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 Join your fellow employees who are fighting for your benefits - Join the Alliance! Retirees, Vendors, Contractors, Temps, and Active Employees are all eligible to become members of the Alliance. |
Highlights—December 31, 2005
- Annex Bulletin: Analysis
of Global IT Leaders’ Business and
Stock Performances. HP, Intel, Fujitsu, Accenture, Capgemini - Top
Gainers; Dell, IBM - Biggest Market Cap Losers; Oracle's "Pyrrhic
Victory" over SAP; IBM Equity Depleted by Buybacks. Excerpts: So
who were the biggest gainers? Well, HP, Fujitsu, Accenture and Capgemini
topped their global IT peers in market cap percentage growth since
March 15, 2005 - the last time we "took the temperature" of
the Top 19 market. Lexmark, Dell, BearingPoint and IBM held up the
rear in this category. They are the only four companies among the Top
19 to have actually experiences market cap declines since nine months
ago. [...]
Just how much things have changed around the IT industry can best be illustrated with the above Equity chart. Microsoft, HP and Intel are all now bigger than IBM in terms of shareholders equity. And EMC is the next biggest competitor in this respect. To a great extent, that's due to IBM's aggressive stock buyback program that has depleted its equity. [...]After a year's hiatus (in 2003), the company resumed stock buybacks in 2004, and accelerated them this year. IBM has spent $67 billion on share repurchases in the last 10 years. And 2005 is likely to set a new record high in stock buybacks, surpassing last year's total of $7.3 billion. [...]Large stock buyback programs have a negative effect on shareholders equity, as can be seen from the above chart. Also, since the IBM market cap has declined substantially (down $66 billion since 2001) despite the stock buybacks, another argument in their favor has vanished. So they have become a lose-lose proposition. Big Blue and other IT companies that practice stock buybacks would be better served to invest in their own businesses, rather than turn their hard-earned cash over to Wall Street for reinvestment elsewhere.
- Wharton School of the University of Pennsylvania:
Giving
Employees What They Want: The Returns Are Huge. Excerpts: David
Sirota, co-author of The Enthusiastic Employee: How Companies Profit
by Giving Workers What They Want (Wharton School Publishing), believes
far too many managers stifle employee enthusiasm across the board by
using bureaucratic or punitive techniques that should be reserved for
a troublesome few. Yet his book, written with Louis A. Mischkind and
Michael Irwin Meltzer, finds that firms where employee morale is high
-- such as Intuit and Barron's -- tend to outperform competitors. The
authors' research is based on the results of 2.5 million employee surveys
taken since 1994.
For example, out of 28 companies employing 920,000 studied by Sirota Consulting, the share price of 14 companies -- those considered to have high morale -- increased an average 16% in 2004. Those prices were then compared to the companies' industry averages, where the increase was just 6%. Six "low morale" companies saw their prices increase, on average, by 3%, as against an overall industry average of 16%. Industry comparisons were based on data from 9,240 companies.In an interview with Knowledge@Wharton, Sirota says managers should rely on common sense principles that allow workers to take pride in their work. He urges them to reject trendy, get-tough tactics that were promoted in the late 1990s, such as trimming staff even at healthy companies in order to improve shareholder value. [...]We find there are three basic goals of people at work. First, to be treated fairly. We call that equity. Employees want to know they are getting fair pay, which is normally defined as competitive pay. They want benefits and job security. These days, employees especially need medical benefits, so those have become significant. On the non-financial side, employees want to be treated respectfully, not as children or criminals. Equity is basic. Unless you satisfy those needs, not much else you do is going to help. If I feel underpaid and if I feel that the company is nickeling and diming me, or wants to pay as little as possible, there is not much else an organization can do to boost my morale. This runs contrary to what a lot of people in my field say -- that pay is not that relevant. Baloney. It's terribly, terribly important. [...]As a general proposition it is hard to be enthusiastic about an organization that is not enthusiastic about you. Let's look at a few specific things. One is job security. We expect employees to be enthusiastic, loyal and engaged in an organization, but with the slightest downturn or prospective downturn we get rid of them. They are expendable. They are treated like paperclips. How can you be loyal and committed to an organization that seems to have absolutely no concern about your job? According to one of the trendiest notions so popular during the booming 1990s, job security is not important to people, particularly young people in high tech, because if they lost a job in tech, they could just walk across the street and get another one. But with the collapse of the high-tech companies, surveys found that job security went to the top of the list. Take a high-morale company -- Southwest Airlines. After 9/11 it said: 'We will take a hit in our stock price and not lay off anybody.' That's putting your money where your mouth is. [...]What I think happened is that in the 1980s and 1990s we had a reaction to particular forms of management. We talk about four kinds: First there is paternalism, where workers are treated as children. Then there is adversarial where workers are the enemy. Then there is transactional, where workers are like ciphers. Management does not know what they are like as individuals. The attitude is, 'We paid you, now we are even. We don't owe you anything.' That's where most companies have gone today. Loyalty is dead. The fourth is what we have been talking about, which is the partnership organization. It does not mean that because I paid you, we are now even. You don't treat partners that way because you might need them to help you out sometime, and they might need you. It's more like a relationship between mature adults -- not like children or enemies, but allies.
- Washington Alliance of Technology Workers (WashTech):
WashTech's Highs and Lows, 2005 Year in Review. By Jeff Nachtigal.
Excerpts: WashTech President Marcus Courtney left little doubt as to
the most significant action for the union in the past year, if not
its eight-year history. “The organizing drive at Cingular was
our biggest success,” said Courtney, who co-founded WashTech
in 1998 to focus on permatemping at Microsoft. “At the same time
it was a great victory for Cingular workers, as well as for our local
to do large-scale industrial organizing. To organize a thousand workers
in one place, in one shot, is a big deal,” Courtney said. That
WashTech was successful in a year-long organizing campaign and will
now support a large group of customer service reps, a job title nearly
ubiquitous with India and offshoring, is a sweet victory in an uphill
battle against disappearing high-tech jobs. [...]
Earlier in the year the news for workers, both in the U.S. and abroad, was not as bright. In June WashTech made public IBM’s plans to hire 14,000 new employees in India over three years. IBM documents discussed "growth drivers" that made the expansion necessary. One reason for hiring in India? IBM’s announced job cuts in the U.S. and Europe. WashTech published a story discussing the realities of life as a call center worker in India. Personal accounts from Indian call center workers showed the divide between Washington Mutual’s (WAMU) “caring, courteous and respectful” concern for customers and working life for employees of the Indian company WIPRO, which handles WAMU accounts in India. [...]Numbers continued to climb on WashTech's Offshore Tracker, which counts nearly half-a-million jobs offshored. The offshoring leaders: EDS, Dell, Intel and Computer Sciences Corp. Recent news that Microsoft, Adobe and GM will spend billions more on their India operations does not come as a big surprise in a non-election year, a time when the political backlash is not as sharp. “I think that outsourcing is not an issue that’s going away,” said Courtney. “Companies in a non-election year are feeling much freer to publicly announce their investments in hiring and firing to hire overseas. "It clearly shows how politics impacts how corporations make these kinds of announcements,” he said.
- Daily Telegraph (United Kingdom): Indian
workers slash IT wages. By Philip Aldrick. Excerpts: Indian technology
workers are flooding the UK on temporary permits, undercutting local
wages and raising the prospect of a homegrown skills shortage, an
IT association claimed. Salaries for certain IT workers have fallen
in recent months, according to the Association for Technology Staffing
Companies. ATSCo chief executive Ann Swain said: "Wages are
being undercut by companies bringing over Indian workers, who are
put up in hostels and paid poorly." [...]
ATSCo's research shows that the "commoditisation" of IT services has reduced average salaries for permanent IT helpdesk workers by 3pc this year to £17,538 and for temporary workers by 25pc to £12 an hour. Ms Swain warned that the trend, known as "onshore offshoring", could lead to a damaging skills shortage. She said: "How will organisations recruit IT staff for mid-to-senior level roles if there are no entry-level jobs left in the UK? The fall in the number of graduates choosing IT careers will filter through to chronic shortages at the top in years to come."
- New York Times: Transit
Strike Reflects Nationwide Pension Woes. By
Steven Greenhouse. Excerpts: Fast-rising pension costs for government
employees - the issue that helped set off this week's transit strike
in New York City - are a problem confronting cities, counties and states
nationwide, causing many budgetary experts to predict a wave of painful
fights over efforts to scale back government retirement programs. [...]
Many government employees and their unions assert that the campaign to trim pensions threatens America's social contract for the middle class: a respectable pension. Saying that in recent contracts they had sacrificed wage increases or better health benefits for solid pensions, many public employees and their unions assert that governments are betraying their commitments by seeking to now cut pensions. Further, they argue that much of the shortfall in pension financing could be erased by a strong stock market in the next several years."A lot of people are exaggerating the size of the problem," said Gerald McEntee of the American Federation of State, County and Municipal Employees, which represents 1.4 million government workers. "Right-wing think tanks and conservative Republicans want to do away with traditional pension plans and replace them with much-cheaper 401(k)'s at the same time they want to give all these tax cuts to the rich."
- Yahoo! message board post by "Bharat Patel". Full excerpt: Let's compare NY transit workers pension plan with IBM pension plan? According to my information, average 25 years of service and age above 55, NY transit workers get about 70% of their salary from pension after tax! While IBM retirees it is less than 35% in similar condition! Please correct me if I am wrong!
- Coachville Resource Center: The
Top 10 Reasons Why 'Forced ranking' Quota Systems Don't Work.
By Diana Robinson, PhD. Excerpts: In recent years some industrial
leaders and major corporations have advocated a system of "forced
ranking and elimination" of
an arbitrary percentage (often 10%) of the lowest performing employees
every year. Not all organizational experts agree that this is an effective
system. Some believe that it can lead to an attitude of fear, unwillingness
to make mistakes, and to stifled creativity. Here are some of the counter-arguments
to forced ranking, summarized from an article by Edward E. Lawler III
in 'strategy + business.' [...]
- 5. Long-term damage to morale. If continued year after year, once the initially identified poor performers have been eliminated, who is to be eliminated next? Those who were previously identified as satisfactory? New hires who have not yet had time to get up to speed? When employees are in a state of constant fear they rarely do their best work. [...]
- 6. Reduced teamwork. The system encourages an 'each person for him/herself' attitude, and discourages teamwork. It also discourages people from asking others for help or for needed training, for fear that this will make them vulnerable to being identified as poor performers.
- CNET News.com (August 18, 2002): The
folly of forced rankings. Excerpt: Mythic leaders such as Jack Welch
swear by distribution curves to remove low performers. But there
are pitfalls in playing the percentage game. General Electric's former
CEO Jack Welch is among the most vocal and articulate advocates of
performance management systems that force turnover of the lowest-performing
employees each year. At GE, it's the bottom 10 percent of employees
who are supposed to be eliminated. Mr. Welch feels so strongly about
this practice that he highlighted it in his 1999 letter to GE shareholders
and advocated it again in his book “Jack:
Straight from the Gut.” [...]
A recent study at one major global pharmaceuticals manufacturer that uses the forced distribution approach determined from exit interviews that several hundred people in its worldwide finance organization who had been identified as top performers by their managers left because they felt undervalued. Managers tend to disown the appraisals and blame the quota system when they are forced to identify poor performers. They say to those individuals, "Well, I know you're not really a bad performer, but I have to identify somebody, and you are the unfortunate one." Supervisors thus discredit the entire appraisal system by not taking responsibility and significantly contribute to employees' negative perceptions of the system.Forced firings also create an unhealthy competition among peers. When employees in a work area compete with one another for ratings, knowing there is always a percentage at the bottom who will be forced out, creates fear and selfishness. People are much less likely to help one another, train one another, share information and operate as an effective team. In today's flatter, knowledge-work-driven and more team-based organizations, this can take a significant toll on organizational performance.A better way of dealing with poor performance starts with replacing bureaucracy and rules with leadership and judgment. Companies that require managers to fire a certain percentage of poor performers every year are simply imposing a rule to try to correct the poor leadership behavior of managers.
- Jacksonville Business Journal (July 16, 2004): Forced
rank performance appraisals don't show real picture. By Richard Hadden.
Excerpts: Forced ranking makes sense only if you're trying to sabotage
your performance management efforts and produce a completely inaccurate
picture of performance quality. Why would any supposedly intelligent
management team risk disenfranchising a large chunk of their employee
population by force ranking them into an unfavorable rating category
in order to satisfy an arbitrary quota? As one of our survey respondents
put it, "Why isn't it possible for everyone in the class to be rewarded
with an 'A' if they're all doing 'A' work?" I agree. [...] The
problem is that forced ranking is just that -- forced. The entire premise
on which it is based is flawed. It ignores the reality of people's
individual performance, paying homage instead to the categories themselves.
[...]
Second, one idea whose time has definitely not come is the so-called 360 degree review. On the surface it sounds like a winner for people to get their performance appraised by folks who work all around them. Unfortunately, whatever good might be accomplished is usually undone by the recipient's understandable musings about which of their co-workers decided to take a cheap, albeit anonymous shot at them. Finally, performance reviews should be a low-tech, high-touch affair. If you're going to do it, do it right. Sending someone a review via e-mail is a long way from right.
- Triangle Business Journal, courtesy of MS-NBC: Companies
will get federal windfalls to keep drug plans for retirees. By Michael
Wagner. Excerpts: Once the new Medicare prescription drug program goes
live Jan. 1, some Triangle employers will receive a federal, tax-free
windfall - in most cases worth millions - for doing absolutely nothing.
[...]
Among private employers, Duke University could receive as much as $1.8 million, GlaxoSmithKline $3.3 million, and IBM $6.6 million based on their number of Medicare-eligible retirees and the estimated $660 average annual payment per retiree. [...]
- San Francisco Chronicle: Big
payoff in CEOs' stockings.
By David Lazarus. Excerpts: Today's the day to count your blessings.
And if you're the chief exec of a major American corporation, you'll
probably want to sit down. That count could take a while. We learned
the other day, for example, that John Mack, CEO of brokerage Morgan
Stanley, will receive a bonus of $11.5 million for all his hard work
this year. Never mind that he's only been on the job for five months.
At Goldman Sachs, meanwhile, CEO Henry Paulson will pocket a bonus
this year of about $38 million. This will help compensate for the mere
$30 million he received last year. [...]
"Transparency is a big problem," said Paul Hodgson, senior research associate at the Corporate Library, a research firm specializing in corporate governance. "Disclosure levels in the United States are not as good as in other parts of the world." For instance, it was reported last week that some companies actually pay the personal taxes of their CEOs as part of compensation packages. But you wouldn't know this in many cases unless you waded through the footnotes of regulatory filings.In a recent report, Hodgson found that the median year-on-year increase in total CEO pay doubled last year to more than 30 percent. The average increase was 91 percent, thanks to 27 CEOs who made more than 1,000 percent more than they were paid a year earlier.
- USA Today: Pension
problems loom for boomers. By Stephanie
Armour and Kathy Chu. Excerpts: The trend by companies to freeze or end
their employee pension plans may have a big impact on baby boomers now
on the cusp of retirement. Boomers with pension plans have counted on
monthly retirement checks at the end of their career, but more employers
are ending their plans or halting future benefit accruals. Those at greatest
risk include boomers in their late 40s and early 50s, who are still at
least a decade from retirement but too old to save enough to make up
the difference in their pension benefits. [...]
"This will definitely be a problem for baby boomers," says Karen Friedman at the Pension Rights Center. "You've been at a company under the plan and worked for years with that expectation, and then it's taken away." [...]More boomers are facing retirement without health benefits. Boomers are already facing a more financially risky retirement as the percentage of private-sector employers offering retiree health benefits drop. In 2002, 13% of private sector employers offered retiree benefits to early retirees (those not yet 65), down from 22% in 1997, according to a report this year from the Employee Benefit Research Institute.
- Wall Street Journal: Lucent's
Profit Crutch – Pensions.
Overfunded Plan Is Invigorating Telecom Company's Turnaround; Retiree
Health-Care Issues Loom. By Sara Silver. Excerpts: Lucent Technologies
Inc. is proud of its turnaround, which just produced its second annual
profit after the troubled years of the telecom bust. What the company
doesn't brag about is that 82% of this year's earnings are from its pension
fund, not improved equipment sales.
At issue are something called pension credits – the amount by which the pension fund's income exceeds its current expenses. The year before, such credits accounted for more than half, or $1.1 billion, of the Murray Hill, N.J., company's reported $2 billion profit. Without the $973 million pension credit in fiscal 2005, its $1.185 billion profit would drop to $212 million. [...]Common wisdom among shareholders is that companies with lots of retirees face big pension problems. Lucent shows that isn't always the case. Lucent isn't the only telecom company whose pension plan has turned into a pot of gold. Earlier this month, Verizon Communications Inc. announced it will freeze the pensions of its management employees after June 30, 2006, a move the company says will save it $3 billion during the next 10 years. Like Lucent's, Verizon's pension program is overfunded and has added billions of dollars to the company's bottom line in recent years.
- New York Times: Big
Labor's Big Secret. By Robert Fitch.
Excerpt: Workers' wages are falling, and hundreds of thousands of jobs
are being sent offshore. America's largest parts supplier, Delphi, filed
for bankruptcy protection, and General Motors, Delphi's main customer,
may too, if a threatened United Auto Workers strike occurs next month.
Meanwhile, Ford and its main parts supplier, Visteon, seem to be skidding
down the same road. How did we get here? There are many causes: poor
car designs, high pension costs, increased foreign competition. But much
of it comes down to the overwhelming health insurance costs borne by
the auto makers. This is why the union's president, Ron Gettelfinger,
has urged Congress to enact sweeping health insurance reforms.
If the government paid everyone's health insurance bills, as those in Canada and most of Europe do, Detroit's Big Three could save at least $1,300 per vehicle. Profitability would return. With deeper pockets, the auto makers could afford to pay their suppliers. Communities would be spared layoffs.Of course, there are a lot of other compelling reasons to support a single-payer plan besides helping the auto industry. Although it is by far the most costly in the world, our health care system still leaves 43 million people uncovered. The latest World Health Organization rankings listed America's system 33rd, below Costa Rica and only two notches above Cuba.Most advocates of universal health care focus on the opposition of Republicans and insurance companies. But perhaps the most important factor keeping an overhaul off the national agenda is one that few Democrats acknowledge: most of Mr. Gettelfinger's fellow labor leaders don't support a single-payer system either. The reason comes down to simple self-interest. The United Auto Workers is one of the few private-sector unions that doesn't run its own health plan. Rather, most have created huge companies to administer their workers' plans, giving them a large and often corrupt stake in the current system. Opposition to a national health care plan is as much a part of the American trade union tradition as the picket line. It goes back to Samuel Gompers, the founder of the American Federation of Labor, who railed at early Congressional efforts to pass a law mandating employer coverage as Britain had done, which he said had "taken much of the virility out of the British unions."
- New York Times: New
York Transit Deal Shows Union's Success on Many Fronts. By Steven
Greenhouse. Excerpts: Mr. Toussaint, whose back appeared to be against
the wall last week, can boast of a tentative 37-month contract that meets
most of his goals, including raises above the inflation rate and no concessions
on pensions. Indeed, several fiscal and labor experts said yesterday
that Mr. Toussaint and his union appeared to have bested the transit
authority in their contract dispute. [...]
When Mr. Toussaint appeared before television cameras at 11 p.m. on Tuesday to announce the settlement, he commented little except to read an impressive list of new worker-friendly provisions: raises averaging 3.5 percent a year, the creation of paid maternity leave, a far better health plan for retirees, a much-improved disability plan, the adoption of Martin Luther King's Birthday as a paid holiday, and increased "assault pay" for bus drivers and train operators who are attacked by passengers.Then Mr. Toussaint announced a big surprise: Some 22,000 workers will each receive thousands of dollars in reimbursements for what are considered excess pension contributions; for several years, these workers paid more toward their pensions than other workers. For those workers, that money will easily offset the fines of slightly more than $1,000 that most of them face for taking part in the illegal strike. The union itself could still face a $3 million fine that a judge ordered because of the 60-hour strike. [...]At first glance, the authority seems to have embarrassed itself over pensions, the issue for which it appeared to draw its firmest line in the sand. To bring its fast-rising pension costs down to earth, the authority first pushed to raise the retirement age for future employees, to 62 from 55, and then demanded that future workers contribute 6 percent of their wages toward their pensions. Finally, after Mr. Toussaint said he would never sell out the union's "unborn," the authority pulled its pension demand off the table - a move that state mediators proposed to persuade the union to end its walkout.
- Investment Advisor: Most Companies See Employee Retirement As Not Their Problem. Mostly concerned about reducing their own costs. By Savita Iyer. Excerpts: It’s no secret that the rising costs of retirement finance call for individuals to save more during their working life, namely by participating more actively in the retirement programs offered by their employers. But even if working folks are doing what’s right, how tuned in are their employers in helping them get to where they need to be? Not very much at all, according to a survey conducted recently by Hewitt Associates, a global human resources services firm. Indeed, of the more than 100 large, U.S. and European multinational organizations Hewitt selected for its Global Retirement Benefits Research Survey, only a paltry 4% said that enabling employees to retire is a top priority. For most companies, particularly those in North America, adequate planning for retirement benefits appeared to be a low priority, and less than half of the corporations surveyed ranked themselves “in control” of the measures required for proper retirement planning, which include aligning retirement costs with business strategies, managing those costs and associated risks, optimizing processes, enabling employees to participate in the programs companies offer and executing a global retirement strategy.
- St Petersburg (Florida) Times: Study: Medicare misses drug discounts. Excerpt: Medicare is losing out on deep discounts by turning its new drug benefit over to private insurance companies instead of negotiating directly with the drug industry, a study released Wednesday suggests. The study, by Families USA, examined what the U.S. Department of Veterans Affairs pays for 20 common drugs vs. what new Medicare Part D drug plans will pay, beginning Jan. 1. VA prices beat the private plan prices for 19 of the 20 drugs, and VA discounts were often two or three times deeper, the study says.
- St Petersburg (Florida) Times: Bush
steers around furor over drug plan. Excerpt:
While President Bush was in Virginia touting his new Medicare drug plan
Tuesday, delegates to the fifth White House Conference on Aging demanded
it be overhauled. Their paths never crossed. Unlike his three predecessors,
including his father, Bush will not attend the four-day conference. The
administration is well represented there, a White House spokeswoman said.
But seniors at the once-a-decade White House conference were in no mood to be sold on the plan. The Part D drug benefit, which takes effect Jan. 1, is administered by a raft of private insurance companies. Some drugs are covered; others aren't. Premiums and copayments vary widely, and Medicare, by law, cannot negotiate price reductions from the pharmaceutical industry. Picking the right coverage from the myriad options "is a daunting task," Bush acknowledged to residents of the Greenspring Village Retirement Community in Springfield. Still, he said, the drug benefit "is a good deal." [...]But when about 100 conference delegates convened a Medicare improvement session, they latched onto the Part D drug plan and wouldn't let go. "D is for disaster," yelled Wisconsin delegate Helen Dicks. "We need one Part D plan - a Medicare Part D plan," chimed in Ohio's Belle Likover, echoing widespread sentiment that the government, not private insurance companies, should administer a drug benefit and negotiate directly with the drug industry for cheaper prices. Other delegates called for allowing importation of foreign drugs, eliminating Part D's coverage gap commonly known as the "doughnut hole" and broadening subsidies for low-income people.
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