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    Highlights for week ending May 10, 2003
  • Boulder Daily Camera: IBM sends layoff slips to 300 U.S. workers. Excerpt: IBM Corp. has sent layoff notices to 300 workers in various facilities around the United States in a job-reduction action that it refers to as "skills rebalancing." Among the layoffs are 50 people in a printer division based in Boulder, where before the layoffs, the company reported having 4,800 workers. Editor's note: The 50-person layoff represents approximately 7% of Boulder Printing Systems division employees.

  • Network World Fusion: Palmisano visits India, may move more work there. Excerpt: IBM has a R&D laboratory in India as well as a software development center with about 4,500 employees, and it does work for both IBM and the company's customers worldwide. The company also is setting up a business process outsourcing center in Bangalore that will offer services to IBM customers worldwide. The size of both the software development and the R&D operations are expected to be increased significantly over the next three years as IBM shifts work from its locations in the U.S. to India, which offers the advantage of low-cost engineering talent, said company sources on condition of anonymity. Palmisano's key objective while in Bangalore will be to assess the progress of the company's strategy to outsource software development and BPO to its Indian operation, according to analysts. As outsourcing to India has become a politically sensitive issue in the U.S., with U.S. companies accused of moving jobs from the U.S. to India during a recession, Palmisano may have decided not to discuss his plans for IBM's Indian operation with the media, the analysts added.

  • Looking for an IT job in the United States or the UK? Consider visiting this India-based site.

  • New York Times: Case Challenges Employees' Waiving Right to Sue. Excerpt: Donald Lagatree was delighted to be offered the job as a legal secretary, except for one provision in the pile of papers that the law firm asked him to sign. The firm wanted him to sign away his right to file a lawsuit over any employment-rated matter, including any discrimination claim, insisting that such disputes go to arbitration. When Mr. Lagatree balked, the law firm, Luce, Forward, Hamilton & Scripps, withdrew its job offer.

  • Janet Krueger: Some people have wondered whether some of us running these boards have a persecution complex -- the government couldn't really be working with IBM to retroactively legalize IBM's pension theft, could they? It is enlightening to read through the web pages of Covington and Burling, the firm representing IBM in Cooper v IBM. Read the whole thing, but especially pay attention to the heading "Regulatory Relief". Excerpts from their Web site include:
    • Corporate Downsizings. An example of our work with more traditional plans has been our efforts to assist clients in recent years to adapt and utilize their long-established defined benefit plans in the context of corporate downsizing.
    • Surplus Pension Assets. We also assist clients in making effective use of surplus pension assets. For example, we have assisted clients who wish to use the assets of their pension plans to provide severance and health benefits.
    • Regulatory Relief. We not only have helped clients make their way through the thicket of applicable legal requirements and defend against adverse litigation, but also have helped to secure significant regulatory relief that has removed many legal obstacles from that thicket. For example, on behalf of The ERISA Industry Committee, we helped to persuade the Treasury Department to modify many of the regulations issued under the Tax Reform Act of 1986 to accommodate legitimate business practices.
    • Legislative and rulemaking work, including delivering formal testimony and written comments for the record, making informal presentations to technical staff and key decisionmakers, and drafting suggested legislative and regulatory language.
    • We have represented such clients as IBM, Verizon, GE Capital Mortgage Services, Union Pacific Railroad, and Capital Cities/ABC in complex employee benefits cases. These cases usually involve claims under ERISA for alleged wrongful denial of employee benefits or claims that one or more of ERISA's fiduciary duties have been violated.

  • According to " i_be_mad_as_heck", Ken An, the investigator at the Boston EEOC office, has announced an EEOC decision to consolidate all age discrimination charges against IBM in a class case. A letter has been sent to all EEOC offices that all cases concerning age discrimination in IBM layoffs are to be transferred to the Boston EEOC office. This is only for cases involving layoff because of age, and not for disability, race, or other reasons. Laid off employees that have filed ADEA charges can now enquire at their local EEOC or State AG office about whether their case has been transferred. If the case was closed before the office received the letter it cannot be resurrected. If anyone has a pending case that has not been transferred that the laid off worker should remind the local EEOC office or State AG to transfer the case to Boston. This can help avoid any more cases being dismissed at other offices. Contact information:

    Ken An - EEOC Investigator
    617 565-2141
    617 565-3196 fax
    JFK Federal Building
    Boston, MA

  • The Financial Times (courtesy of MSNBC): Buffett rails against CEO excesses. Excerpt: Warren Buffett, the billionaire investor, called on shareholders to speak out against excessive executive pay, saying there had been more misdirected compensation in corporate America in the past five years than in the previous century.

  • The Times (of London): US sage attacks executive greed. Excerpts: The second richest man in the world, Mr Buffett, known as the “Sage of Omaha”, criticised plans for tax cuts that he said were designed to fleece the poor and reward the rich. “I am not for the Bush plan. It screams of injustice. The main beneficiaries will be people like me and Charlie,” he said, referring to the Berkshire Hathaway vice-chairman Charlie Munger. Mr Buffett said the tax plan was equivalent to “us giving a lesser percentage of our incomes to Washington than the people working in our shoe factories”. He called on investors to rise up and revolt over colossal executive pay packages, saying in the past 20 years there had been “an enormous disparity in the rates of compensation between people at the top and people at the bottom, and a disconnect between people at the top and the shareowners who give them the money”. ... When asked about the increase in dubious litigation in the US, Mr Buffett acknowledged the problem but seemed more concerned about the growing number of plaintiffs with a genuine grievance against a US corporation.

  • The Record, Hackensack, N.J.: Pensions Watchdogs Discuss Possible Reforms to Accounting Rules, Laws. Excerpt: --"Kid, if you stick with the company till you're 55, you'll retire with a full pension and benefits for life." Jack Brennan recalls those words from the kindly Bell Telephone guy who hired him on Newark's Broad Street in 1953 as though they were just uttered. And a 17-year-old Brennan wholeheartedly believed them. "I wasn't naive," says Brennan, who retired in 1991 as manager of labor relations from the company that became Bell Atlantic and is now Verizon. "In those days, a promise meant something."

  • New York Times: House Considers Measure to Cut Billions in Pension Obligations. Excerpt: A bill pending in the House of Representatives would allow businesses with union workers to reduce their company pension obligations by billions of dollars, because statistics show that most blue-collar workers do not live as long as other Americans.

  • New York Newsday editorial by David Moberg: Stiffing Workers, Not Big Shots - How American. Excerpt: Partly because of this inbred system of control, chief executive pay has soared - from 42 times the average hourly worker in 1980 to 411 times in 2001, with no clear link between pay and performance, according to a Business Week survey. While the top compensation packages tapered off last year, median executive pay still rose 6 percent, double the average worker's increase.But as public outrage has flared and legislators have occasionally tried to rein in excess, top executives have increasingly bulked up their pay with "stealth" retirement plans. For example, now nearly all major companies offer executives the chance to defer a large part of their pay and receive payments for the rest of their lives at above market interest rates - typically 10 to 14 percent. In addition, most big companies offer supplemental executive retirement plans that annually pay a fixed percentage of the executive's highest compensation - sometimes even including stock options and bonuses. Often the existence or cost of these expensive perks is concealed even from shareholders.

    More recently, hundreds of corporations have been converting their traditional defined-benefit pensions into hybrids, such as "cash-balance" pensions that resemble individual retirement accounts - and typically reduce pension payouts to older workers by 20 to 50 percent. The Bush administration is pushing legislation and pension rule changes that will spur more cash-balance plans and provide better retirement options for high-income workers while undermining pensions for low- to middle-income workers. These pension changes often seem arcane. But the results are clear: Over the past two decades retirement income inequality has risen sharply. Fewer families can replace even half of their pre-retirement income - and more are ending up in poverty, despite the stock market and home equity boom of the 1990s, according to a recent study by New York University economics professor Edward Wolff. The only winners over this period were households with a net worth of more than $1 million - whose average retirement wealth soared by 44 percent. If link is broken, view Adobe Acrobat version [PDF--10 KB].

  • Wall Street Journal: Airlines Seek Right to Put Off Catch-Up Pension Contributions. Excerpt: The financially struggling airline industry is quietly seeking legislation that will allow commercial airlines to put off making any catch-up contributions to their underfunded pension plans for almost five years. ... At the same time, however, the airlines' attempt to seek pension-funding relief is part of a broader push toward such legislation in the U.S., with many companies seeking changes to mortality rates and requests to contribute more of their company stock, rather than cash, to their pension plans. Advocates for employees and retirees worry that moves like these will cause pension plans to become even more underfunded, jeopardizing their retirement security. "This is just another form of bailout," says Michael Gordon, a Washington, D.C., lawyer who helped draft pension law, and now works for a retiree-advocacy group. "It's going to erode the funding status of the plans even more, and put more into a death spin."

  • News 14 Charlotte: Retirees protest GE plans. Excerpt: General Electric narrowly defeated the proposal to approve executive’s severance packages at the company's annual shareholders meeting in the Queen City. But, the retirees got plenty of attention before the vote. For their stand on corporate salaries they say, leave them hungry. ... It is not just retirees the protestors say they are fighting for, but fairness too. They are taking shots at GE because of its former CEO's severance package. One, they say, pays more per hour than some retirees get in a year.

  • Baltimore Sun: A broken trust. AS WAR winds down in Iraq and the United States begins stabilizing that country, my family in Baltimore is trying to cope with a stunning domestic defeat. About 95,000 Bethlehem Steel retirees lost their health care benefits April 1 as part of the bankruptcy settlement of a company once at the backbone of American defense. That adds up to 200,000 and their dependents in the steel industry alone in the past six years -- my parents, ages 82 and 88, now among them. ... The question remains: What is being done to help disenfranchised retirees and 41 million Americans without health insurance or prescription benefits? That number will increase as industries fold, corporations merge, reconfigure and continue to discard, like chicken bones, the generation that built America and safeguarded it through three wars. If we have $80 billion and the brainpower and muscle to wage war in Iraq and billions more to rebuild it, why do we lack the resolve to provide health care and prescription benefits to all Americans? If every member of Congress and every CEO in America were without health benefits for just one year, a solution might surface quickly.

  • National Public Radio's Fresh Air with Terry Gross: Listen to Business Journalist Dan Briody. Author of The Iron Triangle: Inside the Secret World of the Carlyle Group (Wiley). The Carlyle Group is one of the most powerful and well-connected private equity firms in the world. Its investments -- most notably -- in timely defense and aerospace industries has made it highly profitable. The group's roster includes or has included former President George Bush, Sr., (advisor), former Secretary of Defense Frank Carlucci (former chairman), Saudi Arabian Prince Alwaleed Bin Talal (investor) and former Secretary of State, James Baker III (managing director and senior counselor). Briody writes that the Carlyle Group "operates within the so-called iron triangle of industry, government, and the military" and that it "leaves itself open to any number of conflicts of interest and stunning ironies." (Editor's note: Former IBM CEO Louis Gerstner is now the CEO of the Caryle Group. This is a "must listen to" interview).

  • The Times (of London): The Iron Triangle. Heady times for Carlyle in the wake of chaos and grief that gripped a nation. Excerpt: The Carlyle Group is one of the most powerful and successful private equity firms in the world with $13 billion under management and with more political connections than the White House switchboard. George Bush Sr, his former Secretary of State James Baker, former chairman of the Securities and Exchange Commission Arthur Levitt, the retired IBM boss Lou Gerstner, and John Major, the former Prime Minister, are among the big names on the Carlyle payroll. The chairman is Frank Carlucci, a former Secretary of Defence and Deputy Director of the CIA, a close friend of Donald Rumsfeld, who put Carlyle at the centre of the American defence industry. With the ascension of George W. Bush to the presidency, the White House is now full of ex-Carlyle employees, friends and business partners. And with the newly fattened defence budget, Carlyle has been able to extract massive profits from its defence holdings.

  • The Times (of London): The Iron Triangle. The blurred boundary that helped Carlyle to reap benefits In the second and final extract from his book Dan Briody examines how Carlyle rose to become the dominating global private equity firm it is today. Excerpt: Ultimately, the success of the Carlyle Group depends on its continuing ability to gain access to high-level government officials, thereby getting a jump on policy changes, both domestic and international. And that access hinges on Carlyle’s remarkable track record of hiring the most powerful men in the world.

  • "ibmmike2006" comments on the Carlyle and other articles. Full excerpt: It appears the NY Times, BW Week, Forbes, Fortune, and others are connecting the dots. Bush Jr, Bush Sr, Bin Laden's brother, Gerstner, Defence Contracts, Defence mfg - Fiat Aircraft and 50 ton gun, Korean Banks, Politics and business influence, Tax cuts equal new Republican Controlled legislation, Death Tax elimination benefit Top 1% of US Wealth owners, Proposed Tax Cuts benefit Top 1% of US Wealth Owners, 2.5 million unemployed, export of IT jobs to India, Walmart number 1 employer where employees need second job to make ends meet, creation of $7 an hour jobs, fast food restaurants for second jobbers to eat before going to second job, cash balance conversion of pensions, and $6.9 Trillion dollar deficit spending. Connect the dots!

  • Business Week: Are IBM's Big Blues Lifting? Last year was tough for the tech giant, but many analysts think CEO Palmisano has a good plan for restoring the stock's lost luster. Excerpt: IBM last year laid off 15,000 people, sold its money-losing disk-drive business, and wrote down the value of some unproductive chip technology. At the same time, it spent more than $6 billion on acquisitions, including the purchase of PricewaterhouseCoopers Consulting and Rational Software, opened a $3 billion state-of-the-art chip plant, and launched a new bet-the-company initiative called e-business on demand. ... Many investors and analysts, however, continue to question whether IBM can generate consistent financial returns without the aid of financial engineering. Critics say retired IBM Chairman Louis Gerstner Jr. pushed and pulled on a variety of levers -- including gains from an overfunded pension plan, income from one-time asset sales, and $44 billion in share repurchases -- to squeeze double-digit growth in earnings per share while eking out an annual average of 5% sales growth. For this year, Merrill Lynch analyst Steven Milunovich expects IBM to increase net income 10%, to $7.5 billion, and to achieve a 9% rise in sales, to $88.3 billion. The good news is that Palmisano has taken steps to increase the quality of IBM's earnings, such as lowering the expected rate of return on its pension and significantly slashing stock buybacks. In the most recent quarter, IBM only spent $65 million on stock repurchases, down from $1.8 billion in the year-ago period.

  • eWeek: Needed: Voice for IT. Excerpt: So you're mad as hell and not going to take it anymore. Who are you going to call? As an IT pro, there is no organization to which you can turn to represent your interests in Washington. That needs to change. We technology workers are a community facing a growing number of threats to our livelihood and to our way of life. But when problems arise, such as laws that threaten the tools we use and sometimes our own personal freedom, the steps we can take are often very limited. For example, with laws such as the federal and state DMCAs, which can make everyday IT tools illegal and even put programmers in jail, all we've been able to do is contact legislators on our own. That's not the way democracy works in the United States. To make our voice heard, we need, like any special interest group, a powerful organization that can effectively lobby for our unique concerns. We need an organization of IT professionals that can get dirty in the political trenches to protect us from bad laws, bad policies and general technology ignorance.

  • Reuters: Lawmakers, CEOS criticize FASB for options move. Excerpt: It was billed as a round table, but seemed more like a boxing ring Thursday as lawmakers and CEOS rained verbal blows on America's accounting rulemaker for moving towards a requirement to expense stock options.

  • Los Angeles Times: Class Warfare's Collateral Damage. Excerpt: Since 1898, Fulton, N.Y., had been home to one of the Nestle Co.'s most important chocolate factories. The more than 450 workers at the Swiss company's plant were proud that Fulton was where Nestle's Quik got its start. They took even more pride that the paychecks they earned enabled them to own homes, send their kids to college and plan for their retirement. But last fall the lives of those workers, their families and everyone else in town were thrown into turmoil when Nestle USA announced it would close the Fulton factory forever. Did the workers in Fulton lose their jobs because they weren't productive enough to cut it in the global economy? Hardly. The Fulton workers had the lowest absentee rate, the best safety record and the highest efficiency rate within their division. The plant was a money-maker for the company. But the workers had something else too: an average age of 52. Many of them were getting close to retirement and the pensions that the Retail, Wholesale and Department Store Union had won for them years before. The sooner the company could close the Fulton plant, the less it would be required to pay into the workers' pension plan. By avoiding these costs, Nestle could save millions of dollars. "Corporate greed" may sound like one of those nasty "class warfare" expressions, but it's the only explanation for why the workers in Fulton lost their jobs.

This week on the Alliance@IBM Site:

  • May 6. IBM Cuts 10% of Employees in IGS/ITS Division (including Customer Engineers)

  • Wall Street Journal: IBM Sends Out 300 Layoff Notices. Full excerpt: International Business Machines Corp., Armonk, N.Y., has sent layoff notices to 300 workers in various facilities around the U.S. in a job-reduction action that it refers to as "skills rebalancing." Among the layoffs are 50 people in a printer division based in Boulder, Colo. An IBM spokesman confirmed the layoff notices have been sent out. IBM has about 320,000 workers around the world. Last year it laid off 15,000 workers as the industry slump led to lower than expected sales and earnings. However, its results for the first quarter rose strongly from a year ago, with net income rising 16% on an 11% revenue increase. However, much of the growth came from acquisitions made late last year and from currency translation due to the strength of foreign currencies against the dollar. IBM has said in the past that it expects to make layoffs on a regular basis to reflect changing demands for various skills.

  • May 1: IGS cuts 300 employees - We have heard of job cuts in IGS San Jose, and in the Business Consulting part of IGS. No numbers have come in yet - if you have a layoff package please mail a copy of it to us: Alliance@IBM, 36 Washington Ave., Endicott, New York 13760 - this will help us compile the numbers.

  • Job Loss Questions and Answers
  • Job Cut Survival Kit

  • Variable Pay in IBM Sweden. Excerpt: Our coworkers in Sweden report that 40% of employees refused to sign the Variable Pay Agreement (gosh, they have a signed agreement!) ... here is their statement: "With regards to changes in Variable Pay system and IBM's actions in conjunction to this. We, members of the trade unions within IBM Svenska AB, hereby protest against the way IBM has acted in connection to changes in Variable Pay. Changes in Variable Pay were carried out without involvement of our trade union clubs, as were the actual formulations in the new agreements sent out to the employees. IBM invited the union clubs to negotiations, but unilaterally closed the negotiations and thereby broke the law concerning right of participation in decision-making (MBL).

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