the individual into corporate culture. Reposition corporate direction so that, in he future, the focus is on all business results, not just EPS. Yes, I would recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Awful” Software Enablement (Current Employee). I have been working at IBM full-time for more than 10 years. Pros: Some of the people; flexibility to work at home. Cons: Massive layers of management, incredibly dense politics, no concern for customers/product users. Advice to Senior Management: Get rid of at least three layers of upper management. For my team of eight, there are ten layers of management. So there are more managers than workers. How is that necessary? Change the employee rating system. Develop products that work and that people like. Stop looking at short-term profit which you make by cost-cutting and not by truly delighting your customers. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Remember you are just a number in IBM” Architect (Former Employee). Sydney (Australia). I worked at IBM full-time for more than 8 years. Pros: Work from home and flexibility. Cons: You are just a number and can be made redundant at any time. Hence no career planning, and managers do not even conduct KPI reviews. So you are pretty much on your own. It is shareholder driven and employee welfare is their least concern. Advice to Senior Management: Think about your employees first and look at where you rate on the Glassdoor index. No, I would not recommend this company to a friend.
    • Some of the management are clueless.” Service Planner (Former Employee) Atlanta, GA. I worked at IBM full-time for more than 10 years. Pros: Great pay, very good work/life balance. The opportunity to work from home. Cons: They lay off too often. Advice to Senior Management: Before you start cutting the work force, take a good look at management first. There were 5 layers of management before you got to Ginni. My manager was clueless, because I worked remote; he basically forgot that I was part of the team, did not include me in memos. and during team meetings never asked if I had anything to talk about. No, I would not recommend this company to a friend.
    • A once great company, now a shell of its former self.” Anonymous Employee (Current Employee). I have been working at IBM full-time for more than 10 years. Pros: Great coworkers. Knowledgeable people in the trenches. Benefits are not what they once were, but still good relative to many others. Cons: Too many layers of management. The higher up they are, the more out of touch with reality they are. The end of year ranking system pits one employee against another and is just pitiful. It also needs a complete overhaul. Advice to Senior Management: Bring someone in from outside to purge the executive ranks. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Good on resume, dismal future in USA” Business Analyst (Current Employee). Pros: Strong starting salary. Immediate co-workers are supportive, good people. Positive work-life balance. Cons: Zero job security. Benefits can be reduced or taken away at any time. Minimal opportunity for salary growth. Untrustworthy and secretive upper management in Armonk. Advice to Senior Management: You cannot cut your way to growth forever. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Fantastic Learning Opportunity,Brand Name,Worst Appraisals” Systems Engineer (Current Employee). I have been working at IBM full-time for more than 3 years. Pros: Awesome learning experience; good technical people around. Work--life balance. Work from home facility. Cons: Compensation and appraisal, people management onsite (less for Microsoft technologies). Advice to Senior Management: Please treat all the IBMers equally. Yes, I would recommend this company to a friend.
    • Culture driven by lawyers and accountants.” Software Developer (Former Employee). I worked at IBM full-time for more than 7 years. Pros: IBM Research would be a cool place to work. Financially stable. Managers were very accommodating about family life. Cons: Software group is a very patriarchal organization. There is no willingness to consider different opinions, consequently IBM has a very low revenue per developer because they can not change or adapt. IBM has almost no interest in developer productivity and believes that if just imposes enough process on your work, then everything will work out. Your manager is likely to be a "Yes Man" or a ladder climber as these are generally the people who succeed best in this work atmosphere. Advice to Senior Management: Ginny, if you really want to have an employee centric culture the way you say you do, you will need to fire senior leaders who are abusive to their staff. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company
    • Good, getting worse” Anonymous Employee (Former Employee). I worked at IBM full-time for more than a year. Pros: multinational; different cultures accepted; 100 euros benefits per month, achievable. Cons: high pressure and managers are not so good now and getting worse from what I've heard. Advice to Senior Management: Control your ways, people are to be treated well. If you want better results, offer quality jobs. €500 for what in Lisbon are paid in the store more than €1000. Yes, I would recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Big Company, Huge Company Politics” Software Engineer (Current Employee), San Jose, CA. I have been working at IBM full-time for more than 8 years. Pros: Just about anything you want to work on, you can do here. Access to some of the best technology on the planet. Some of the very best minds in the business here. Cons: Big company mean huge company politics. It appears that it is not what you know sometimes, but who you know. Some awesome people managers here, but then there are those engineers who became managers, but do not know how to herd the cats. Want loyalty from the employees, but do not give that loyalty back. Had a recent layoff where they fired people who had over 25 years invested in this company. Advice to Senior Management: To the upper management, Ginni, please come out of your ivory castle in Armonk once in awhile and visit some of us on the west coast of the US. We would love to have a Q&A session. Yes, I would recommend this company to a friend. I'm not optimistic about the outlook for this company.
  • Glassdoor IBM Canada reviews. Selected reviews follow:
    • Good company” Managing Consultant (Current Employee), Montreal, QC. I have been working at IBM Canada full-time for more than 7 years. Pros: Exposure to big clients, work from home, access to IBM discounts: insurance, computers, etc., name on the market and your resume. Cons: No payment for extra hours, no recognition for good work, management seems to be always distant, very complicated to grow internally, the salary increases are just a few %, new hires can earn more than people that have many years in the company. Advice to Senior Management: Management should be closer to people and develop leadership. Change the evaluation process; it doesn't promote performance. Yes, I would recommend this company to a friend.
    • Below average” Software Engineer (Current Employee), Markham, ON. I have been working at IBM Canada full-time for more than 10 years. Pros: Some areas have great people to work with. Location is very good for commuting. Some facilities in the building/area are good. Cons: Useless, time-consuming and nonsense processes that keep getting worse. Salary is mediocre too. Cafeteria may be among the worst I have ever seen. Advice to Senior Management: Look after your employees, pay them better instead of crying "poverty". Bring back decent bonuses, not the insult you are paying now. Stop the nonsense and make things more efficient. No, I would not recommend this company to a friend.
  • Huffington Post: The Agony And Ecstasy Of Tech's 20-Something Army. By Bianca Bosker. Excerpts: Courtney Boyd Myers, 28, thought she’d found her dream job when she joined a thriving education startup in London staffed predominantly by people her age or younger.

    Her youthful co-workers were extremely web-savvy. They weren't yet distracted by children or spouses, making them tirelessly hardworking. Her colleagues were also her friends, and nights at the office would often seamlessly transition into nights on the town.

    But since leaving her job in April to start her own company, Myers has been collaborating with a slightly older group of founders, an experience that’s prompted her to reflect on the potential pitfalls of having so many major technology companies dominated by young people.

    She and her peers would waste time trying to figure out problems someone with more experience would have been able to address quickly. Their round-the-clock work schedule made burn-out inevitable. And their shared age had given them a limited view on the world, narrowing how they approached their work.

    “Having a team or company that has a diverse group of ages makes for a more inspiring and creative place to work than if there’s just a bunch of millennials all hacking away at things,” said Myers, who founded Audience.io, an audience development firm based in New York and London. “We have a lot of stupid apps out there that are all about finding next best restaurant -- products geared toward 20-somethings -- and I think we’re missing out on products that the rest of the world can use.”

    The 20-somethings populating the ranks of top tech companies and aspiring startups have been praised by managers as some of the most enthusiastic and driven employees in the labor pool. They’re obsessed with career advancement, immersed in the Internet and don’t yet have families pulling them away from the office. Because they’re still only starting out in their careers, they’re also usually cheaper to hire.

    Yet people have given considerably less airtime to the risks that emerge when these young workers are disproportionately represented in a company’s talent pool. The lack of experience that makes them well-suited to seizing on new approaches is also causing some young firms to repeat errors that led to the dot-com crash, experts warn.

  • Washington Post: Are hedge funds really for suckers? Yeah, kinda. By Neil Irwin. Excerpts: I’m starting a hedge fund. Here’s the plan.

    You give me your money. Every year I will take this money to Las Vegas at the beginning of football season and bet that some pretty good team will NOT win the Super Bowl. The Seattle Seahawks currently face 7-1 odds, and I don’t really like the color of their jerseys, so I’ll bet against them this year. Assuming Seattle does not win the Super Bowl, I should turn every $7 of my investors’ money into $8, a whopping 14 percent return!

    Even better, my ability to achieve that return is not affected a whit by whether the stock market rose or fell that year. In the world of investing, a “non-correlating” asset like my hedge fund is particularly desirable. You want things that zig when the rest of the markets zag, or at least where the zigs and zags happen randomly.

    Now, of course, I require adequate compensation for my hard labor. Suppose you and my other investors gave me $1 billion to “invest.” I think I’ll take 2 percent of that off the top, you know, $20 million in walking around money. Then I’ll take 20 percent of the profits I generate, another $28 million in this case. So I’m paying myself a handy $48 million a year before expenses for “managing” my investors’ money. And suddenly your 14 percent return is actually more like 9 percent. Sorry! Gotta pay the bills. Do you know what a Gulfstream jet and a house in the Hamptons cost these days?

    But still, a 9 percent return! Non-correlating! Assuming the Seahawks don’t win the Super Bowl, you might be so happy that you give me even more money next year. My fund, which I’m calling Strategic Capital Asset Management, looks like a great deal.

    Now, as a savvy investor, you may see the problem. It may look like I’m giving you a 9 percent non-correlating return, but SCAM, is, well, just that. It’s not a return I’m delivering thanks to some real skill, but through luck. I may well go many years in a row generating a nice return, but eventually the fund will blow up and you will lose all your money. Of course, by the time that happens, I may well have recorded hundreds of millions of dollars in fee income which, if I’m smart, I’ve stashed in a diversified set of investments.

  • Alliance for Retired Americans Friday Alert. This week's headlines:
    • Why Summertime Heat is Especially Dangerous for Seniors
    • Alliance Members Tell Their Stories of High Drug, Health Care Costs
    • Democratic Senate Majority Hinges on a Few 2014 Races as First Forecasts Come in
    • Social Security Begins to Accept Same-Sex Marriage Claims
    • Contest Backfires on Social Security Privatizer
    • Alliance Thanks Outgoing Senior Legislative Representative Sarah Byrne
New on the Alliance@IBM Site
  • Job cuts have begun. So Far in North America:
    • BT/IT CIO Enterprise Transformation: 4
    • Corporate Marketing and Communication: 83
    • GBS AMS Commercial Delivery: 27
    • GBS AMS IBM Global Account: 123
    • GBS CS Financial Services Sector: 14
    • GBS CS Industrial Sector: 32
    • GBS PS Business Analytics: 39
    • GPS Solutions and Delivery: 116
    • IBM S&D Communications Sector: 3
    • ISC Engineering: 75
    • ISC Sales Transaction Support OIST: 70
    • Research: 65
    • S&D Global Techline and Channel Technical Sales: 9
    • SO Delivery HQ Cloud Development and Delivery: 40
    • SO Delivery Integrated Competencies: 46
    • SO sectors (GSSR): 31
    • Software Group Collaboration: 115
    • Software Group East Region Sales: 40
    • Software Group Industry Solutions: 126
    • Software Group Information Management: 137
    • Software Group Marketing: 222
    • Software Group NA Software Sales: 63
    • Software Group Rational: 59
    • Software Group Security: 22
    • Software Group Tivoli: 98
    • Software Group WW Services and Education: 22
    • STG Advanced Microelectronics Solutions: 114
    • STG Burlington Semiconductor MFG and Development: 93
    • STG Burlington Site Operations: 8
    • STG Cloud Systems SW Development: 70
    • STG Competitive Lab and Technical Sales Centers: 35
    • STG Electronic Design Automation: 106
    • STG High Speed links, Cores and Memory: 67
    • STG IBM I Development: 60
    • STG ISV Global Support: 35
    • STG Lab Services and Tech Training: 52
    • STG Operations and Transformation: 34
    • STG Power Software Development: 64
    • STG Pureflex & System X Software Development: 32
    • STG Semiconductor Research and Dev: 165
    • STG Server & Storage Engineering System Test: 97
    • STG SSE Intellectual Property: 64
    • STG Storage (ISSA): 41
    • STG Storage Systems Development: 121
    • STG Strategic Initiatives: 8
    • STG System Z Software Development: 45
    • STG Systems Solutions Dev: 56
    • STG Systems Technology Development: 24
    • STG Test Site Design: 59
    • STG Worldwide Client Care: 30
    • STG WW STG Tech Support: 65
    • SWG Application and Integration Middleware: 86
    • Total cut so far: 3312
  • From the Alliance: Since June 12th, over 3000 US and Canada IBM employees were notified that they were no longer needed. The job cuts report section is filled with comments about locations, business units and number of co-workers who have been RA'd and how this is damaging the company.

    There is also a fair amount of anger directed towards CEO Rometty and other executives. Why? Because since the resource action began none of the IBM executives have sent out messages of regret or explanation to workers terminated in their divisions.

    Whether it is a new hire or someone with long service, these workers deserve a response. These workers deserve respect. One worker put it this way:

    "Where are all those executives that celebrate our product releases? Now when the situation is less convenient they run away and hide. No comments, no statements. No communication with the infantry. Enough low level folks left to remove the collateral damage where as Queen Ginny and Grandpa Sam are in their palace and eat caviar for $10 million each day. IBM promoted great leadership in the last decades. The senior leadership team obviously did not attend these leadership classes. Instead they attended the class 'how to become a perfect coward'."

    We couldn't agree more. The leadership only cares about money. In the drive to reach the goals of Roadmap/Roadkill 2015 CEO Rometty has neglected and disrespected IBM's greatest asset--its employees.

    There is a growing employee "vote of no confidence" in the running of the Company by CEO Rometty. Some say Rometty should be fired.

    We are at a crossroads. Do we allow CEO Rometty and others to continue abusing employees or do we fight back. It is your choice. The Alliance@IBM team -Alliance-

  • Job Cut Reports
    • Comment 07/15/13: I just left after 14 years in SWG Marketing. I made a lot of friends, had great managers and am quite sad to have been pushed out the door. But I do not regret my time with IBM at all, I will always be proud to have worked here. Just sorry the employees who make the company work are now completely expendable -Anonymous-
    • Comment 07/15/13: I was an employee for 10+ years starting in GBS then STG and later corp strategy and S&D. Traveling around the world on bus dev. IBM is one of most top heavy orgs I've seen. So much waste at the top. I estimate that 1/2 of VPs are just sucking oxygen and add no real value. It's too bad such a great company has become insular AGAIN...wasn't that the learning from Gerstner?!?! I left a few months ago on my own just because I couldn't take the false promises that we try to dupe our clients with over and over. -Anonymous-
    • Comment 07/16/13: Disbeliever - I received a PBC 3 this year, after multiple years of 2+ reviews, plus being a part of the CSC program. In my case it was because I kept arguing with my second line who expected me to lie to our internal customer...but they don't like to call it lying, they like to say that you need to give a "less negative answer". BTW, was not part of the last RA, and have been actively and openly looking since the 2012 RA's. I am an "associate" member here. -India Business Machines-
    • Comment 07/16/13: Just resigned from IBM on my own doing. Have had enough of the place. Only worked there for just over two years as a recent graduate in my early 20's. We were promised a career, and all we got was a RA. How the heck can a company treat its employees like dirt? Moving onto better money and outlook in a firm that is actually investing in local talent. Got so tired of the constant fear of RA, the silence and the lies from management in all shapes and forms. Not good when you first start your career. All the others my age (that are still left) feel the same. The company's backbone is fast being eroded thanks to Madame Ginni and her minions. Soon there won't be a company, and the place will go down like a sinking ship. -Onwards and Upwards-
    • Comment 07/16/13: Round 2 of resource actions scheduled for mid October. straws are being picked now.
    • Comment 07/16/13: Don't forget to file for TAA benefits if you job was moved offshore. See front page for info. -Anon-
    • Comment 07/16/13: Are any of you ex-PwC? I was not given my full 26 weeks (based on my service reference date). I was told there was an agreement between IBM and PwC that they would honor the service reference date and not the acquisition date. But I only got 22 weeks. -Jen-
    • Comment 07/16/13: To Will there be another RA. No, My first line told be that this was a one time thing. Of course that was in 1993! Get real! There will be more. Just wait until the separation package changes. -biker1mike-
    • Comment 07/17/13: Left IBM after 14 years. Channel is going down hill fast. Partners are not happy with changes. Watch out for drop in revenue going forward. Not this year but in the years to come. You can not grow business partners by ignoring the smaller ones! -Big Dog-
    • Comment 07/17/13: Has the situation for IBM US workers gotten any better over the last decade? I hope everyone reading this is thinking "NO." Cost of healthcare premiums going up, little to no pay increases, little to no bonuses, 401(k) match taken away if not employed at end of year, constant daily fear of losing your job, stress levels sky-high, poor morale, constant "resource adjustments", increased hours and inability for many to take earned time off. Just to name a few. Do you think the situation will get better over the next 10 years? How about by 2016..."you know, IBM must turn the tide after Roadkill 2015 completes. It'll get better by then, I just know that it will." Why won't you wake up and join the union! Just give it a try. I'm not guaranteeing it will get better under a union but it can't get much worse, and from what I see, it can only get better by voting in a union. -Dave-
    • Send the RA pack to ibmunionalliance@gmail.com so we can validate and count the number of workers fired. Names are confidential.
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
Minimize
  • The Fiscal Times: Making a Mint on Medicare: Private Businesses? By Neesa Sweet. Excerpts: The real beneficiaries of Medicare “entitlement,” say the authors of a recently released book, are the private companies that rely on the $600 billion that Medicare spends each year: the drug companies, device manufacturers, hospitals, doctors, investment banks, hedge funds, private equity firms and others who pile up billions of dollars of unnecessary spending as they serve the needs of the Medicare population.

    Medicare Meltdown (Rowman & Littlefield 2013), by Rosemary Gibson and Janardan Prasad Singh is the latest in their series of volumes about health care in America. By reframing the debate, and calling for a change in the conversation, Gibson and Singh hope to create enough public outcry to reform Medicare and protect beneficiaries at the same time. ...

    Gibson and Singh note that Medicare providers have done a great deal of good by bringing products and services to older adults and all Americans. Their concern is the manifestation of the excess, in particular payments made to hospitals, that is contributing to Medicare becoming unsustainable financially.

    “The nexus between business and elected officials is at the heart of the excessive, wasteful spending,” Gibson told The Medicare NewsGroup in a recent interview. “The open ended fee for service system was agreed to by LBJ (President Lyndon Baines Johnson) who had to agree to industry demands if hospitals and doctors were to participate. “ ...

    The waste from Medicare, as they also illustrate, is frightening. Pointing to a calculation by The Institute of Medicine of the National Academy of Sciences released in 2012, they note that 30 percent of health care dollars in the U.S. are wasted. That’s $170 billion, more than the economy of New Zealand, which applies to Medicare. Instead of helping seniors, that money goes to excessive pricing and overuse of unnecessary services. And, they imply, much of this waste, while not fraudulent, is also not accidental.

    For example:

    • Hospital executives are paid, not to be good stewards of Medicare resources or even primarily to take good care of patients, but to maximize revenue. They illustrate how building excess capacity leads to unnecessary and even harmful treatment.
    • When Medicare tried to crack down on improper payments, cardiologists, Wall Street, the AMA and the AHA pushed back, causing Medicare to delay its review.
    • Congress hamstrings Medicare officials by preventing them from paying the lowest cost for drugs under Medicare Part B.
    • The Obama administration created a loophole in the Medicare Advantage (MA) bonus program to reward less than stellar performers, thus making up some of the revenue MA plans might lose under the Affordable Care Act (ACA).
    • Congress and drug companies have worked together to make sure higher doses of dialysis drugs are approved by Medicare, even when those doses might be harmful to patients.
    • “Fast-tracking” of medical devices such as artificial joints or brain stents, in response to Wall Street pressure, can lead to higher payouts and patient harm.
  • New York Times: Health Plan Cost for New Yorkers Set to Fall 50%. By Roni Caryn Rabin and Reed Abelson. Excerpts: Individuals buying health insurance on their own will see their premiums tumble next year in New York State as changes under the federal health care law take effect, Gov. Andrew M. Cuomo announced on Wednesday.

    State insurance regulators say they have approved rates for 2014 that are at least 50 percent lower on average than those currently available in New York. Beginning in October, individuals in New York City who now pay $1,000 a month or more for coverage will be able to shop for health insurance for as little as $308 monthly. With federal subsidies, the cost will be even lower.

    Supporters of the new health care law, the Affordable Care Act, credited the drop in rates to the online purchasing exchanges the law created, which they say are spurring competition among insurers that are anticipating an influx of new customers. The law requires that an exchange be started in every state. ...

    The new premium rates do not affect a majority of New Yorkers, who receive insurance through their employers, only those who must purchase it on their own. Because the cost of individual coverage has soared, only 17,000 New Yorkers currently buy insurance on their own. About 2.6 million are uninsured in New York State. ...

    The plans to be offered on the exchanges all meet certain basic requirements, as laid out in the law, but are in four categories from most generous to least: platinum, gold, silver and bronze. An individual with annual income of $17,000 will pay about $55 a month for a silver plan, state regulators said. A person with a $20,000 income will pay about $85 a month for a silver plan, while someone earning $25,000 will pay about $145 a month for a silver plan.

  • The Buffalo News: Wegmans cuts health benefits for part-time workers. By Samantha Maziarz Christmann. Excerpts: Et tu, Wegmans? The Rochester-based grocer that has been continually lauded for providing health insurance to its part-time workers will no longer offer that benefit.

    Until recently, the company voluntarily offered health insurance to employees who worked 20 hours per week or more. Companies are required by law to offer health insurance only to full-time employees who work 30 hours or more per week.

    • Physicians for a National Health Program: Comment. By Don McCanne, M.D. Excerpts: The best coverage for part-time workers? Well, for part-time workers and for everyone else, it would be a single payer national health program. But we don't have that. So, before we can enact an improved Medicare for everyone, what would be the best way to cover part-time workers under the Affordable Care Act?

      During the reform process, the plight of the part-time worker remained an important consideration in trying to design a near-universal system (which it didn't turn out to be). Part-time workers tend to have very low wages making it impossible to purchase decent insurance on their own, and yet their family incomes are often just barely high enough that they do not qualify for Medicaid.

      Congress decided to continue to rely heavily on employer-sponsored health plans for coverage. The problem with part-time workers is that most employers either provided them with no coverage at all, or, if they did, the coverage was often so spartan that it was almost worthless. Although it was decided to require all but the smallest employers to provide employee coverage or face financial penalties, legislators yielded to larger employers who wanted part-time employees to be exempt. The threshold qualifying as part-time was set at 30 hours.

      But look at the opportunity they have with the 30 hour threshold. They no longer have to feel guilty about providing only worthless plans or no plans at all. Under the Affordable Care Act, the government is going to provide part-time employees subsidies inversely related to income, supposedly allowing these people to buy more comprehensive coverage through the exchanges. Employers can walk away, and these employees will get a better deal from the government. ...

      So these employers will be relieved of their responsibility of paying for health care coverage for their part-time employees, and the taxpayers will pick up the tab. Although there are important reasons for bringing an end to employer-sponsored coverage, it is unfair to give these employers special breaks, especially when considering that several members of the Walton family are near the top of the billionaires list. We should pay more taxes so that they can collect more billions?

      No. This "win-win," wherein "the employee gets subsidized coverage, and the employer gets to lower costs," is a loser for health care equity and justice. As said at the start, we need a single payer national health program.

  • New York Times: Glaxo Used Travel Firms for Bribery, China Says. By David Barboza. Excerpts: Earlier this year, the authorities here began looking into suspicious activity involving a Shanghai travel agency that was rumored to have huge revenue but few bookings.

    What they uncovered, they said Monday, was a conspiracy involving tens of millions of dollars, directed by senior executives at the British drug giant GlaxoSmithKline.

    Investigators said that for years, high-ranking executives at the company’s China operations used travel agencies as money-laundering shops to funnel bribes to doctors, hospitals, medical associations, foundations and government officials.

    The payoffs, investigators said, helped bolster drug sales and allowed GlaxoSmithKline, also known as GSK, to sell its products for higher prices in China.

    At a news conference in Beijing on Monday, the authorities accused senior executives at the company’s China operations of organizing fictitious conferences, overbilling for training sessions and in various other ways filing sham expenses for which the cooperating travel agencies would issue bogus receipts. That enabled the GSK executives to get reimbursed by their company with money they could use for bribes, investigators said, while the travel agencies skimmed off shares of the money for themselves.

    The practice is said to be so common a form of money laundering, and so lucrative for travel agencies, that they would compete for the chance to take part. Sometimes they would induce GSK executives to throw the business their way by offering cash, luxury travel or even by hiring young women to engage in sexual activities — or “sexual bribery” — with GSK managers, Chinese officials said.

  • New York Times: Health Insurance Within Reach. By Roni Caryn Rabin. Excerpts: Ever since Marci Lieber, a part-time social worker in Brooklyn, learned she was pregnant, she and her husband have been scrambling to find health insurance. But insurers consider pregnancy a pre-existing condition, and won’t sell anyone a new policy that covers it.

    That changes on Jan. 1, 2014, when insurers will no longer be permitted to deny coverage of pre-existing conditions — and all Americans will be required to have health insurance under the Affordable Care Act. Ms. Lieber, 37, hopes to purchase a policy through New York State’s new health exchange as early as this October.

    Just in time: the baby is due Jan. 25.

    “I hadn’t paid super close attention to the A.C.A. I didn’t realize it would apply to my life,” Ms. Lieber said. She learned she could purchase a policy through the new exchange from a counselor at Community Health Advocates, a consumer assistance program that helps New Yorkers find health coverage.

    Ms. Lieber isn’t alone. Many Americans still don’t realize the A.C.A. is coming into effect, including 6 out of 10 low-income workers who especially stand to benefit, according to a study by the Kaiser Family Foundation. Many mistakenly believe the law has been overturned and few have any idea how they are to go about purchasing health insurance from the online exchanges being set up in each state — or that the federal government intends to help many of them pay for it. ...

    All health plans offered on a state exchange must provide comprehensive coverage that includes doctors’ visits, lab work, hospital stays, emergency room services, maternity care, prescriptions, mental health services and children’s dental and vision care. Presumably, this means fewer consumers will be stung by minimal coverage and unexpected denials — the fine print of health policies that everyone dreads. ...

    What many consumers don’t realize is that even if you earn well above the minimum wage, you may get help purchasing the policy you want. People who earn up to four times the federal poverty level — roughly $45,960 a year for a single person and $94,200 for a family of four — can receive subsidies to help pay for the new coverage. Those earning 250 percent of the poverty level are eligible for additional cost-sharing subsidies. ...

    Americans who work at minimum wage jobs, earning less than 138 percent of the federal poverty level, which is $15,856 for a household of one and $32,499 for a household of four, will qualify for free government coverage under Medicaid — but only if they live in a state that is expanding its Medicaid program. The Kaiser Family Foundation has a list of what each state is doing on its Web site.

  • Kaiser Health News: Kentucky’s Rush Into Medicaid Managed Care: A Cautionary Tale For Other States. By Jenni Bergal. Excerpts: Kaden Stone loves playing baseball, riding his bike and watching Duck Dynasty on TV at his red-brick ranch-style house in rural south central Kentucky.

    Despite his energy, the tiny boy of eight with a crewcut and missing front tooth can’t eat much, the result of congenital bowel problems that have required dozens of surgeries and procedures. He needs PediaSure, says his mother, who was shocked when Kaden’s Medicaid managed care plan stopped paying last fall for the expensive nutritional drink, saying it was not "medically necessary."

    "We couldn’t believe it, because he had only gained four pounds in a year and the doctor said he had to have it because he wasn’t flourishing," said Angelina Alcott. "He’s only 3 ½ feet tall and 48 pounds."

    Ever since Kentucky rapidly shifted patients from traditional Medicaid to private health plans that manage their care for a set price, problems have been widespread.

    Patients complain of being denied treatment or forced to travel long distances to find a doctor or hospital in their plan’s network. Advocates for the mentally ill argue the care system for them has deteriorated. And hospitals and doctors say health plans have denied or delayed payments.

    Experts warn that what happened in Kentucky should be a cautionary tale for other states that rush to switch large numbers of people in Medicaid, the state-federal program for the poor and disabled, to managed care in hopes of cutting costs and improving quality. Nearly 30 million Americans on Medicaid now belong to a private health plan, as states move away from the traditional program that paid doctors and hospitals for each service they provided.

  • The Urban Institute: It’s No Contest: The ACA’s Employer Mandate Has Far Less Effect on Coverage and Costs Than the Individual Mandate (PDF). Summary: There will be a one-year delay in the implementation of employer penalties for large employers (50 or more workers) who do not offer affordable coverage to their full-time workers (30 or more hours per week) under the Affordable Care Act (ACA). Some viewed the employer responsibility requirement as a key part of the ACA and the penalties as being an important tool for securing employer based insurance coverage once other reforms to the nongroup market are implemented. However, our analysis shows otherwise. In addition, some have suggested that it is unfair to leave the individual mandate in place while delaying the employer mandate. Our analysis shows that the different requirements have dramatically different implications for cost and coverage under reform.

    We use the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM), a state-of-the-art microsimulation model for estimating the cost and coverage implications of an array of changes to the health care system. The analysis compares the distribution of coverage under the full ACA, the ACA without an employer mandate, and the ACA without an individual mandate. We show that the employer mandate delay has almost no effect on overall coverage under the ACA or the distribution of that coverage across public and private sources of coverage. Eliminating the individual mandate, however, would significantly increase the number of uninsured compared to full implementation of the ACA, decreasing employer coverage as well. These findings are consistent with the evidence in Massachusetts, where coverage reforms were implemented beginning in 2006. The delay of the employer mandate also has little effect on government spending on subsidies or Medicaid, but does result in a slight reduction in government revenue.

    While a delay of one year in the implementation of the employer mandate will not have a discernible effect on coverage or government spending on insurance, delaying the individual mandate would undermine a critical component of the coverage expansion in the ACA. Combined with the Medicaid expansion, insurance market reforms, and subsidies to assist those with modest incomes to purchase private insurance through the health insurance exchanges, the ACA’s individual responsibility requirement provides stability to insurance pools and financial access to adequate coverage for a broad swath of the population disadvantaged by the prior system.

  • Wall Street Journal, courtesy of Physicians for a National Health Program: Insurers will continue to skirt regulations. Insurers Seek Right Balance of Risk, Reward. By Anna Wilde Mathews. In the insurance business, some customers are more desirable than others—and insurers will be seeking to woo them in preparation for the health law's new marketplaces.

    Customers not only bring revenue in the form of the premiums they pay. They also come with costs, since the insurer will be on the hook for medical expenses. Traditionally, that has made healthier people the best insurance risk. Insurers often could decline to sell plans to people with health problems, or charge them more.

    Now, the health law is changing the rules of the game. Under its requirements, insurers must sell plans to all comers, and the rates can't be tied to customers' health. Less obviously, the law includes mechanisms that are designed to ensure that individual companies aren't punished if they draw a mix of sicker consumers. ...

    Since insurers can no longer pick and choose their customers, they will employ a range of subtler tools, including marketing campaigns and carefully designed plans aimed at the customers the insurers most want.

    "They want to attract the right risk," said Siva Namasivayam, chief executive of SCIO Health Analytics Inc. His firm helps insurers identify customer types, such as "entry-level singles" and "healthy baby boomers," each with projections on likely costs. The firm pinpoints, by ZIP Code, where the different types tend to live, so the insurer can target its marketing geographically.

    Highmark Inc., a Pittsburgh, insurer, said it has around 100 targeted campaigns aimed at particular types of consumers, including recent college graduates and retirees not yet eligible for Medicare. It sends walk-in tractor-trailers to college campuses and sets up booths at community events such as charity walks. "We have to be more one-to-one than we were historically," said Steven Nelson, a senior vice president at Highmark.

    Comment: By Don McCanne, M.D. Excerpts: One of the great advantages of the Affordable Care Act was that it would finally bring an end to insurance company chicanery in which they were able to selectively insure more profitable healthy individuals while keeping the more costly sick individuals out of their plans. At least, that's what the new requirements for guaranteed issue (they must sell the plans to everyone, not only the healthy) and community rating (they cannot charge higher rates for the sick) were supposed to do. But insurers have a much larger bag of tricks.

    Although insurers can no longer reject applicants who fail medical underwriting standards, they have learned to selectively market their plans to healthier populations, and they will continue to do so. They intensify their targeting to younger, healthier individuals while avoiding marketing to higher cost individuals. As this article indicates, an industry has arisen to help insurers select their targets for marketing, based on the health of selected groups or on the average health in geographical regions (ZIP Codes). This adds yet more administrative costs to our system already tremendously overburdened with administrative waste. ...

    Insurers are masters at innovation. No matter how many laws and regulations they face, they will always find other ways to work the system. That's just plain old good business. And that is the problem. We don't want our health care defined by what is good for the industry; we want it defined by what is good for patients. We won't get that until we establish our own public system dedicated to the primacy of patients.

    And about that Blue Cross & Blue Shield of Rhode Island campaign that included posters on the walls of men's bathrooms in bars with the slogan, "You don't need beer goggles to fall in love with this health plan." Although there are ten categories of essential health benefits, insurers are allowed flexibility within each category. Those young men would be well advised to read their plans carefully to see if they exclude sexually transmitted diseases and injuries while intoxicated. Insurers know no boundaries.

  • Omaha World-Herald: Nebraska's acclaimed wellness program under fire. By Martha Stoddard. Excerpts: In its first two years, Nebraska's state employee wellness program said it had saved $4.2 million, caught more than 500 early cancers and improved the health of thousands of employees.

    Last year it helped Nebraska become the first state to win the prestigious C. Everett Koop Award, given for promoting better health while cutting medical costs.

    Gov. Dave Heineman has touted it as a model of how to make health care more affordable and as an alternative to the federal health care overhaul.

    But a Massachusetts-based expert in analyzing health outcomes says the claims about Nebraska's wellness program amount to so much hokum.

    “The bottom line is their numbers don't add up,” said Al Lewis, who has criticized the program in recent blog posts and an opinion piece in the Wall Street Journal.

    “They're spending millions of dollars to tell people three things they should already know: Stop smoking, eat healthier foods and exercise more,” he said.

    Lewis' arguments about the Nebraska program are part of his broader challenge of many workplace wellness programs, which he labels “get well quick” schemes.

  • Los Angeles Times: Health reform could help close gaps in mental health care. By Anna Gorman. Excerpts: A disjointed financing system for mental health services in California has led to gaps in care, but the national healthcare law is expected to help close some of those holes, according to new research by the California HealthCare Foundation.

    Half of the state’s adults and two-thirds of the adolescents with mental health issues aren’t receiving treatment, according to the study.

    Private insurance has historically lacked mental health services, so patients often seek care through the public system. Nearly $7.8 billion in public money was spent in fiscal year 2012-13 on mental health care, with the largest share — $3.3 billion—paying for Medi-Cal beneficiaries. ...

    The Affordable Care Act, however, is expected to improve access for many. The law expands who is eligible for Medi-Cal, the coverage program for poor and disabled residents, enabling them to get comprehensive mental health services, and California residents purchasing insurance through the healthcare marketplace will also have access to mental health care. ...

    In addition, the law promotes more integration between mental health care and physical health care. There is an increasing awareness about how important it is for doctors to address mental health and substance abuse needs among their medical patients, said Neal Adams, deputy director of the California Institute for Mental Health.

  • Washington Post Wonkbook: 10 things I learned reporting on Obamacare. By Ezra Klein and Evan Soltas. Excerpts: Sarah Kliff and I have spent the last three months interviewing dozens of Obama administration officials, state-level implementers, outside experts, steadfast critics and pretty much anyone else we could think of who’s involved in setting up Obamacare. The full article going deep inside the effort to implement Obamacare is here, but as a bit of a teaser, here are 10 of my takeaways from the reporting:
    • For the White House, it’s all about the marketplaces. ...
    • It’s a lot like the campaign. ...
    • Don’t forget IT. ...
    • No one knows how to model politics. ...
    • But maybe the politics won’t really matter. ...
    • There will be glitches. ...
    • Glitches may not really matter. ...
    • Different states will have wildly different experiences. ...
    • No one knows quite what to do in states that aren’t expanding Medicaid. ...
    • State regulators are exhausted. ...

    To wrap up: Read the whole story. Really. There’s much more there, including an update of Max Baucus’s famous “train wreck” quote…

  • Washington Post: On Obamacare, Republicans test the definition of insanity. By Dana Milbank. Excerpts: According to The Washington Post’s fact checker, Glenn Kessler, there were 37 votes to scale back Obamacare before Wednesday’s two votes in the House. But those 39 don’t include the Senate, where Reid’s office has documented 28 votes, all but a couple in the form of Republican amendments. This might explain the new findings that Congress is holding more votes than ever but passing fewer bills.

    Wednesday’s 66th and 67th attempts went much like the previous 65, except for a mid-debate recess so that lawmakers could have their official photograph taken on the House floor.

    “This bill is unraveling before us,” exulted Rep. Paul Ryan (R-Wis.).

    Rep. Michael Burgess (R-Tex.) reported that “the train is not coming off the rails; it’s already off the rails.”

    On the Democratic side, Rep. John Dingell (Mich.) responded by saying, “Einstein observed that insanity is doing the same thing over and over again with the full expectation that the results are going to be different.” Actually, the quote is probably apocryphal — but Einstein didn’t live to see the 113th Congress.

  • New York Times editorial: The Good News on Insurance Premiums. Excerpts: Individuals and families who buy health insurance on their own will pay significantly lower premiums next year in New York and many other states. It is the most impressive evidence yet that the Affordable Care Act, through its mandates and competition-promoting health insurance exchanges, can hold previously rising premiums in check.

    The encouraging news underscores the vital importance of the health law’s “individual mandate,” which requires most people to buy health insurance next year or pay a penalty. The provision is designed to bring in a flood of young, healthy people into insurance pools, which helps reduce the cost of coverage for older and sicker enrollees.

    In a symbolic vote designed purely for the campaign trail, Republican leaders pushed a bill through the House on Wednesday to repeal the individual mandate. Fortunately, Democratic control of the Senate and the White House will block that folly before it can harm the very people whose interests the Republicans claim to champion. ...

    The Obama administration followed with an analysis on Thursday showing that individual premiums in 10 states — including California, New York, Ohio, Colorado, Virginia and Washington — and the District of Columbia will be 10 percent to 18 percent less, on average, than projections the administration derived from estimates by the nonpartisan Congressional Budget Office. (Because these are averages, some people in these may pay more.) The costs for most individuals buying coverage on the new exchanges will be reduced even further by federal premium subsidies available on a sliding scale, for those with incomes up to $94,200 for a family of four.

News and Opinion Concerning the "War on the Middle Class"
Minimize "It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"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.

  • New York Times editorial: Overpaid? Or Worth Every Penny? Excerpts: Major corporate filings for 2012 have now provided an updated portrait of executive pay. The median compensation of chief executives at 200 of the nation’s biggest public companies came in at $15.1 million last year, a 16 percent jump from 2011, according to Equilar, the executive compensation analysis firm. The pay packages — including salary, bonus, benefits, stock and option grants — ranged from $96.2 million at Oracle to $11.1 million at General Motors.

    Is that excessive? One way to answer that question would be to look at the pay gap, the ratio of the pay of the chief executive to that of the company’s employees. But nobody really knows what the gaps are. Three years after passage of the Dodd-Frank financial reform law requiring companies to disclose the gaps, the Securities and Exchange Commission has not even proposed rules to put the provision into effect. Nor has Congress or the administration pressed the agency to get on with the job.

    The pay gap information has many potential uses. It could help investors judge the effect of a company’s pay structure on productivity, efficiency, innovation and other aspects of work-force performance. It could also help consumers determine whether companies are solid corporate citizens or sources of enrichment of the few. And it could help economists and policy makers detect emerging asset bubbles and impending crashes, which generally correlate with rising income disparities.

    But corporations don’t want any of that. To hear them tell it, computing the pay gap is too hard. Nonsense. The real obstacle is that many chief executives do not want to have to defend what are sure to be some indefensibly large gaps.

  • Washington Post opinion: Five myths about Wal-Mart. By Rebekah Peeples Massengill. Excerpt: Wal-Mart has attracted controversy for decades: Its supporters laud its low prices and market efficiencies, while its opponents charge that the company exploits workers, destroys local economies and pollutes the environment. Now, despite warnings from the retailer that it would reconsider its plans to open three stores in Washington, the D.C. Council has passed a living-wage bill that would require Wal-Mart to pay its workers here at least $12.50 per hour. Let’s examine a few of these impressions about the world’s largest retailer.
  • Smirking Chimp: Sen. Elizabeth Warren Says Banking Should Be Boring! By Thom Hartmann. Excerpts: Senator Elizabeth Warren wants to make banking boring again. Yesterday, the freshman senator introduced the 21st Century Glass Steagall Act, which would break up the big banks, and rebuild the wall between traditional banking and Wall Street gambling. In a statement, Senator Warren said, “Despite the progress we’ve made since 2008, the biggest banks continue to threaten the economy.”

    Senators John McCain and Maria Cantwell, the pair who attempted a similar bill back in 2009, joined Senator Warren as she introduced her new legislation. Of course, taking on the “too-big-to-fail” banks won’t be an easy challenge. Previous attempts to reign in bank size and power were met with huge resistance from the banksters, who railed against proposals to break up the banks. ...

    Since the day she was elected, Senator Warren has worked hard to hold banksters accountable for wrecking our economy, and proposed rules to prevent it from happening again. When she introduced the 21st Century Glass Steagall Act yesterday, she said, “The four biggest banks are now 30% larger than they were just five years ago, and they have continued to engage in dangerous, high-risk practices that could once again put our economy at risk.” We know the banksters won’t give up their power easily, but Senator Elizabeth Warren isn’t backing down without a fight.

  • Financial Times: Markets make best case for Glass-Steagall. By John Authers. One-stop shops knew that they were too big to fail, encouraging risk-taking. Excerpts: The brainchild of Carter Glass and Henry B. Steagall will not go away. It is 13 years since the key provisions of their banking act were repealed, and about 83 years since they were introduced.

    When Glass-Steagall – which thwarted deposit-taking commercial banks from owning insurers and investment banks – was repealed, it seemed obsolete. Wall Streeters spent much energy finding legal ways around it. A cross-party consensus agreed with little debate that it must go.

    Now, another cross-party Senate group, led by former Republican presidential candidate John McCain and Elizabeth Warren, the consumerist Democratic senator for Massachusetts, have introduced a bill to reinstate Glass-Steagall’s split of commercial and investment banking.

    It is not going to happen. But it should. With the benefit of the experience of the last 13 years, we can see that Glass-Steagall should never have been repealed. ...

    The one-stop shops knew that they were too big to fail, encouraging risk-taking. Over the last decade, US banking has grown far more concentrated. In the mid-1990s, the biggest five banks accounted for about 13 per cent of assets. By 2009 this was 38 per cent. ...

    Finally, look at the Glass-Steagall era. Those seven decades look like an anomaly, a “quiet period”, as Yale University economist Gary Gorton puts it, when there were hardly any bank runs (and economic growth was steady). For decades leading up to the Great Crash, bank runs had been endemic in the US. Deposit insurance, and a requirement that banks that took deposits could not also play at investment banking, vanquished that problem.

    That was quite an achievement. It did not look that way in 1999. It does now.

  • Financial Times: Simpson and Bowles are wrong on US debt. By Edward Luce. The deficit hawks were mistaken before 2008 and they remain so. Excerpts: Even before the 2008 crisis, America’s deficit hawks were warning the US was heading the way of Greece. They were wrong then and they are wrong now. It is time for them to whistle a different tune.

    According to the independent Congressional Budget Office, America’s national debt will fall to 71 per cent of gross domestic product by 2016 – barely a third the level of Japan’s and roughly half that of Europe’s Mediterranean countries. Because of rising revenues and the impact of steep cuts from sequestration, this year’s US fiscal deficit will halve to $642bn from $1.1tn in 2012. By any measure, this is a vertiginous drop. At 4 percentage points of GDP, the salient worry is whether it is falling too rapidly.

    Yet Alan Simpson and Erskine Bowles – the retired politicians who lead the “fix the debt” movement – remain as unwavering as before. Given such rectitude, perhaps their motto should be: “When the facts change, we do not change our minds.”

    The bipartisan duo, and their deep-pocketed backers, notably Pete Peterson, the founder of Blackstone, should pay heed to the fable of the boy who cried wolf. Exposure to false scares is only likely to inure the public to the debt crisis when it does arrive. But that looks to be an increasingly long way off. Even at the depths of the Great Recession, when the budget deficit was soaring – as it should have – rising national debt always posed a medium-term rather than a short-term threat. ...

    Nor do the debt scare stories sound particularly frightening. According to the Committee for a Responsible Federal Budget – the most vigorous advocate of fixing the debt crisis now – the Social Security trust fund is set to go bankrupt in 2033, which means that benefits “will be cut automatically by 23 per cent across the board”. Set against today’s domestic cuts, which are also in double figures, the Social Security crisis looks like a picnic – and a hypothetical one at that. Without irony, the committee warns that by 2087 the Social Security deficit, if unaddressed, could equal 1.64 per cent of GDP. By then barely any of today’s voters are likely to be alive. My six-year-old daughter will be nudging 81. ...

    Mr Bowles and Mr Simpson did everyone a favour three years ago when they came up with a plan to restore order to the US budget. Their idea of broadening the tax base and eradicating loopholes would be sane with or without a debt problem. There is also something admirable in the lengths to which they go to publicise their cause. In December, the 81-year-old Mr Simpson even danced “Gangnam style” on YouTube – all six foot seven inches of him. “These old coots will clean out the Treasury before you get there,” he warned his “millennial audience”.

    And so they might. But with the exception of America’s richest 1 per cent, no other income group rates the US budget deficit among the country’s biggest threats, according to polls. The remainder rank unemployment and stagnant incomes as bigger problems. To be fair to the 99 per cent, their concerns look more real. Can it really make sense to worry more about possible cuts 20 years away than actual pain today?

  • Financial Times: Too much profit on Wall Street. By Tom Braithwaite. Banks have issued so many warnings about regulation that they cannot now admit that they are thriving. Excerpts: The biggest US banks are wrestling with an intractable problem. It is not a surge in loan defaults, a wave of cyber attacks or mounting lawsuits. It is far more serious: they are on the verge of making too much money.

    JPMorgan Chase is on track to make $25bn or more this year – as much as the gross domestic product of Paraguay – with at least a 17 per cent return on common equity that takes the bank back to the heady levels of 2007.

    At another time, excess cash would be handed over to shareholders and employees. Half of revenues from investment banking would be paid out to staff and up to – and sometimes more than – 100 per cent of earnings would be distributed to investors via dividends and share buybacks. ...

    Sensible bankers are accentuating the negative – Jamie Dimon warned of a “dramatic reduction” of mortgage profits last Friday and fretted that foreigners were going to steal US business. On the earnings call a puzzled analyst pointed to “extremely good” trading results and asked the JPMorgan chief executive “if you could brag a little bit?” The never-normally-shy Mr Dimon would not. ...

    Here is the problem: banks have spent a lot of time, energy and money warning of the potential ill-effects of ramping up regulation. But since the crisis, international regulators have kept demanding more capital, including a surcharge for the biggest banks. Lenders have doubled their capital levels as a result, hitting the new Basel III targets six years early in some cases and, yet, where are the ill effects? The best of them continue to set new profit records. ...

    A very precise recent survey found that regulation had increased by 117 per cent in the past 12 months, forcing banks to add 2.3 more people each to deal with it. For all the silliness of those numbers, there is a regulatory challenge for small banks. But that merely underscores the slow but steady industry consolidation, where JPMorgan, Wells Fargo and their top peers are enjoying more and more share as their smaller rivals crumble. ...

    The banks’ only hope is that regulators and politicians pay more attention to these grim threats than the more upbeat evidence from their own rosy bottom lines.

  • New York Times editorial: A Step to Majority Rule in the Senate. Excerpts: After years of growing Republican obstruction — legislation blocked, judicial candidates forced to withdraw, presidential nominations left to languish, government agencies rendered powerless by denying them leaders — Senate Democrats say they are finally ready to take action. Barring a last-minute deal, Harry Reid, the majority leader, said he would move to change the Senate rules on Tuesday to ban the filibuster for executive appointments.

    This is a relatively modest step toward returning basic governance to the chamber. It does not change the 60-vote requirement that Republicans have made routine for virtually all legislation, perverting the majoritarian vision of the Constitution. It does not ban the filibuster for judicial nominees, though we wish it did because Republicans are still holding up too many federal court candidates.

    Nonetheless, Mr. Reid’s move would be an extremely important reassertion of majority rule, finally allowing a president’s nominees to cabinet departments and other agencies to come to a confirmation vote. The president’s right to assemble an executive team without encountering ideological litmus tests from the Senate is fundamental, as history shows. From the Eisenhower to the Ford administrations, there were no filibusters of executive nominees. Over the next 32 years, there were 20.

    But since President Obama took office, there have been an unprecedented 16, including one for the secretary of defense, a first, and a new low. Determined to erect stumbling blocks at every step, Republicans have delayed cabinet secretaries and agency leaders for months, hectoring them with hundreds of questions and imposing holds for reasons having nothing to do with fitness for office. The Treasury secretary, Jack Lew, had to answer 444 written questions, more than the previous seven nominees for that position combined. Gina McCarthy, nominated to lead the Environmental Protection Agency, was given more than 1,000 questions and has been blocked by a Republican senator for more than four months, the longest delay in the agency’s history. ...

    The most brazen example has been the effort to destroy two legally created agencies that Republicans dislike: the Consumer Financial Protection Bureau and the National Labor Relations Board. Republicans have, for years, refused to confirm Mr. Obama’s nominees for board members or the bureau’s director, knowing that neither agency can properly operate without permanent leaders.

    “No one has anything against the person,” Mr. Reid said in an interview on Monday. “They just don’t like the agency. They want the Labor Department and the N.L.R.B. to go away.” Without a leader, the latter will on Aug. 1.

  • Financial Times: The market is not the best place to set a fair price for assets. By John Kay. At Enron and in the banks, assets were marked to values set by biased traders. Excerpts: Listed companies in Europe are required to prepare accounts in accordance with International Financial Reporting Standards. The directors of these businesses have a statutory obligation to ensure that the accounts present a true and fair view of the company’s affairs.

    Are these duties consistent with each other? Two weeks ago, a group of institutional investors wrote to the Financial Times arguing that they were not, with a supporting counsel’s opinion. The problem caused so much concern to the Parliamentary Commission on Banking Standards that it proposed that banks should have two separate sets of accounts. Banks are at the centre of the controversy, although the issue is a more general one. ...

    It is understandable that, with experience of crooked executives and faced with potentially onerous legal liabilities, accountants should have sought to hide behind increasingly complex and supposedly objective rules. The desire for a set of general principles that can be applied to all businesses whatever the nature or location of their activities is understandable. But this search is misconceived. Comparability and consistency are of little value if won at the expense of relevance. The preparation of accounts that reflect a true and fair view of corporate affairs is necessarily both a pragmatic and an eclectic activity.

  • New York Times: G-20 Backs Plan to Curb Tax Avoidance by Large Corporations. By Andrew E. Kramer and Floyd Norris. Excerpts: The world’s richest economies for the first time endorsed a blueprint on Friday to curb widely used tax avoidance strategies that allow some multinational corporations to pay only a pittance in income taxes.

    It could be years before any changes take place in national tax laws and big corporations and other interest groups are sure to lobby heavily to preserve their tax breaks. But the proposal was the most concrete response yet to the intensifying pressure on governments around the world to address the issue.

    The governments have strong motivation for change. They are starved for revenue and face citizenry who see inequity in a system that enables some highly profitable corporations to pay far lower tax rates than workers.

    In one widely cited example, Starbucks last year paid no corporate tax in Britain despite generating sales of nearly £400 million ($630 million) from more than 700 stores in that country. Apple, despite being the most profitable American technology company, avoided billions in taxes in the United States and around the world through a web of complex subsidiaries.

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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