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Highlights for week ending September 20, 2003
- TechsUnite.org and the Alliance@IBM: Vermont
AG investigating age discrimination in IBM layoffs.
Excerpt: Vermont’s Assistant Attorney General for Civil Rights opened an investigation of
age discrimination in IBM’s layoffs in August, shortly after 780 IBMers were given their
severance pay checks on August 5. The investigation could lead the government to demand that IBM
older workers with back pay and other benefits. Before the end of August, Kate Hayes, the
Vermont Assistant Attorney
General, announced that 32 older laid off IBMers filed complaints with her office under federal
and state law charging that IBM laid them off because of their age. Research done by IBM
employees indicates that employees age 45 and older have a higher chance of being laid off,
and that probability
dramatically increased with age.
Why is IBM especially targeting older workers? By cutting employment before retirement eligibility
IBM can slash pension fund obligation, increasing the profit report from the pension fund under
an arcane accounting rule. The company also avoids retirement medical for these older worker, further
increasing the profit report. Executive incentive compensation is tied to the report of profit.
In essence, top IBM executives are pocketing millions of dollars of company money for themselves
by targeting older workers for layoff.
- Forbes: Calif. court to decide
if IBM cancer suit to proceed. Excerpt: The first of about 250
worker health lawsuits filed against IBM across the country reaches a critical juncture in
a California court this month, when a judge rules on whether to let the case of four cancer-striken
former employees go to trial. The four have charged that they were poisoned by chemicals while working at an
International Business Machines Corp. electronics factory in San Jose. Workers at IBM plants
in Minnesota and New York have made similar claims.
Union Network International (UNI): CWA
Gets Excellent Contract at Verizon Thanks to Mobilization and Support. Excerpt:The Communications
Workers of America (CWA) reached a tentative 5-year collective bargaining settlement with Verizon
Communications that meets the union's key goals of protecting members' job security rights, healthcare
and other benefits and provides fair wage and pension improvements. The agreement, covers 60,000
workers in 12 states in the company's Northeast and Mid-Atlantic operations. A similar settlement
was announced by the International Brotherhood of Electrical Workers representing another 18,000
- Denver Post: Avaya
dumps pension plan, enhances 401(k). Excerpt:
Business communication system provider Avaya Inc. is switching from a defined pension plan for U.S.
salaried employees to a beefed-up 401(k) plan, following a trend of corporations getting out
of pension plans in favor of other options.
The company, which has about 2,400 employees in Colorado, said Friday that the changes, affecting
its approximately 8,300 salaried employees in the United States, will take effect at year's end. ...
The switch does not affect Avaya retirees or the company's 5,200 union workers, who recently negotiated
- Wall Street Journal: Treasury
to Issue Guides On Cash-Balance Payouts. Excerpt: The feud over cash-balance plans has focused
on how the new-style pensions can hurt some older workers. But there is another issue tied to
brewing in Washington that has to do with the way employers calculate payouts to all departing
workers. The Treasury Department is expected to issue guidelines on how to calculate the payouts
as part of broader rules on cash-balance plans. Employers have been looking for guidance, and
been lobbying heavily for favorable regulations, which they hope could help overturn recent
appeals-court decisions requiring employers to pay higher lump sums. ... The lump-sum issue also
came up in a "doctored" memo on Treasury letterhead distributed on Capitol Hill earlier
this month by a lobbyist for International Business Machines Corp., which has been sued over
age-discrimination issues with its own cash-balance plan. The Treasury said it is investigating
but declined to say
how the document was altered. IBM has said it believed the document to be genuine. If link
is broken, view
Adobe Acrobat version [PDF--37 KB].
- Wall Street Journal: Push
for Broad Pension Change Is Losing Steam in Congress. Employers Won't See Any Major Relief
To Help Ease Burden of Nest-Egg Funds. Excerpt: The outlook for broad pension overhaul has
dimmed, with Congress likely to offer employers only narrowly focused relief from the financial
burdens they face for their traditional pension plans. Concern has been growing among lawmakers
about pensions and retirement security in recent months, as corporate scandals and a slow
economy have exposed weaknesses in the current system. But
with time running out to clear legislation this year, lobbyists and some Capitol Hill aides
predict lawmakers won't have time to pass more than a few provisions. Those measures likely
would focus on giving businesses relief, possibly on a temporary basis. The lack of momentum
on many retirement-savings changes reflects the knottiness of the underlying issues, which
directly affect Americans' all-important nest eggs -- and have big implications
for many employers and financial services firms, too.
If link is broken, view Adobe Acrobat version [PDF--24 KB].
- New York Times: Senate
Panel Votes to Give Pension Relief to Companies.
The Senate Finance Committee voted yesterday to give companies a break on their pension requirements,
which would save them about $60 billion over the next three years, according to a new government
analysis. America's pension funds now have a total deficit of about $400 billion — a record — and
unless the rules governing pension financing are eased, many companies will have to start
making large contributions to close the gap. The Senate bill would shield companies from having
to do that during a slow economy, helping them conserve cash. But it would also weaken the pension
funds, the government projections show.
- Business Day (South Africa): Are
IBM's trustees meeting obligations? (Scroll about half way
down the page to view article). Full excerpt: The law requires that all those who look
after other people's money must exercise "utmost good faith, care and diligence".
This story is about utmost good faith. Managers who do not observe this can go to jail for 15
Trustees of pension funds fall squarely into this definition (section 2(a) Financial Institutions
(Protection of Funds) Act). IBM is among the richest of the world's multinationals. It
is the last place you would expect to find an increasingly acrimonious argument between its
the company. But that is the case right here, in SA.
An argument has been running for the past six or seven years between an action group of
pensioners and the company. The pensioners claim successive company-appointed trustees
have breached their fiduciary duties, misinterpreted rules and ignored others intended
to inform and protect members. Are IBM pensioners being done out of their just rewards?
On the basis of the information available, I don't know. But what is clear is that the
pension fund suffers intractable
disputes with the number of company-appointed trustees always equalling those elected by
members. And it also appears as though successive ranks of company appointees have acted
only in IBM's favour.
It looks suspiciously as though the fund is grossly underfunded and cannot afford what
pensioners think is their entitlement. But the trustees are obliged to act in the interests,
not of IBM, but of the fund. What smells is that the trustees were advised to ask the court
for a declaratory order as to the fund's obligations. The IBM appointed trustees opposed
this. That, by itself,
suggests bad faith. IBM was found guilty in a US court of bad behaviour towards its pensioners
in July this year. The judge found IBM was tampering with pension fund earnings to boost
the firm's showing. I hope that's not happening here. Meanwhile, if the pensioners want
any advice, head straight for the Financial Services Board.
Houston Chronicle: Perhaps
cost cutting too damaging to social contract. Excerpt: Brooks
Hamilton is a figure-it-out-and-do-it kind of guy. An employee benefits attorney who
is also a major geek, he is comfortable with both words and numbers. Over the last 10 years
spreadsheets, talked about retirement planning, and worked on ways to improve defined
contribution plans -- the things most people know as their 401(k) or 403(b) plan. Not long
ago, we collaborated
on a paper, "Reinventing Retirement
Income in America" for the National Center For
Policy Analysis. So it's a little
strange to see him sitting pensively or to hear him expressing doubt.
But that's what he's doing. He's worried. I ask what's on his mind. "The social contract," he
answers. He says it the way some people would say, "My Visa bill." "I've just
become really unsettled with the hardball way senior management (in corporate America)
wants to play with the masses. "I think we're missing a bet. We shouldn't eat our children
to avoid starvation. We have too few businesses focused on what's good for the country,
too many focused
on their very short-term business interest," he says. "What's the social
contract?" I ask. ...
The question is whether retirement in dignity is part of the social contract. I've never
thought that a pension was a gift. The phrase `wages and other conditions of employment'
includes a pension. What you were required to do was structure compensation so it included
`retirement in dignity.' "What has bothered me is that our business schools have taught slash-and-burn
--- if you can cut payrolls to make a profit, you get an A.
- Boston Globe: Fewer
get workplace health plans. Premiums rise, coverage drops over decade. Excerpt: Americans
who receive health insurance through their employers have dropped to less than one- half
of all workers from about two- thirds a decade ago, according to a report on the nation's
released yesterday by the US Bureau of Labor Statistics. ... "Employer-sponsored coverage
has traditionally been the mainstay of the US healthcare system, and if it begins to erode
we're going to have larger numbers of people without health coverage," said Sara Collins
of the Commonwealth Fund, a health research organization. The study found 45 percent of US
employees have health insurance at work, down from 63 percent in 1993. In New England, 43 percent
of workers are covered. Walter Marshall, a bureau economist
in the Boston office, called the drop in nationwide coverage "dramatic." But he warned
the data may overstate the trend, in part because of coverage shifts within two-income
- New York Times: Quick:
What's the Boss Making? Excerpt: Richard A. Grasso, the toppled chairman
of the New York Stock Exchange, is not a large man, but he fell with a thump that is being
felt in corporate boardrooms across America. Directors of big companies, already under pressure
to demonstrate independence from management, are now worried that they will be blamed for
failing to explain not only how much but how they
pay chief executives. After all, none of them want to end up acknowledging in public,
as some directors of the exchange did, that they do not really understand what the chief
has coming. Mr. Grasso's pay plan was a marvel of complexity. It looked like a $188 million
wedding cake, with tier upon tier of bonuses and pension enhancements stacked so high that
they left onlookers
gaping. The outrage that followed the disclosures and led to his resignation last week
may not spur directors to cut executive pay. But, compensation experts say, it may cause
simplify pay plans and will almost certainly force them to produce more detailed explanations
of how the plans are constructed.
Mr. Grasso's arrangement was unusual in allowing him to collect his pension money without
retiring, it mirrored the plans of many large companies in its complexity. At I.B.M.,
for example, senior executives can participate in pension and benefit plans that are not
available to the
typical worker. Besides long-term incentive plans, these executives receive a supplemental
executive retention plan, I.B.M. Personal Pension Plan, executive deferred compensation
and I.B.M. Savings Plan.
For Louis V. Gerstner Jr., the retired chairman of I.B.M., those tributaries combined
to produce annual payments of more than $2 million in retirement. His successor, Samuel
J. Palmisano, stands to receive more than $3 million in pension annually after he retires,
but shareholders would be hard-pressed to figure that out from the
latest proxy statement from the company. To estimate Mr. Palmisano's pension, an investor
to calculate his average compensation over five years and study a table of 48 numbers
to find the correct range. But in what may come to be known as the post-Grasso era,
more companies may head in the direction of G.E., which acceded this year to the demands
of union officials at the A.F.L.-C.I.O. and
eliminated one special benefit for executives. The plan that G.E. scrapped had allowed
its five highest-paid officers to defer pay and earn interest of 12 percent to 14 percent
money — more, it seems worth noting, than even Mr. Grasso got.
If link is broken, view Adobe Acrobat version [PDF--26
| Coverage on H1-B and L1 Visa and Outsourcing Issues
CIO Magazine: The Hidden
Costs of Offshore Outsourcing. Moving jobs overseas can be a much more expensive proposition
than you may think. Excerpts: The current stampede toward offshore outsourcing should
come as no surprise. For months now, the business press has been regurgitating claims
from offshore vendors that IT work costing $100 an hour in the United States can be done
for $20 an hour in Bangalore or Beijing. If those figures sound too good to be true, that's
because they are. In fact, such bargain-basement labor rates tell only a fraction of the
story about offshore outsourcing costs. The truth is, no one saves 80 percent by shipping
IT work to India
or any other country. Few can say they save even half that. As just one example, United
Technologies, an acknowledged leader in developing offshore best practices, is saving
just over 20 percent by outsourcing to India. (Editor's note: We highly recommend reading
this article if you are involved in outsourcing decisions, or are a victim of outsourcing).
If link is broken, view Adobe
Acrobat version [PDF--264 KB].
- Hindustan Times (India): Bush
totally against scrapping H1-B visas. Excerpt: At a private reception attended by eight
Indian Americans in Jackson, Mississippi, Bush vehemently expressed his opposition to House
Resolution 2688, a Bill introduced by Republican Congressman Tom Tancredo of Colorado,
according to those attending the meeting. ...
"Bush spread his hands as wide apart
as possible and stated unequivocally that 'Tancredo and I are at opposite ends of the pole.
I fully do not support Congressman Tancredo's Bill against H1-Bs'," Shah told IANS.
Besides Bush, other noted luminaries at the reception included former senate majority
leader Trent Lott of Mississippi as well as Karl Rove, the President's chief campaign
advisor. Sampath Shivangi of Mississippi organised the exclusive Indian American delegation.
... Currently, there are some estimated 900,000 H1-B employees in the US, 35-45 per cent of whom are
from India, according to AILA. "Judging from the President's strong negative reaction to the Tancredo
bill, it's apparent that he understands that the current unemployment situation in the US is not due
to H1-B visa holders taking American jobs," Shah contended. ...
"As soon as I mentioned the visa, he (President Bush) knew what I was talking about, he knew
about the Tancredo bill, he knew what it meant. From his immediate grasp of the H1-B issue, and his strong
support for continuing
the programme, he understands also that these foreign specialty workers are basically a much needed element
of our economy," Shah said. By implication, some observers contend the President is not going to
be against business outsourcing as well.
Shah also submitted AILA's proposal on the L-1 visa programme to counteract the various legislation
currently pending in Congress to limit its usage. "The L-1 Visa programme is heavily used by the
Indian community. Last year, Indians comprised 24.4 per cent of the worldwide L-1 visas issued, making
them by far the number one group of users of
this visa programme," Shah stated.
- ComputerWorld: Study:
IT worker unemployment at 'unprecedented' levels.
Excerpt: Unemployment for IT workers reached 6% this year, an "unprecedented" level
for a profession that was once a sure path to a well-paying job, according to a new study
that also found that foreign-born workers now account for a fifth of all IT employees in
the U.S. The
report also found that the percentage of laid-off foreign-born IT workers is slightly higher
than for U.S.-born workers. ... Randy Rosenthal, manager of computer operations at Southwest
Securities Group Inc. in Dallas, has seen the same trend: highly qualified people with multiple
degrees applying for jobs IT managers once had trouble filling. "That tells me that 6% has
hit the IT area pretty hard," he said.
Wired News: Protesters Mourn
Tech-Job Drain. Excerpt: Nearly 40 unemployed engineers and software developers met Tuesday
with labor activists from the Communications Workers of America in a protest outside
the Hyatt Regency hotel in Burlingame. Their goal: to call attention to discussions taking
place inside at the 2003 Nearshore & Offshore Outsourcing Conference. The two-day conference
focuses on ways for companies to reduce costs by outsourcing IT work to countries like India
Russia -- a practice that critics say is undermining
the U.S. economy.
- San Francisco Chronicle: Offshore
debate. Job export issue pits companies against workers. Excerpt: Inside the hotel, more
than 250 senior executives, mostly from Bay Area technology and financial services companies,
gathered for a conference to learn how to cut costs by increasing their use of foreign
tech workers, a process known as "offshoring." Two years ago, the conference drew
less than half that number. Outside, about 50 picketers organized by the Communication Workers
of America chanted, "Hey,
hey, ho, ho, offshoring's got to go" as conference attendees entered the building.
Among the picketers were workers who had lost their jobs to overseas competition and
others who fear the same fate. Several protestors who are still employed said they had
used vacation time to participate.
The Your Job Is Going To India Web site is
a rich source of information on outsourcing issues. We recommend it highly.
- CNET News: Labor activists picket outsourcing
event. Excerpt: Labor unions face an uphill
battle gaining a foothold in an industry that has been indifferent, if not hostile, to
organized labor. The CWA, whose tag line is "The Union for the Information Age," has
begun testing the waters. It recently teamed up with WashTech, an IT workers activist
group in Seattle,
to launch TechsUnite.org, a Web site dedicated to highlighting the problems that computer
industry workers face. The site has 14,000 registered subscribers, 900 of which are
in California, CWA organizer Joshua Sperry said. The union also is lobbying politicians
to study offshore
outsourcing and support legislation that would limit foreign work visas.
- Wired News: Bidding Your Job
Bon Voyage. Excerpt: "This is disgusting," said stockbroker Martin Gonnet. "Leaving
aside the issue of jobs lost in this country, this strikes me as nothing more than a slave
market where you can buy desperate people very cheaply and use them until you find someone
work for even less." In the Outsource World pavilion, two dozen Indian companies are pushing
people, products and services. Indian firms have recently become concerned that they may
in their bustling outsourcing industry as other countries begin to offer cheaper rates
for the same work. In the other corner, occasionally glaring over at the Indian firms'
booths, are the crews from Romania and Bulgaria, whose representatives insist they are
the obvious "correct
cultural choice" for European and American firms.
- Kansas City Star: Sprint
will outsource technology jobs. Excerpt: Sprint Corp. has hired two
companies to spearhead an outsourcing project that eventually could send hundreds of
local technology jobs overseas. The Overland Park company said it had signed contracts
with IBM Global Services and EDS to
develop and maintain some Sprint software. Sprint expects to save $150 million over
the life of the five-year contracts. An undetermined number of computer programmers and
others will lose their jobs as Sprint tries to both cut costs and streamline its massive
information technology operations, said
Michael Stout, Sprint's chief information officer since May. ...
In announcing the outsourcing program, Sprint is joining other American companies that have turned
to consulting companies to farm out basic jobs. Many of those tasks, in turn, are completed in India,
Pakistan and elsewhere, where salaries are substantially lower.
- InfoWorld: H-1B hearing:
Companies say foreign workers needed. Excerpt: The unemployment rate
of electrical and electronic engineers has reached an all-time high," said John Steadman,
president-elect of the Institute of Electrical and Electronics Engineers-USA. "This translates
to hundreds of thousands of unemployed U.S. engineers. These are people who are degreed
and capable U.S. engineers." Unemployment among electrical and electronic engineers reached
7 percent in early 2003, Steadman said. ... Backers of the H-1B program argued Tuesday
that the visas aren't taking away U.S. jobs, because some technology companies still can't find
qualified workers for some positions. Ingersoll-Rand has searched for more than a year to fill
a plastics engineer and an industrial robotics engineer position, finally settling on a Canadian
resident in both cases, said Elizabeth Dickson, advisor of immigration services for the industrial
- The Age (Australia): Unions
urge: save Telstra jobs. Excerpt: Workers' unions have called on the federal government to "save
Australian jobs" after Telstra outsourced an IT contract to an Indian firm. Around 200 people
gathered outside Telstra's Melbourne office to protest against Telstra's $75 million deal
with Indian information technology company Infosys. The Community and Public Sector Union
(CPSU) estimates between 200 and 400 jobs will be cut from Telstra's existing contractor,
IBM Global Services, as a result of the Infosys contract. Victorian Trades Hall Council secretary
Leigh Hubbard said the federal government should intervene to stop the "exporting of Australian
jobs". "They (Telstra) are owned by us as taxpayers and as taxpayers we demand that
they not only take account of shareholder value but also the need of workers in the community," he
- Forbes: Giant Sucking Sound.
Excerpt: The new Electronic Data System office in Mumbai (formerly Bombay) is half a
world away from company headquarters in Plano, Tex. Getting to this Indian
requires a bumpy two-hour drive from downtown Mumbai. At every stoplight women dressed
in rags and holding emaciated, dull-eyed infants tap car windows to beg. In the slums
lining the roads,
thousands of people live crammed into dirt-floored rooms, sheltered from monsoon rains
by plastic sheets. At the end of the drive is a heavily guarded, new office tower that
rises above the slums. This is where Amit, 24, works. "This is Andy. How may I help you?" he
says politely, hour after hour, to the Midwesterners who have forgotten their e-mail
passwords or need the
phone number of a colleague. EDS (nyse: EDS - news - people ) hired Amit and 500 of his
colleagues--young men and women dressed in khakis or saris--to answer phone calls and
e-mails on behalf of American
companies that have outsourced tech work or customer service calls to EDS.
- CNN/Money: It's
an OutsourceWorld. Excerpt: Just past the Hewlett Packard (HPQ: Research,
Estimates) exhibit at the 22nd PC Expo, OutsourceWorld pitched its booths, filled with
reps from more than 80 global outsourcing companies who want to help customers -- U.S.
-- cut costs and raise productivity by farming out work, quite often overseas. In booths
decorated with the flags of Nepal, South Africa, Egypt and many more nations, company
and country representatives touted the advantages of moving work abroad. An Indian software
development company, DSS Infotech International Inc., promised customers savings of up
to 50 percent by moving work to its development centers. Bulgaria noted its
information technology (IT) professionals make, on average, just $300 a month. IBM
commandeered a cafe to ply potential customers with free coffee
and brag about
its outsourcing abilities.
IT Workers Face Confidence Crisis. Unemployment and outsourcing are creating a crisis
of confidence among domestic tech professionals, according to a report by the IT Workforce
Data Project Excerpt: Others jobs have moved overseas or been lost to overseas IT professionals
who have either immigrated to the United States, or been brought in by employers via
H-1B temporary employment visas or L-1 visas that permit multinational companies to transfer
employees to the United States for as long as seven years. The number of L-class visas
reportedly has tripled over the past decade. Of particular concern, the report noted,
was that L-1 visas carry no cap on the number of employees eligible for transfer and
no requirement to match prevailing local wages.
The study also cited reports that some companies transfer L-1 employees to U.S. offices,
then shift them to outsourcing services for external customers, further decreasing
employment opportunities for domestic IT workers. India accounted for one quarter of
L-class visas in 2002, the report said.
- InformationWeek: Identity
Crisis. Excerpt: Last Tuesday morning in Burlingame, Calif., unemployed
hardware engineer Cary Snyder was taking lessons from the pros on the finer points of
picketing: Chants get you heard, big signs get you seen, and a permit prevents the police
from asking you
Snyder had joined other technology workers and local organized-labor representatives
on the sidewalk outside a hotel that was hosting an offshore-outsourcing conference.
It was a surreal experience, he says. "I never thought of myself as ever needing to do
something like this or thinking that the white-collar engineer in Silicon Valley would
ever have such
an incredible need," says Snyder, who can't find work despite a solid resumé and
20 years' experience. ... The issue of unionization isn't new, but it may be gaining traction.
The Washington Technology Council, an offshoot of the Communication Workers of America, has
275 dues-paying members. Another CWA affiliate, Alliance@IBM, is made up of IBM employees. Both
work to promote employee concerns, such as retirement benefits and off-shore outsourcing, and
- WashTech: Lawmakers
seek fix on white-collar job visas. Excerpt: Facing the deadline and business
pressure, senators sought a short-term fix limiting the number of annual visas for white-collar
workers entering the U.S. for such training. Business witnesses, forced by committee
chairman Orrin Hatch (R-Utah) to pick a number, favored either 115,000 or 195,000 L-1
visas per year--but
argued there should be no limits and the
market should decide. No labor witnesses were invited. John Steadman, speaking for
the Institute of Electrical and Electronics Engineers, countered by advocating a limit
of "zero." He
said that exports of white-collar engineering jobs pushed joblessness among those highly
skilled U.S. engineers from 1 percent to 5 percent
in the last three years. Senators from both parties, except Hatch, were concerned about
the white-collar job loss. Sen. Edward M. Kennedy (D-Mass.) said New York securities
firms predicted that their U.S.-based
computer technology jobs would drop from 800 people now earning $150,000 each to zero
in three years. "They'll all be overseas at $10,000 each," Kennedy said of those jobs.