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    Highlights—May 6, 2006

  • San Francisco Chronicle: Fighting the hostile takeover. By David Sirota. Excerpts: Amid all the consultant-packaged rhetoric about America being the "greatest democracy in the world," it often seems impossible to figure out exactly who controls our government. But every now and then, the public gets a fleeting glimpse into who is really running the show.
    We get to see how there no longer is a boundary between Big Business and government, and how our politicians are wholly owned subsidiaries of Corporate America. We get to see, in short, exactly how our government has been the victim of a hostile takeover.
    Last month, in three little-noticed stories buried in the business press, the hostile takeover was on full display. The first story was a tiny one buried on the inside pages of the Wall Street Journal about how the U.S. Treasury Department worked hand in hand with IBM to kill bipartisan pension legislation in 2003. The bill would have outlawed pension schemes employed by IBM and other big companies that give workers less than they were originally promised. The report noted that at the time, "a Treasury official disclosed nonpublic information to IBM and failed to report expenses paid by a lobbyist for a pension-industry trade group" -- all while allowing the company to circulate documents on Capitol Hill claiming the U.S. Treasury officially was working with IBM to kill the legislation. Clearly, the behavior ran afoul of the lobbying laws supposedly creating a boundary between business and government. But as the Journal went on to note, "The Justice Department didn't pursue criminal or civil charges in the matters because they didn't meet the agency's 'prosecutorial threshold.' " The legislation was ultimately killed. In effect, a major federal agency -- in this case the Treasury Department -- was the victim of the hostile takeover, serving as an arm of Corporate America, rather than a regulator.
    A few weeks later, the well-respected trade publication Manufacturing & Technology News reported that the Bush administration continues to refuse to fully release a congressionally mandated report on the effects of outsourcing. Federal law required the White House to release the Commerce Department report well before the election in 2004. But the report "was delayed for clearance by the White House and the Republican-controlled Congress due to the controversial nature of the subject," the publication noted in an earlier story. Put another way, the White House and its corporate benefactors who were profiting from outsourcing didn't want to even talk about the pesky issue during the president's re-election campaign.

Coverage of 2006 IBM Stockholders' Meeting in Tulsa, Oklahoma

  • Note: Most of the coverage of the 2006 IBM Stockholders' meeting is in last week's highlights.
  • "IBM Stockholders' Meeting Highlights" by "i_be_mad_as_heck". Excerpts: Boy, I will bet somebody got their tit in a ringer over what happened at the ASM. There are many people paid big bucks to ensure these things to not happen at the ASM and that Sam is not embarrassed.
    They must not have had Jim on their radar. I will bet that Jim never gets called on again. What a great job he did! The "punch line" was right on target and related Sam's pension in a way that regular folks can comprehend the numbers. Blue_guy_25, too bad you weren't there to hear it.
  • Yahoo! message board post by "ibmmike2006": Sam, Is $10,000 a day or $22,000 a day, Enough to live on? Excerpts: When Jim Askew asked the question to Sam Palmisano at the Tulsa, OK 2006 IBM annual Stockholder meeting. "Sam, do you think you will be able to get by on $10,000 to $22,000 a day pension when you retire? Do you think you will have enough?
    Sam went on to explain that the reason the IBM SERP (Supplemental Executive "Retirement aka IBM Retention" Plan) was set at those levels was to "Retain" executives who, in 1999, were rushing out of IBM to seek the fortunes of the "dot.com" exuberance like Jesse Greene, who left IBM and then when "dot.com's" did not work out, came back to IBM to collect his IBM stock options.
    Now on the other hand, maybe the IBM SERP with a top scale prior to 1999, of $2,000,000 annual pension instead of $8,125,000 like it is today, page 21, table 2, IBM 2006 Proxy was raised 400% by Lou Gerstner for another reason.
    Prior to Gerstner changing the IBM SERP top value from $2 million to $8 million, Lou was only going to get approximately a $250,000 annual pension from that IBM SERP table prior to 1999 based on his compensation and years of service. By raising the amount payable from this Non-qualified Defined Benefit Pension plan, aka IBM SERP 400 per cent, Lou would get his goal of $1,000,000 a year annually for life. I think Lou, as goal oriented as he is, wanted more than $250,000 a year lifetime pension from IBM for teaching the "Elephant to Dance", so he had to raise the IBM SERP top end for ALL the IBM executives. At approximately the same time, Lou awarded himself 10,000,000 shares of IBM stock that split a year later in 1999 to 20,000,000 that Lou can cash in at the $53 Option strike price prior to June 30, 2008. We won't know when Lou cashes in those stock options, as he is no longer a director for IBM and is not required to report the sale to the SEC.
    You have to go back and look at the IBM Proxy's prior to 1999 to see the IBM SERP top end amount of $2,000,000.
    Now at the IBM Shareholder meeting in Tulsa, Sam said, he wished IBM would give him $1 Billion dollars. Well sometimes the numbers get clouded especially when you are taking $10,000 to $22,000 a day pension, sometimes calculators just don't go that high. Sam did not dispute the $10,000 to $22,000 a day defined non- qualified pension he will receive, just the $1,000,000,000 dollars. Lots of zeroes.
    Congress had tried to limit the amount of defined benefit pension Corporate Executives receive back in the 80's by limiting the amount of money that can come from the IRS Qualified Defined Benefit Plan like most IBM retired employees receive from their pension trust fund. The top Amount annually is $165,000. So Congress thought they would send a message to Corporations saying that "Corporate executives should only receive a $165,000 annual lifetime pension".
    A US Senator with 30 years of service receives $110,000 a year defined benefit pension with a Cost of Living adjustment for example. In a US Senator's mind, being the CEO mentality of our Corporate Senators, thinking Corporate Executives don't deserve much more than a US Corporate Senator would receive upon a 30 year, re- elected career of being a US Senator.
    Well, the Corporate Executives said, "That ain't enough" and I want 60% of my last five year income in a defined benefit pension."! So they have this law established by the IRS that allows a "Top Hat" NON-QUALIFIED defined benefit pension in addition to the $165,000 limit from the IRS Qualified defined benefit pension trust funds that can be established to reach 60% of that executives last average five years of income.
    The IRS gives IBM a tax break on the Qualified regular IBM Defined Benefit Pension plan to defer the annual income of $165,000 lifetime pension for the contributions that IBM made on behalf of their executives over their 35 years of employment. The difference, in Sam's case, if his annual earnings are $12,500,000 in the last five years of his reign as IBM CEO, he will receive $165,000 from the regular IBM Trust Fund and $7,960,000 from a Non-qualified IBM SERP defined benefit pension fund established to be paid from IBM Assets.
    Now, lets assume that when Sam retires, IBM would take a Lump Sum for Sam and IBM would put this Lump Sum in an annuity with a lifetime income for Sam and his wife, at the same age of 60 with his wife receiving 50% joint survivorship to meet the amount established for his IBM SERP Defined Benefit Non-qualified Lifetime Pension.
    How much money, deposited in a Joint Lifetime annuity would it take to receive a Lifetime income of $10,000 or $22,000 a day and $5,000 or $11,000 for his spouse as a joint survivor?
    For this, I needed to talk to a financial advisor.
    Annuities take into consideration the age of the annuitant (Sam) and his spouse as to come up with the annual lifetime amount and it is based on both he and his wife's life expectancy. The mandatory age of retirement of an IBM executive has been age 60. So assuming Sam and his lovely wife, that Don Parry introduced Sam to, are both age 60. At the present 3.75% interest rate for annuities, this is how much IBM would have to deposit with an insurance company so Sam and his wife receives a daily income of $10,000 or and for his wife to receive 50% joint survivorship of $5,000 a day.
    If Sam manages to reach the top end of an average five year salary of $12,500,000 annually, as indicated in the IBM SERP table on page 21 of the IBM 2006 proxy, or $22,000 a day, this is the amount of money the insurance company would need to deposit in a lifetime annuity to give that Lifetime income to Sam and his wife without a COLA, of course. [...]
    Keep in mind, the IBM executives have NOT disclosed how many people are covered by the "Top Hat" SERP. Looking at the entry level of $500,000 annual Income level on Page 21, table 2 of the 2006 IBM Proxy, it appears that an executive making $500,000 a year qualifies for the SERP if they were making that much money prior to May 1, 2004. Sam pointed out that IBM has shut the door on new entries into the SERP "club". So the estimate could be as high as 3,000 and that is a lot of money waiting to be printed, aka IBM stock, sold to purchase the annuity for the IBM executive SERP Defined Benefit Pension lifetime income. [...]
    At the IBM shareholder meeting, I had coffee with a couple whose spouse had retired 20 years ago from IBM. He was an administration manager and they lived in Tulsa, and they shared with me that in the 20 years as an IBM retiree, they have not received any cost of living adjustment they could recall to combat inflation from IBM. He spent 27 years at IBM and retired a early.
    If he retired with a $1,000 a month pension at 3% inflation, his purchasing power has been halved. Every 20 years, that a retiree does not receive a COLA, the purchasing power halves. Retiring today at $1500 a month pension will only buy an $750 worth of goods 20 years from now. With rising medical costs, more than likely, the pension might only pay for medications not covered by Medicare.
    For your own well being, plan on No Cola from IBM and a life expectancy of age 87 if you retire at age 60.
    Sam was right, he is not going to be given $1,000,000,000 Billion, only $120,000,000 if he was does well. The great news is that only 44% of the lifetime income will be taxable as ordinary income the first 27 years.
    I guess Sam's Lifetime pension is in line with the average CEO to average IBM retiree. Sam will be receiving 451 times more pension annually than the average IBM retiree at $18,000 a year. Not bad for guy, hired off the street and trained by Don Parry at IBM basic. I wished I had been in the same class. Maybe in my next life.

  • Pension Rights Center: House Motion to Instruct on executive compensation passes; Verizon-related activities. Excerpts: Motion to Instruct Passes House of Representatives Late last night, the House of Representatives approved a motion, offered by Representative George Miller (D-CA-7), Ranking Member of the Committee on Education and the Workforce, to “prevent corporate executives from padding their own retirement pay packages even when rank-and-file employees face restrictions on their pension benefits,” according to a press release describing the motion’s passage. The motion passed by a vote of 299 to 125. To see how Members voted on the Motion, click here: http://clerk.house.gov/evs/2006/roll122.xml
    The motion instructed conferees who are working on the pension reform bill to treat restrictions on the retirement benefits for corporate executives in the same manner as benefits for rank and file employees. Right now, under the House version of the legislation, if an employer allows a traditional plan to become less than 80 percent funded, workers’ can be penalized – even though they have had nothing to do with the underfunding of the plan. The motion is meant to ensure that there is some rough justice and that executives can’t allow their plans to become underfunded, pay themselves astronomical benefits --- while employees get hit with benefit restrictions. While this motion is not binding, it increases the chances that language of this sort could end up in the final bill.
    NEXT we have to get Congress to act to stop executives from paying themselves huge benefits – WHILE FREEZING THEIR EMPLOYEES’ PENSIONS!
  • ProtectSeniors.org: Retiree Healthcare was promised to be paid by corporations, forever. It was not a gift from benevolent management. It was earned by the employee's hard work. Employees accepted a promise of future payment in retirement for their work so corporations would not have to lay out hard cash at the time the work was performed. General Motors was one of the first to renege on that deferred pay promise. Their retirees fought back in the courts. After about six years and a million dollars in court costs, a courageous group of General Motors retirees lost at the US Supreme Court. That loss emboldened other corporations to take away earned, subsidized or fully paid, healthcare from their retiree family.
    How could this happen? Corporate America crafted a slick PR campaign which sold courts, the press and many of us on the erroneous concept that paying for retiree healthcare was somehow a "GENEROUS GIFT" provided by corporations to their retiree family. We all know now that the HEALTHCARE SUBSIDY IN RETIREMENT WAS AN EARNED BENEFIT AND IS NO DIFFERENT FROM ANY OTHER COMPANY DEBT.
  • Journal of Financial Planning: A Convergence Toward Flat...and Lumpy. By Lewis J. Walker. Excerpts: Early January 2006 found me flat on my back in Atlanta's Piedmont Hospital, recovering from back surgery. In truth, I spent more time propped up on my side so as to minimize pressure. Nevertheless, I was flattened physically as I read Thomas L. Friedman's best-seller, The World Is Flat: A Brief History of the Twenty-First Century. In the newspapers, IBM's announcement of the termination of its defined-benefit pension plan made headlines. The explanation by Big Blue's senior vice president of human resources, Randy McDonald, seemed to underscore Friedman's themes.
    McDonald cited market volatility and complex pension regulations as mitigating factors. In the main, business pressures were "exacerbated by global competition that has never been fiercer." Said McDonald, "At IBM, we face many competitors—in the U.S. and elsewhere—that have considerably lower employee benefit costs than IBM."¹ There you have it—future U.S. retirees flattened by growing competition from the BRICs—Brazil, Russia, India, China—and elsewhere.
    Planners with clients at IBM pondered the meaning of the announcement relative to the human impact of the move. Wall Street took the stock up by 5 percent in a short-term boost on the news. Hold this thought. [...]
    The world is flat. Jobs are up for grabs; global competition squeezes profit margins; leadership shifts in sectors; new firms pop up and go public, and some people get wealthy; old firms downsize, die, or are acquired, and for some, financial security decreases; employee benefits are reduced. Where are "people" in all of this? They are not flat. They're lumpy; they are emotional and worried about how fast to run and in what direction, just to stay in place, or to get ahead. [...]
    The Human Element: Take a financial scalpel to a company—reduce jobs, relocate plants, slash benefits—and often the stock price increases. As asset managers and investment consultants, we like that. Take that same scalpel to the finances of a client who has been downsized or has lost benefits, and there is pain, real pain, that we as their advisor must help to manage.
  • U.S. Newswire: Democrats Urge Energy Secretary to Change Course on Contractor Pensions. Excerpts: In the latest example of the Bush Administration's ongoing campaign to undermine Americans' retirement security, Energy Secretary Samuel Bodman has announced that that the Department of Energy will compel its contractors to stop providing the secure pensions and health care benefits they have long offered to their workers. Today, Senate Democratic Leader Harry Reid and Democratic Senators Edward Kennedy, Max Baucus, Jeff Bingaman, Tom Harkin, Barbara Mikulski, Maria Cantwell, and Patty Murray sent the following letter to Secretary Bodman, urging him to immediately change this unreasonable policy. The text of the letter is below.
  • InformationWeek: Another New Bill Tries To Raise Cap On H-1B Visas. The Skil Bill aims to unencumber H-1B visas from other immigration reform issues. By Marianne Kolbasuk McGee. Excerpts: "This new bill helps set free the H-1B issues from the other immigration reform issues that might have less chance of moving forward," says a spokesman from Compete America, a lobby group that represents about 200 businesses, universities, and trade associations and supports the new legislation. Among the recommendations of the Skil Bill is an exemption from the annual H-1B cap for any professional who has earned a post-graduate degree from an accredited U.S. university.
    Currently, the annual cap on H-1B visas is 65,000. The bill proposes to raise the ceiling to 115,000, with options to increase the cap annually by 20% based on the needs of employers. The United States received the maximum number of allowable petitions for H-1B visas in fiscal 2006 six weeks before the fiscal year even began. The Cornyn bill also proposes allowing employers to pay a premium fee to expedite the processing of an immigrant petition and provides for a "precertification system" to streamline the processing of certain nonimmigrant and immigrant petitions.
    The Skil Bill was co-sponsored by Senators George Allen (R-Va.), Wayne Allard (R-Colo.), Mike Enzi (R-Wyo.), Bob Bennett (R-Utah), and Trent Lott (R-Miss.).
  • WashTech News: New Senate Bill Raises H-1B Caps, Sponsor Has Strong Ties to Indian Lobby. Excerpts: The high-tech industry called in a chit on Republican U.S. Senators this week by getting them to introduce a new stand-alone Senate bill expanding the number of H-1B visa workers allowed into the country from 65,000 to more than 115,000. The bill also creates a mechanism that employers could go beyond the cap by 20% based upon need. The high-tech industry, led by Microsoft, has made expanding the H-1B visa program its number one political priority in Washington D.C. The prime sponsor of the bill, Sen. John Cornyn of Texas, has strong ties to the Indian lobby.
    In 2004, WashTech news broke the story that almost a dozen members of Congress went on an all expense paid trip to India courtesy of the Indian tech lobby. The only Senator that went on the trip was John Cornyn, where he spent six days at a cost of $13,818 according to his Travel Disclosure form. In a speech to business leaders, on the trip, he said that outsourcing was inevitable and that U.S. companies save costs, which makes them more competitive. Cornyn is not up for re-election this year, but has garnered more than $145,000 in campaign contributions from the computer industry according to the Center for Responsive Politics website since 2000.
  • Workforce Management: Boeing Awards Taking Off in New Direction. Boeing is adopting a high-tech, culture-sensitive employee recognition system to replace one that wasn't motivating its employees. By Bridget Mintz Testa. Excerpts: rewards and recognition isn’t rocket science at aerospace giant Boeing--but until recently, it was almost that difficult. A Fortune 20 company, Boeing em­ploys nearly 154,000 people in 48 U.S. states and 67 countries. Thousands of those employees are unionized. Job types range from factory work in building civilian and military aircraft to aircraft mechanics, test pilots, engineers and designers of all stripes, executives, support personnel, Ph.D. researchers and, of course, rocket scientists.
  • WashTech: The Wal-Martization of Microsoft? By Roberta L. Wilson. Excerpts: Not so many years ago I traversed the hallways of Microsoft, debated in meetings, and swore at my computer, but I was always thrilled at the work, the intelligence and comradeship of my fellow high-tech workers, and the corporate culture that inspired all of it. As Microsoft embraces the Wal-Mart model, however, I wonder if my work experience there will survive.
    While at Microsoft, I largely felt free to do my work in a way that made sense to me, make suggestions for improvement in products and processes, and further the next generation of software. I was fairly rewarded for this effort and devotion to my work. While I have, of late, taken Microsoft to task for its permatemp practices and ever-growing commitment to offshoring and inshoring, through its lobbying to increase H-1b and L-1 visa limits, the truth is Microsoft was the best job I ever had as either a contractor or perm employee in the 20-some years I spent in the software business.
    Unlike other corporations, which were built on the military model, the big boss, Bill Gates, created a work culture based on the campus model. The idea was that adults did not need to be treated like young children, who some think need to be constantly told what to do. Micro management was out; self motivation was in. Definitely my kind of place. [...]
    But indications are that Wal-Mart is the model, and perhaps even worse. Steve Ballmer was recently quoted as saying that he regularly fires 6.5% of his work force. Check out: http://business.timesonline.co.uk/article/0,,9075-2153181,00.html. This contrasts with the dearly held belief that Microsoft hires only the best, which motivated many of us to live up to that expectation. [...]
    In other words, our American corporations are no longer “ours,” if they ever were. The social contract between American corporations and the workforce is fading. You know, the contract in which we work hard and are rewarded well so that we can actually buy the things we make, with a few social safety nets built in should bad things happen. Hmm…I wonder when they were going to tell us that the old contract is over. The new contract is that we workers are continually threatened with replacement by workers (generally who are underpaid and unprotected) who will make stuff cheaply so that we can buy it, except we don’t have jobs anymore; or if we do, we’re paid less than we were a decade ago; or even if we’re paid well, we have little job security in this race to the bottom. Geez, I don’t remember voting for, or even being asked about, this version of our future.
  • Yahoo! message board post by "ibmgrunt": It's all going to India as fast as possible. Full excerpt: I was on a project call today and after the call several people that are project managers asked me to stay on the call. THEY are all disgusted about all the projects they are on to move everything possible to India as soon as it can possibly happen. There are two major firms in India that claim they can do it better and cheaper and will put IBM out of business within the next two years. This has execs nervous and they are pushing to send everything possible overseas to save all the money possible. They claim IBM is looking at EVERYTHING possible at this point and the goal is end of year. Alliance can not gain ground at this point because people are so tired they are too busy looking for a new job so they can move on. Nobody wants to save their crappy IBM job anymore. I know if I get a decent offer I'm outta here.
Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
  • "so..." by "gustajo". Full excerpt: what is harder. selling a project or delivering a project. i believe you will get two equally vocal answers.
  • "The hard part is..." by "whitespider". Full excerpt: PROFITABLY delivering a project that some clued-out sales exec with no industry expertise has oversold.
  • "Let's be positive for a change!" by "O_Byteme". Full excerpt: After careful reflection and a lot of soul-searching, here's my list. Please feel free to add to it!
    1. Knowing I'll always have a job as long as I perform well.
    2. Being led by professional managers who understand what it takes to motivate people.
    3. Great retirement plan.
    4. Employer-paid health care benefits.
    5. Plentiful opportunities for advancement and growth.
    6. Being part of a well respected company with a good future.
    7. Clear career path for both fast-track and "normal" employees.
    8. Pride of working for "the best".
    9. Paid tuition reimbursement.
    10. Good work-life balance.
  • "Here's how it really was" by "O_Byteme". Full excerpt:
    1. Knowing that no matter how hard I work, any day could be my last.
    2. Having a manager who leads by threats and intimidation instead of by example, and would probably make a good manager in a shoe factory.
    3. No retirement plan outside of my own 401K savings and Social Security drawdown.
    4. Employer pays a continually decreasing cost of my ever increasing health insurance premiums.
    5. No opportunities for growth or advancement.
    6. Wondering where my company will be in 30 days, much less 5 years.
    7. Clear path for "fast tracked" employees (i.e., straight to management).
    8. Depression resulting from the realization that we used to be a great company.
    9. No tuition reimbursement, but I am expected to educate myself about the latest technical advances on my own time.
    10. No work-life balance. I have no life outside of work.
    11. Being constantly afraid to speak my mind because my manager lurks outside our office doors straining to overhear conversation looking for signs of subversion or discontent so he can take us into his office, close the door, and correct our faulty thinking. Being afraid to post comments critical to the company on internet boards because the company is known to be monitoring them trying to figure out who their employees are.
  • "You asked for it..." by "NJ22". Excerpts: Newbie here who just received a job offer from IBM BCS looking for some advice. Based on what I've read on the message board here, I have a good idea of what the response is going to be, but I figured I'd pass along the specifics of my situation:
    I have about 6 years of experience and my offer is to join at Band 8 with a 13% increase over my current base salary. Bonus potential at my current job is 20% versus 12% at IBM. $5k signing bonus (which while nice has no real impact on my earning potential in the future). My current firm, while not a "boutique" in the true sense at over 200 people, certainly does not have the clout of the big blue machine. Benefits at IBM are better with 401(k) matching. [...]
    This might be a tough one for some of you!, but are there positives you see with working at IBM? I know message boards generally attract more of the "malcontents", but it's not that difficult to filter those people out and get legit feedback. Do the people on this board represent the majority or the minority at IBM? Are guys like Dose still at IBM (and if so why) or have most of you already moved on to other companies? Thanks in advance for any feedback.
  • "Some thoughts" by "Dose of reality". Excerpts: First, a reality check on your quantitative comparison. While the IBM bonus potential may be a nominal 12%, it is never paid out at that level since it is contingent on achieving overall divisional profit targets, which are always set so high as to be unachievable, and the rating system is severely curved so that only around 5% of staff get a 1 rating. Figure 2 - 4% at most.
  • "The dichotomy explained" by "Dose of reality". Excerpts: You asked a really interesting question that I am surprised no one has asked before. How can I hire into my practice and at the same time discourage the general population from joining the company? The answer is that I do disclose to prospective applicants my view of the environment and culture here. I also disclose to them how I will work to mitigate against the problems. While there is not much that I can do to move the compensation needle, I can provide interesting work, well run projects, high standards, opportunities to grow, etc. The qualitative aspects of working here can be managed, but there is a cost to it. The problem is that in most practices, they either can’t afford to take the hit, or they only manage upward, staff-be-damned. [...]
    I also get a lot of my staff from elsewhere in the company – people that are looking for a safe haven, either short term or long term. There is definitely a contingent of seasoned consultants that are satisfied to work in a stagnant environment, as long as they are appreciated and entertained in their work. I am one of the few partners in here that still take the time and effort to do that. Also, I hire very few entry level staff. Beware of anyone that paints a rosy picture of BCS – they can’t be trusted.
  • "From the not-so-silent majority" by "jb40967". Full excerpt: don't post to the board much. I check the board quite often but only post when I can contribute something worthwhile. Although there are those who complain about the negative slant of the board, I think it is fairly representative of IBM BCS in general.
    I left BCS last January. But I still have some friends there who are aching to get out. I might actually hire a few of them later in the year.
    The only positive thing I can think of about BCS is that there are still a few good partners out there. I was fortunate to work continuously with two. I would say the only way to get ahead inside is if you can find a partner that will really look out for you. In your case, that would be difficult since you don't know anybody yet.
    As for bonuses and pay increases, let me give you some very specific examples so that you'll know what to expect.
    For five and a half years, I was a project lead for one of the biggest projects in the Northeast -- multi-million $$$ billings every month. You cannot find a more profitable project anywhere.
    The last four of those 5.5 years was under IBM. During those 4 years, I had 100%+ billable hours every year. I had a 1 rating consistently. During those 4 years, I had zero raises and zero bonuses. Not just me, everybody else was in the same spot. Some would say that what happened was because of the economy -- I don't think so. So, take that into consideration when you think of your bonus potential.
    Finally, last December, BCS got a wake up call and gave 10% salary increases for selected individuals. I was among those blessed. The following week, I submitted my resignation and said "No, thanks". I've found a much better place.
  • "Cost cutting is the tail...process improvement is the dog." by "Dose of reality". Full excerpt: If the exercise begins and ends with the objective of cutting costs, it is doomed from the start. It has to start with the objective of improving operations, and it rarely, if ever, does at IBM.
    This is process improvement 101, and we represent to the outside world that we are Business Consultants, yet when it comes to putting our own house in order the ideas and execution comes from groups (Finance and HR) that have no understanding of the underlying business dynamics of our overhead structure or of the front line consulting resources.
    This is why the value in the PwC acquisition has been eviscerated since day one. You need only look at the 2002 Mckinsey study that recommended across the board compensation reductions since staff "would have no place else to go". This is the cost cutting philosophy that pervades IBM, and is one of the primary reasons I believe that the current regime is clueless on how to build a successful organization.
  • "More of the same from Lort" by "Dose of reality". Excerpts: Growing revenue requires a few things:
    1. Shoring up your baseline revenue through superior customer value and service.
    2. Investing in new products and services
    3. Convincing customers that you are the best choice
    For 1, we have too many salesmen that are heavily incentivized to sell regardless of delivery feasibility or profitability. Share price is a distant third objective when it comes to their decision process
    For 1 and 2, those responsible for the decision process here are attuned to quarterly earnings first and equity second. If there is a choice between making the short term numbers or a multi-year, more costly plan for growth, they will inevitably opt for the former.
    For 3, we can’t control customer decisions, but we can control cost cutting initiatives. That is why we opt for the latter. It is the easiest path for executives to live to fight another day. It doesn’t matter how much they want revenue to grow, short term considerations rule.

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Associated Press, courtesy of the Washington Post: UnitedHealth CEO Discusses Stock Cache. By Joshua Freed. Excerpts: UnitedHealth Group Inc. chief William McGuire defended his billion-dollar stock option compensation on Sunday, saying his pay has not come at the expense of affordable health care. McGuire is chairman and CEO of the nation's second-largest managed care company. His compensation has been in the spotlight in recent weeks following disclosures that he was granted stock options dated on the best possible day during 1997, 1999, and 2000, and that he held $1.6 billion in unexercised stock options as of the end of 2005.
  • New York Times: Loss of Competition Is Seen in Health Insurance Industry. By Robert Pear. Excerpts: Federal investigators have found that a handful of companies account for a growing share of the health insurance policies sold to small businesses in most states, leaving consumers with fewer options and higher costs. The Government Accountability Office, an investigative arm of Congress, said that the largest insurer had 43 percent of the market for small group coverage in a typical state, up from 33 percent in 2002. In nine states, the largest carrier — a Blue Cross and Blue Shield company — has more than 50 percent. [...]
    The Census Bureau estimates 45.8 million Americans have no health insurance. More than half of uninsured workers are self-employed or working in businesses with 50 or fewer employees. In a study of 294 metropolitan areas, the American Medical Association found a "remarkable reduction in the number of competing health plans." In 95 percent of those regions, a single insurer had at least 30 percent of the market, and in 56 percent of the areas, a single insurer had a share of 50 percent or more.
  • Washington Post: Debating the Impact of High-Deductible Health Plans. By Albert B. Crenshaw. Excerpts: Proponents of these plans argue that they give you an incentive not to use health care you don't really need and to shop carefully for the care you do need. This newfound cost-consciousness, the thinking goes, puts downward pressure on prices throughout the system.
    The theory seems to make sense. It's the reality that's a problem. [...]
    The conclusion, he added, is that "in and of themselves, the high-deductible health plans have a zero impact on health-care [cost] trends. Clearly, if you ask people to pay more money, you will get a one-time reduction in the base cost. But they have a zero impact on annual trends."
  • New York Times: Death By Insurance. By Paul Krugman. Excerpts: For lower-income working Americans, lack of health insurance is quickly becoming the new normal. That's the implication of survey results just released by the Commonwealth Fund, a nonpartisan organization that studies health care. The survey found that 41 percent of nonelderly American adults with incomes between $20,000 and $40,000 a year were without health insurance for all or part of 2005. That's up from 28 percent as recently as 2001. [...]
    What would happen if Medicare was expanded to cover everyone? You might think that the nation would spend more on health care, since this would mean covering 46 million Americans who are currently uninsured. But the uninsured already receive some medical care at public expense — for example, treatment in emergency rooms that would have been both cheaper and more effective if provided in doctors' offices.
    And Medicare manages to spend much more of its funds on medicine, as opposed to other things, than private insurers. If you do the math, it becomes clear that covering everyone under Medicare would actually be significantly cheaper than our current system. And this calculation doesn't even take into account the costs our fragmented system imposes on doctors and hospitals. Benjamin Brewer, a doctor who writes an online column for The Wall Street Journal, recently commented on the excess expenses he incurs trying to deal with 301 different private insurance plans. According to Dr. Brewer, he currently employs two full-time staff members for billing, and his two secretaries spend half their time collecting insurance information. "I suspect," he wrote, "I could go from four people in the paper chase to one with a single-payer system." [...]
    So here we are. Our current health care system is unraveling. Older Americans are already covered by a national health insurance system; extending that system to cover everyone would save money, reduce financial anxiety and save thousands of American lives every year. Why don't we just do it?
  • New York Times: Doctors Without Managed Care Plans Rises. Excerpts: The proportion of physicians who don't participate in managed care plans is rising in a development that may signal a trend toward higher patient costs and less access to doctors, a study to be released on Thursday said. The proportion of U.S. doctors without managed care contracts rose to 11.5 percent in 2004-05, up from 9.2 percent in 2000-01 and 8.6 percent in 1998-99, according to the Center for Studying Health System Change, a nonpartisan research group in Washington, D.C.
    Individuals who choose doctors outside their managed care networks often bear higher costs because they are responsible for paying any difference between the ''usual and customary'' fee paid to them by their insurer and the actual fee charged by the doctor. Often the doctor's fee is higher than the reimbursement an individual receives from the insurer. Patients who can't afford to pay that difference may find themselves with a more limited pool of doctors.
  • Boston Globe: Employers focus on chronic ailments Incentive programs aim to control costs. By Diane E. Lewis. Excerpts: Hoping to slow rising healthcare costs, a small but growing number of employers are reducing or eliminating drug copayments for workers with chronic ailments, offering medical screenings at work, and helping employees with catastrophic diseases access clinical trials. [...]
    Concerned about escalating health insurance premiums, Marriott International Inc. began eliminating copayments on generic drugs for workers with chronic conditions such as asthma, diabetes, and heart disease last year. The benefit, for 75,000 US employees and their dependents, includes a 50 percent cut in copayments for brand-name drugs. [...]
    Dr. Mark Fendrick, director of University of Michigan's Center for Value Based Insurance Design, said incentives are more effective than higher deductible plans. ''Right now, this country's number-one approach to the high cost of healthcare is to make employees pay more," said Fendrick. ''But cost sharing is a blunt instrument and the evidence actually shows that if you make people with chronic illnesses pay more, they stop buying the lifesaving things they need and companies wind up paying more."
  • New York Times: Study: More Workers Drop Health Insurance. Excerpts: More workers are passing when it comes to their companies' health insurance benefits because they can't afford the cost, a study says. The percentage of eligible employees who enrolled in their companies' health insurance plans declined from 85.3 percent in 1998 to 80.3 percent in 2003. During that same time, insurance premiums for individuals jumped more than $1,000 nationally -- from about $2,400 to about $3,400 a year. [...]
    The report said young adults, those ages 19-34, are more likely to be uninsured than older adults. Also, Hispanics are more likely to be uninsured, which reflects that many non-citizens are employed in low-wage jobs that don't offer health benefits, plus they're ineligible for public coverage in most states, the report says.
  • Physicians for a National Health Program: Unions Back Single-Payer Health Plan. By Mark Gruenberg. Excerpts: A bill establishing a government-run Canadian style single-payer health care system for the U.S., built on Medicare, is gaining union backers, coincidentally as “Cover the Uninsured” week ran from May 1-7. The measure, H.R. 676 by Rep. John Conyers (D-Mich.), would eliminate the private for-profit health insurance industry by establishing a government-run system. [...]
    Data from America's Agenda: Health Care For All, a group headed by former UFCW President Doug Dority, shows health insurance premiums rose 60 percent since the year 2000, but “the proportion of premiums that insurers paid out for medical costs declined” in the same time. The money went into insurers’ profits and claims processing – paperwork. Other data shows private insurers spend approximately one-fifth of their revenue on overhead, including processing. Medicare – the basis for Conyers’ bill – spends three percent.

New on the Alliance@IBM Site:
  • Human Resources Webcast. March 2, 2006. Randy MacDonald, Senior VP, IBM Human Resources. [PDF--785 KB]. Excerpts:
    • 2006 Compensation & Benefits: Major steps taken in all geographies to address costs associated with overly competitive retirement programs which now should provide us more compensation flexibility going forward.
    • Mixed results with Managed Attrition and MIS; not driving the desired behavior
    • Performance Attrition = MIS, PBC 3 & 4 resignations and PBC 2 managed out
    • The US pension change does not have an impact on ESI (Employee Satisfaction Index)
  • The Inquirer (United Kingdom): IBM accused of hacking lawyers', clients' email. l Big Blue compromised security, claim. Excerpt: A remarkable case has started against IBM in Washington DC with a law firm accusing Big Blue and an unknown employee of hacking into it and its clients' email.
  • Alliance Activists Join One Man Protest in RTP. Excerpt: Since early March, Brian Costine, an Alliance@IBM Voting Member, has waged a one-man protest against IBM, his employer for 25 years. He spends 90 minutes each morning protesting in front of IBM's campus in Research Triangle Park, North Carolina (RTP) before starting his work day. Costine says IBM is actively trying to force longtime workers like him off the payroll and out of future benefits by giving them unfairly negative performance reviews. He plans to continue the protests for a year.
    On Sunday, April 30, a group of Alliance@IBM activists drove down to RTP. The group was led by Bill Costine, Brian’s brother and an East Fishkill employee and Bill McGreevy, an employee at the Southbury, CT site. On Monday morning, in solidarity with Brian, they joined his protest outside the main gate to the plant. They held signs and waved at passing cars for over an hour, receiving mostly positive responses from people on their way to work.
  • Job Cuts Status & Comments page:
  • From the General Visitor's Comment page:
    • Comment 5/02/06: A colleague recently found an HR powerpoint presentation (webcast of March 2, 2006 by Randy MacDonald) on the IBM Intranet. One of the HR's goals for 2008 is to reach an annual 3.5% performance attrition level achieved by MIS, PBC 3 & 4 resignations, and PBC 2 managed out. The people running IBM are clueless, heartless, brainless, and without any compassion for their fellow workers. How do such people wind up running (and ruining) a great company? -Anonymous-
    • Comment 5/03/06: Well I joined IBM in 2000 as part of an outsourcing deal. IBM agreed to bridge my old service years with the client company so I ended up instantly vested in the "retirement" plan and since I was over 40 got dumped into the Future Health Account. Whoopeeeee what a deal. I am now ready to leave IBM (retire) and basically I see no advantage at all to being an IBM retiree. I get a lump sum of my PPA and I can use the FHA to buy insurance at the inflated IBM prices...wow. What I pay $90 for now will be $550. So please, can someone tell me exactly what is so frigging great about being an IBM retiree? Luckily I have another job lined up to go to and also have heavily funded my own 401K and other savings plans. In short, my six years with IBM (which by the way did not ever include any pay raises because I was "making too much anyway") sucked and what I can expect from this suckass outfit in "retirement" sucks even more. And IBM is a good place to work? -Anonymous-
    • Comment 5/03/06: IBM Corporate sent a representative to Austin to meet with a group of managers a couple weeks ago. The message delivered -- managers were not performing enough MIS (management-initiated separation) actions. The managers attempted to explain that their people were needed and were doing their jobs; but the representative was not interested. Subsequently one upper level manager has worded his PBC to increase attrition. The area in question is doing well from a financial and business perspective. Why does corporate have a driving need to force people out of the company! We all know that the next step will be -- employees with satisfactory performance will suddenly be performing unsatisfactory with no change on their part. The "BAR" will be magically raised (in the past tense), as well as deaf ears applied to any anomalies that go with doing a job year in and year out. -Anonymous-
    • Comment 5/04/06: I'm a former employee of IBM; I was resourced out after 28 years. My question is this -- can I be a voting member of the Union? Or just a supporter? I plan to send you a check no matter what the reply dictates, as you have done a world of good for IBM employees.-Anonymous- Alliance reply: Thank you for the kind words. Yes you can join the Alliance as a voting member. The Alliance is open to former employees, retirees, current employees (except management) and contractors who work at IBM. We are the new IBM family. One that will fight for the issues of all who are or have been affected by anti-employee/retiree policies.
    • Comment 5/04/06: To the person who asked about the PBC 2 managed out. I had good PBC ratings throughout my 20 years at IBM and my last 2 PBC ratings were both 2's. Imagine my shock and horror when I was forced out of IBM by a so called "layoff". It all depends if your 2nd level manager likes you or not. If he or she doesn't, start looking for a new job immediately. The IBM Management Way will force you out. If you are still with IBM for your own sake join the Alliance and fight for a union. Honestly, it is your only hope to protect you from these vindictive managers at IBM. -Anonymous-
    • Comment 5/05/06: Without a legally designated union to protect your job, you will always be in danger of being "managed out", terminated or just plain fired, even if you haven't done anything wrong. With a union in your corner you have job security. Without the union you have none, it's that simple. We don't worry about the dreaded PBC in our bargaining unit because it is simply an annual evaluation tool and nothing more. Our salaries and job security are protected by our Collective Agreement. Since 1975, we have been representing employees of ISM Canada, a wholly - owned IBM subsidiary located in Saskatchewan, Canada. View our Collective Agreement online at: http://www.cep911.org. Gary Schoenfeldt, President Local 911; Communications, Energy and Paperworkers Union of Canada.
  • Pension Comments page
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