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    Highlights—December 23, 2006

  • Yahoo! IBM Pension message board post by Janet Krueger. Full excerpt: AARP filed an Amicus brief with the Supreme Court today on our behalf supporting our request for cert; it is available in the FILES area as: Cooper_AARP_SC_Amicus_Brief.pdf
  • Yahoo! IBM Pension message board post by Janet Krueger. Full excerpt: The Cooper legal team filed a reply to IBM's opposition brief with the Supreme Court today. It is available in the FILES area as: Cooper_SC_Reply_to_IBM.pdf. Lots of good Christmas reading for IBM's counsel! (-;
  • Los Angeles Times: As earnings sizzle, a chill for workers Firms and investors, not the rank and file, reap gains from globalization and labor productivity. By Tom Petruno. Excerpts: American companies are about to wrap up their fourth straight year of spectacular profit growth, which has filled corporate coffers with cash and kept the bull market alive on Wall Street. Operating earnings of the blue-chip Standard & Poor's 500 companies have risen at double-digit percentage rates for 18 straight quarters, an unprecedented streak.
    But to many rank-and-file workers, the booming bottom line may only serve as a reminder of what has been missing from their own paychecks.
    Wages of average workers have just begun to improve in recent months after badly lagging behind inflation for much of this decade. Amid the surge in corporate profit, many workers have faced terminated pension plans, reduced healthcare benefits and rising outsourcing of jobs overseas.
    The swelling earnings of business — and of many top executives — have become part of the debate about widening U.S. income disparities. When they take control of Congress next month, Democratic Party leaders will focus intently on those disparities, they say, and on trade agreements that some contend enrich multinational firms while destroying American jobs. "I'm very passionate about this, and I'm going to be joined by some people who are equally passionate," said Sen. Byron L. Dorgan (D-N.D.). "Some reinforcements are coming." [...]
    Among the biggest U.S. firms, Bank of America Corp. earned $15.9 billion in the first nine months of this year, up 23% from a year earlier. Technology giant IBM Corp. posted a 25% jump in profit in the period, to nearly $6 billion. McDonald's Corp.'s results rose 15% to $2.3 billion. [...]
    "Companies are saying, 'We can't afford anything' " when it comes to providing for U.S. workers, said Larry Mishel, president of the liberal Economic Policy Institute in Washington. In the context of soaring earnings, "that's not irony, it's hypocrisy," he said. [...]
    What's striking to many experts is that labor's share of the economic pie has failed to grow over the last decade even as American workers have become more productive. In essence, those productivity gains have flowed to companies and their shareholders, not to the rank and file. "We've had nine years of great productivity growth, and most workers see no gain for it," said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington. [...]
    Stephen Roach, an economist at brokerage Morgan Stanley in New York, believes that the persistent threat of outsourcing helps keep a lid on worker pay demands, particularly at the lower end of the income scale. That also has been the view of some in Congress — Democrats and Republicans — who have railed against trade agreements that they say encourage U.S. companies to move jobs overseas or to use outsourcing as a lever against domestic workers. "All these companies say the same thing: 'We have to [move overseas] to compete,' " Dorgan said. "It's not about competing — it's about fattening their profits." [...]
    Mishel, of the Economic Policy Institute, said that although companies are free to do as they please with their profits, their decisions help determine the long-term viability of the U.S. economy. "If we have high profits and it's not translating into domestic investment and higher wages," he said, "the system isn't working."
  • Yahoo! IBM Employee Issues message board post by Kathi Cooper. Full excerpt: The reason so many spirit parties have been cancelled is because IBM has to meet their year end bogey. Do you think they report the numbers as they fall at year end? Nope. They report the numbers they have modeled. I bet they have also notified all accountants to defer all available expenses.
  • Yahoo! IBM Employee Issues message board post by "alwaysontheroad4bigblue". Full excerpt: They have. Among the expenses that have been put on hold are Thanks awards (typically $25 to $40 each), reimbursements for supplies (paper, ink, etc.), and any travel expenses that are not paid by a client. I've heard no word, however, on whether "no cost" stock grants for executives have been scaled back. :-)
  • Yahoo! IBM Employee Issues message board post by "ibmaccountant". Full excerpt: My friends tell me that according to BOND, no expenses are allowed except for any expense that has to be paid that is directly contractually required by a revenue generating client contract.
    Employee TEAs (travel expense accounts) are still being processed but won't be paid until 2007.
  • The Register (United Kingdom): HP wrestles IBM for top spot. Excerpts: HP has claimed it will be the world's largest IT company by the end of this year, surpassing IBM on revenue. The switch in positions depends on IBM - HP's financial year ended on October 31, and it announced revenues of $91.7bn. IBM's financial year doesn't finish until the end of December; analysts suggest it could report less than $90bn.
  • Los Angeles Times: Nest egg to goose egg in no time. Brokers with rosy sales pitches lure unwary 401(k) holders. The results can be ruinous. By Jonathan Peterson. Excerpts: Like many of his co-workers, Bradley Simon had put in decades at the Exxon Mobil refinery, building up a stout 401(k) retirement account and enviable pension benefits. So he listened carefully to the investment broker's pitch that he should seize a head start on the golden years. "He said, 'Why are you still working?' " Simon recalled. "He said, 'I can make you more money staying at home.' "
    At 54, Simon quit his job making ethylene and turned over more than $700,000 to David L. McFadden, a broker for Omaha-based Securities America Inc. McFadden promised to keep the portfolio growing and told Simon that he could safely withdraw $65,000 a year for living expenses.
    Then the stock market tanked. Simon's savings dropped even more than the market, 65% over two years.
  • Bloomberg: You Deserve a Gift -- Cut Grinchy 401(k) Costs. By John F. Wasik. Excerpts: Very few year-end financial actions are as satisfying as cutting your 401(k) expenses. Trimming costs can boost your total return and put more money into your plan. Yet the gnarly matter of discovering how much your retirement program is really costing you is a trying process. Like the Dr. Seuss character the Grinch, the middlemen who are profiting from your retirement funds are largely unseen. Fund managers and middlemen compensate themselves for their services from each fund in your plan in the form of an annual "expense ratio." They may be overcharging you. [...]
    Loeper's experience confirmed what industry experts and, most recently, the U.S. Government Accountability Office (GAO) have found: 401(k)-type plans are too expensive and middleman deals are buried in the fine print of program documents. Out of the 47 million Americans in 401(k)s, "80 percent of plan participants are not aware of how much they are paying in fees," a recent GAO report found.
    I would suggest that even more than 38 million are in the dark as to how their retirement plans are enriching brokers, agents, managers and administrators. An accepted practice called revenue-sharing takes a slice of your mutual-fund expenses and passes it along to third parties, such as record keepers. Middlemen get away with these arrangements because the U.S. Department of Labor -- the main watchdog over these plans -- doesn't require or enforce full, transparent fee disclosure.
    For example, in Loeper's company plan, he discovered that his 401(k) vendor was charging him 0.63 percent annually for his plan, expenses that were "effectively hidden"' That translated to $1,200 per year per employee on a $200,000 balance. Angered by the cloaked charges, he searched for new vendors and found a third-party administrator that could provide a better plan for as little as $25 a person.
  • Washington Post: 'Lucky' Stock Options Not Limited to Executives. Study Finds Board Members Profit, Too. By Terence O'Hara. Excerpts: Chief executives weren't the only ones enjoying near-guaranteed profits from stock options in the past decade. Outside directors at hundreds of American companies also received option grants that are likely to have been manipulated, a new study found.
    According to the study, 9 percent of 29,000 option grants to outside directors from 1996 to 2005 were granted on a day when the company stock price was at a monthly low. The likelihood of such a concentration of "lucky" grants is so low as to be statistically impossible, the study's authors said.
    "It's like going to Vegas thousands of times and betting on red every time and winning more than half the time," said Lucian Bebchuk, the Harvard University professor who co-authored the report, titled "Lucky Directors," with Cornell University's Yaniv Grinstein and Urs Peyer, a professor at the French business school Insead. "From a numerical standpoint, it can't be random. There has to be some manipulation of the outcome." [...]
    The study is not the first to raise questions about a possible link between options backdating practices and board governance practices. A study by the Corporate Library of 120 companies implicated in backdating found a high incidence of interlocking directors, or directors who served on more than one company that backdated. The study suggested that backdating practices may have spread from company to company through these interlocking director relationships.
  • Wall Street Journal: Study Cites Role Outside Directors Had With Options. By Steve Stecklow. Excerpts: A new academic study suggests that many outside directors received manipulated stock-option grants, a finding that may help explain why the practice of options backdating wasn't stopped by the boards of some companies. The statistical study, which names no individuals or firms, estimates that 1,400 outside directors at 460 companies received questionable option grants, suggesting the widespread practice extended well beyond the executive suite.
    The study is notable because it suggests that outside, or independent, directors -- who are supposed to play a special role safeguarding against cozy board relationships with management -- may have been co-opted in options backdating by receiving manipulated grants themselves. The New York Stock Exchange requires that a majority of board seats, and all compensation- and audit-committee members, be independent. The study doesn't address whether directors were aware that their options were propitiously timed.
  • Wall Street Journal: IBM to Stop Option Grants To Independent Directors. Excerpt: International Business Machines Corp. said it will discontinue a program that awards stock options to board members that are not employed by the technology giant. Instead, IBM said it will double the annual retainer paid to directors from $100,000 to $200,000 effective Jan. 1. The company did not provide an explanation for the board compensation change, which was disclosed in a filing with the Securities & Exchange Commission.
  • Thinkandask.com: Human Resource Depts. Force More Out Before Retirement Age. Excerpts: If you live in the United States, a culture which plays-up diversity in the workforce, nearly one quarter of older professional workers are forced out of the job market by corporate human resource departments.
    With such a discriminatory environment the new economic game in the United States, Sun Life Financial urges all workers older than 40-years-old to prepare for forced early retirement. Not only are many older workers financially unprepared for retirement, but a recent survey by Sun Life Financial found 22 percent of all retirees are forced into retirement several years before they had anticipated. As corporations, such as IBM and other Fortune 100 companies, attempt to boost stock prices through mass layoffs the trend will affect more professional workers in the coming decade.
    The forced retirements have not only left retirees well short of their financial goals, but 69 percent of respondents stated their overall retirement plans have been affected either a great deal or somewhat, requiring them to reduce expenses and change their lifestyles to adjust to their new status. Moreover, 55 percent of all respondents also say they were ineligible for Social Security benefits when they were forced to leave the workforce. [...]
    The average respondent planned on accumulating approximately $1 million in retirement savings, but had accumulated only about half of that amount when they were forced to retire. The gap was most prevalent with respondents under the age of 55, who expected to retire with an average of $1.4 million in savings but only had $314,000 when forced into retirement.
  • Law firm of McTeague, Higbee, Case, Cohen, Whitney & Toker, P.A.: IBM Age Discrimination Lawyers - IBM Wrongful Termination Lawyers Representing Former Employees of IBM in a Nationwide Age Discrimination Lawsuit. Excerpt: On October 7, 2003, 135 former IBM employees filed a collective action lawsuit against IBM for violations of the Age Discrimination in Employment Act (ADEA). On August 31, 2006, those employees, represented by McTeague Higbee Case, won a major victory when the 9th Circuit Court of Appeals (Syverson et al. v. IBM) held that the waiver which most employees signed to receive severance pay was INEFFECTIVE and does not prevent employees from suing IBM for age discrimination. Moreover, under federal law, employees who signed the waiver can sue IBM and do NOT have to return the severance package/pay they received. [...]
    In recent years, IBM has laid off thousands of employees in their 40s, 50s and 60s. At the same time, IBM hired many young college graduates and retained a disproportionate number of young workers. The lawsuit alleges that IBM's layoff/termination practices were discriminatory on the basis of age, and therefore violate the ADEA (Age Discrimination in Employment Act). Statistical analysis has shown that older IBM workers have been terminated in numbers disproportionate to the rate at which younger workers were let go. We brought the lawsuit to seek justice for employees harmed by IBM's discriminatory practices. [...]
    Contact an employment lawyer at Mc Teague, Higbee, Case, Cohen, Whitney & Toker, P.A. to discuss your experience by completing our inquiry form or by calling 800-482-0958. Our attorneys are committed to helping former employees of IBM fight this age discrimination.
  • Law firm of Keller Rohrback L.L.P.: Cash Balance Plans. Excerpt: Keller Rohrback L.L.P. is also currently investigating several companies regarding their conversions from a defined benefit pension plan to a cash balance formula. We believe this type of conversion is a discriminatory practice that is aimed at older, long-time employees who have given up wages in exchange for a traditional defined benefit pension plan. If you would like more information regarding our Cash Balance Plans investigation, please contact us. Corning Inc. Hewlett-Packard Company. Pitney Bowes Inc. Safeway Inc. Washington Mutual Inc.
  • WTVR-TV (Richmond, VA): Facing a Tight Labor Market, Employers Dish Out the Perks. By Drew Armstrong. Excerpts: When it's time reel in that potential hire, it's true that a cushy salary can be the dealmaker. But what got them to send in their resume in the first place? As more companies are learning, reputation, company culture, and the unique perks that come with it are playing a bigger and bigger role in recruitment. [...]
    So instead of just offering bigger salaries, companies are offering perks that may seem more Fantasyland than 9-to-5. And they're more than just hiring incentives - these perks are often extensions of company culture that bosses say give their organizations a leg up in recruitment and productivity.
    Take Motek, a Beverly Hills, Calif.-based software firm, where all employees get an annual $5,000 bonus to pay for their vacations. The only catch? Their trips have to last at least three weeks. Founder and CEO Ann Price says that "the vacation is required, it's not a carrot on a stick." In her view, it's a necessary break from work that lets employees recharge their batteries. It also sends the message to job applicants that Motek takes care of its own. "We've never had to recruit anyone," Price says. "The problem is weeding out all the people that beg us for a job."
    For some companies, luring the best employees means building a benefits program for a generation that has a very different idea of what "job" means. Silver Spring, Md.-based Discovery Communications is a young company -- the average age of its employees is 31 -- and a salary isn't all they care about. "For that whole next generation that's coming out, money is not a driver," says Pandit Wright, Discovery's vice president of HR. "The driver is feeling like you can have a life."
  • New York Times: Wall St. Bonuses: So Much Money, Too Few Ferraris. By Jenny Anderson. Excerpts: It’s a brisk Wednesday morning in the windy caverns of Wall Street and Sarah Clark’s toes are cold. Dressed in a purple flight attendant outfit, Ms. Clark, a 26-year-old model, is trying to entice recent bonus recipients at Goldman Sachs into using a charter plane service, handing out $1,000 discount coupons to people in front of the investment bank’s Broad Street headquarters. “Where am I going?” asks one man, heading toward the Goldman building. “It’s your own private jet,” says Ms. Clark with a smile. “You can go wherever you like.” For Wall Street’s elite, the sky may well be the limit. [...]
    In recent weeks, immense riches have been rained upon the top bankers and traders. After a year of record profits, investment houses like Goldman Sachs, Lehman Brothers and Morgan Stanley are awarding bonuses as high as $60 million. And a select group of hedge fund managers and private equity executives may be taking home even more. That is serious money. And the serious luxury goods markets are feeling the impact.
    Miller Motorcars, in Greenwich, Conn., is fielding more requests for the $250,000 Ferrari 599 GTB Fiorano than it can possibly fill. One real estate broker laments a dearth of listings for two clients trying to spend $20 million on Manhattan properties. Financiers already comfortably settled in multimillion-dollar apartments and town houses are buying $5 million apartments for their children. Vacation homes, usually bought and sold in the spring, are now hot this winter, including ones in private resorts like the Yellowstone Club in Montana near Yellowstone National Park. [...]
    Last week, Michele Kleier, president of Gumley Haft Kleier, received a call from a hedge fund manager in his late 30s. He had spent $6 million on an apartment two years ago and, with his bonus, wanted to upgrade. His new price range? “Not more than $20 million.” [...]
    Those young, single hedge fund managers are bringing holiday cheer to car dealerships as well. This year, drama surrounds the very limited production of the Ferrari 599 GTB Fiorano, a car with 612 horsepower that can go from zero to 60 miles an hour in 3.6 seconds. “It is the most sought-after car ever made,” said Richard Koppelman, president of Miller Motorcars. With a waiting list of 50, Mr. Koppelman expects to get only one. [...]
    The morning Goldman Sachs announced record fourth-quarter and 2006 earnings, Lloyd C. Blankfein, chairman and chief executive, implored his employees — many whom would directly benefit from the bountiful earnings — to avoid excess. “As stewards of the firm’s reputation, I ask each of you to remember that our actions — inside and outside of the office — reflect on Goldman Sachs. Even a perception of arrogance hurts all of us,” he said in a voice mail sent to the entire firm.
    Back handing out vouchers in front of Goldman, Ms. Clark wondered why there weren’t more people coming to work during the early hours. Then, at 7:30 a.m., a black Mercedes pulled up, depositing Mr. Blankfein in front of Ms. Clark. The night before, he had been awarded a $53.4 million bonus. She offered him a voucher. “How are you?” he said, smiling quickly but refusing the voucher. “I guess he didn’t want it,” she lamented.
  • New York Times opinion: Helping the Poor, the British Way. By Paul Krugman. Excerpts: Although Tony Blair has been President Bush’s obedient manservant when it comes to Iraq, Mr. Blair’s domestic policies are nothing like Mr. Bush’s. Where Mr. Bush has sought to privatize the social safety net, Mr. Blair’s Labor government has defended and strengthened it. Where Mr. Bush and his allies accuse anyone who mentions income distribution of “class warfare,” the Blair government has made a major effort to reverse the surge in inequality and poverty that took place during the Thatcher years.
    And Britain’s poverty rate, if measured American-style — that is, in terms of a fixed poverty line, not a moving target that rises as the nation grows richer — has been cut in half since Labor came to power in 1997. [...]
    But there’s no denying that the Blair government has done a lot for Britain’s have-nots. Modern Britain isn’t paradise on earth, but the Blair government has ensured that substantially fewer people are living in economic hell. Providing a strong social safety net requires a higher overall rate of taxation than Americans are accustomed to, but Britain’s tax burden hasn’t undermined the economy’s growth.
    What are the lessons to be learned from across the pond?
    First, government truly can be a force for good. Decades of propaganda have conditioned many Americans to assume that government is always incompetent — and the current administration has done its best to turn that into a self-fulfilling prophecy. But the Blair years have shown that a government that seriously tries to reduce poverty can achieve a lot.
    Second, it really helps to have politicians who are serious about governing, rather than devoting themselves entirely to amassing power and rewarding cronies.
    While researching this article, I was startled by the sheer rationality of British policy discussion, as compared with the cynical posturing that passes for policy discourse in George Bush’s America. Instead of making grandiose promises that are quickly forgotten — like Mr. Bush’s promise of “bold action” to confront poverty after Hurricane Katrina — British Labor politicians propose specific policies with well-defined goals. And when actual results fall short of those goals, they face the facts rather than trying to suppress them and sliming the critics.
    The moral of my Christmas story is that fighting poverty isn’t easy, but it can be done. Giving in to cynicism and accepting the persistence of widespread poverty even as the rich get ever richer is a choice that our politicians have made. And we should be ashamed of that choice.
  • New York Times opinion: Democrats and the Deficit. By Paul Krugman. Excerpts: Since the 1990s were an era of peace, prosperity and favorable demographics (the baby boomers were still in the work force, not collecting Social Security and Medicare), it should have been a good time to put the federal budget in the black. And under Mr. Rubin, the huge deficits of the Reagan-Bush years were transformed into an impressive surplus.
    But the realities of American politics ensured that it was all for naught. The second President Bush quickly squandered the surplus on tax cuts that heavily favored the wealthy, then plunged the budget deep into deficit by cutting taxes on dividends and capital gains even as he took the country into a disastrous war. And you can even argue that Mr. Rubin’s surplus was a bad thing, because it greased the rails for Mr. Bush’s irresponsibility.
    As Brad DeLong, a Berkeley economist who served in the Clinton administration, recently wrote on his influential blog: “Rubin and us spearcarriers moved heaven and earth to restore fiscal balance to the American government in order to raise the rate of economic growth. But what we turned out to have done, in the end, was to enable George W. Bush’s right-wing class war: his push for greater after-tax income inequality.” [...]
    With the benefit of hindsight, it’s clear that conservatives who claimed to care about deficits when Democrats were in power never meant it. Let’s not forget how Alan Greenspan, who posed as the high priest of fiscal rectitude as long as Bill Clinton was in the White House, became an apologist for tax cuts — even in the face of budget deficits — once a Republican took up residence.
  • Motley Fool: The Crisis in Our Future. By Brian Richards. Excerpts: With Social Security more unreliable with each passing year, and with corporate pensions going away -- IBM, Verizon, and Lockheed Martin recently froze all or some of their pensions in favor of 401(k) plans -- more Americans are charged with controlling their own financial destiny.
    The mixed bag. That's decidedly good news if (1) you know what you're doing, and (2) you have some interest in doing it. You can pick your own equities, determine optimal asset allocation, and not have to pay sometimes-exorbitant broker/planner fees. But it's decidedly bad news if (1) you don't know what you're doing or (2) you have no interest in doing it.
  • San Jose Mercury-News: HP has hired, fired by the thousands. Employee "Churn" as Competitiveness Tool. By Nicole C. Wong. Excerpts: What's 150,000 minus 45,000? In Hewlett-Packard's world, the answer is still roughly 150,000.
    Since 2002, HP has laid off 30 percent of its employees worldwide to cut costs and improve operations. But sending all those employees away with pink slips or early retirement packages hasn't caused a plunge in HP's global head count -- because the company continuously hired new workers while it escorted others out the door.
    Hiring people while laying off others is called churn. And HP isn't the only aging Silicon Valley vanguard that's using churn to survive the onslaught from technological innovation and global competition. But the legendary computer company's use of churn to help fuel its financial turnaround illustrates how the strategy has shattered the implicit employment contract that once bound America's companies with their workers. [...]
    The global layoffs recently helped HP chisel away at an expensive workforce in the United States and Western Europe, and funnel work to lower-paid employees in Asia, Eastern Europe and Latin America, according to several HP executives in Europe. ``Some jobs are disappearing on-shore because the skills and the quality exist elsewhere at a much cheaper cost,'' said Eric Grall, HP Services' vice president of global delivery for Europe, the Middle East and Africa. [...]
    Paul Oyer, an associate professor of economics at the Stanford's Graduate School of Business, said IBM adopted this churn strategy in the 1980s. "They were downsizing the company dramatically, but they were always hiring into new types of businesses," Oyer said. "They closed manufacturing units but at the same time were increasing their software and consulting businesses."
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Managed Healthcare Executive: Savings by design: IBM's Dr. Martin Sepulveda saves millions with employee benefit design. Excerpts: When you're in the innovation business, you take some risks and temper your expectations. When one of your innovations produces $100 million in annual savings, you know you're doing something right.
    For global tech giant IBM, innovations to save healthcare dollars among the 340,000 people enrolled in its benefit plan fall squarely on the shoulders of Martin Sepulveda, MD, vice president of global well-being services and health benefits. Dr. Sepulveda, an approachable, easy-going executive, doesn't seem the type to brag about saving the self-insured corporation $100 million on its healthcare bill or about the fact that employees never pay a dime in premiums, but deep down, he probably knows that other employers would love to know his secret.
  • In a Yahoo! IBM Pension message board post, "ibmaccountant" comments on the article about Dr. Sepulveda. Excerpts: Interesting how they try create an aura of uniqueness and skill where none exists. Sepulveda, IMHO, hasn't done anything special. This article smells of a pre-announcement for some "innovation practice".
    First of all, a lot of the savings were done by increasing the onus of paying on the retirees. Another hidden cost to the employee is the transient nature of the provider relationship. Long term treatment success due to relationship building and knowledge of the patient over time is clearly taken away in exchange for short term corporate gain. Lastly, they clearly state in the article that they aren't anymore interested in the employee's family, they are just another expense for the employee. The employee is valued if only as a production tool, ready to be discarded when its value even shows the slightest decrease in productivity.
    Interesting to see that execs are focused on the benefits, not the money. That tells you two things:
    1. The execs know that the money offered to employees, much like the cash balance and 401(k) story, is less than what is needed to deliver the proper minimum benefit.
    2. When you are underpaid, your focus is on survival, so you will be more amenable to take chances with your life for a few more sheckles. As you reach for some money to make ends meet, they make more money by cutting the benefits even more.
  • Workforce Management: Report Shows Employers Shifting Health Costs to Retirees. By Jeremy Smerd. Presented this year with the option of shifting retirees to a Medicare-sponsored drug program, employers chose to keep prescription benefits in 2006, and they say they will do the same in 2007. Excerpts: Concerns that the Medicare prescription drug benefit would lead employers to drop drug coverage for retirees this year have not materialized. Instead, employers have opted to increase the share retirees pay for their health care costs, according to a new report. With more of the burden of health care falling on individuals, the cost of retiring is escalating, according to a report released Wednesday, December 13, by the Kaiser Family Foundation and Hewitt Associates. [...]
    Employers looking to save on retiree health care costs are opting to require retirees to pay more for their health care. In 2006, 74 percent of employers increased the premiums that retirees under 65 must pay and 58 percent of employers raised premiums for Medicaid-eligible retirees. In 2007, 80 percent of the 302 large employers surveyed in the report plan to increase the amount individual retirees pay toward health care premiums. [...]
    The overall increase in cost and the slow erosion of health benefits for retirees who are not eligible for Medicare will likely encourage older workers to stay in the workforce longer, or retire but find a part-time job in order to maintain health benefits. “We are reappraising what retirement means,” Neuman says, “and work will be a larger component of it than it has been in the past.”
  • Physicians for a National Health Program: Would Europe's health-care-for-all model work here? Cover everyone and use Medicare as a model. Excerpts: Compared to other advanced nations, the United States spends far more on health care but achieves only mediocre results. Though the World Health Organization has ranked us first in spending, we are ranked 37th in performance—well behind Canada and all Western European nations. What do these countries know that we don’t? Universal coverage is public policy in the rest of the industrialized world, but it is not in the United States. We leave nearly 47 million without any insurance at all. Even the insured are finding that increasingly inadequate private insurance policies are leaving them exposed to insurmountable costs.
    Although unheard-of in other nations, illness and medical bills contribute to half of personal bankruptcies here, and 75 percent of those with medical debt had coverage when they got sick.
    How do other nations insure everyone, protect their personal assets from medical debt and do it at a much lower cost than that of the United States? Although no two nations have identical programs, none has adopted the disorganized, wasteful, fragmented insurance payment system that we have in America. [...]
    This egalitarian social insurance model of other nations contrasts sharply with the market model of private plans that we have here. Private insurance companies erect massive bureaucracies for the purpose of fighting claims, issuing denials and screening out the sick from coverage. Their principal product is an excess of administrative services with its resulting headaches. Doctors, hospitals and businesses must react by employing armies of administrators to deal with this massive private bureaucracy.
    Health-care administration consumes a mind-boggling 31 percent of our health spending. Some $350 billion of this waste could be recovered and is enough to extend good coverage to all Americans. Americans are already paying for national health insurance — we just aren’t getting it. Two-thirds of our health-care system already is funded through the tax system.
  • Associated Press, courtesy of the New York Times: Pfizer’s Ex-Chief to Get Full Retirement Package. Excerpts: The former chief executive of Pfizer, Hank McKinnell, who was forced into early retirement in part because of investor anger about his rich retirement benefits, will get every penny of it and perhaps more, a new regulatory filing shows.
    Mr. McKinnell’s package, which the company disclosed in a filing with the Securities and Exchange Commission yesterday, amounts to more than $180 million. It includes an estimated $82.3 million in pension benefits, $77.9 million in deferred compensation, and cash and stock exceeding $20.7 million.
    The total value could grow to almost $200 million if Mr. McKinnell gets a $18.3 million stock award, but that is contingent on the future performance of the company’s stock.
  • Plan Sponsor: USW Retirees Seek to Enforce Medical Benefit Promise. Excerpts: United Steelworkers (USW) retirees and their union have filed a class action lawsuit against Continental Tire North America, Inc. (CTNA) to force it to uphold its obligations to thousands of retirees, spouses, and surviving spouses to provide lifetime retiree medical benefits. According to a USW press release, the retirees allege CTNA breached agreements promising lifetime insurance coverage by announcing that effective on various dates in 2007 it will shift a large part of the cost of retiree medical coverage from the company to retirees and surviving spouses. The lawsuit alleges the breach is in violation of the Labor Management Relations Act (LMRA) and the Employee Retirement Income Security Act (ERISA).
New on the Alliance@IBM Site:
  • From the Job Cuts Status & Comments page
    • Comments 12/15/06: GTSA (old ITS) will be getting significant cuts in services sales teams for 1Q07. PBC results early in January, cuts in February and involuntary departures in March. Sales numbers look pretty bleak except that execs will say they had a good quarter because they padded the numbers as they passed them down. The are cutting base salary to 82% to bolster cash flow at employee's expense -Anonymous-
    • Comments 12/18/06: SWG - DB2 division reorg to be announced tues. or wed. Good luck everyone. oh and merry xmas of course! Great timing as usual IBM! -Anonymous-
    • Comments 12/18/06: Are you ready for the LEAN process? This is the name IBM uses for layoffs going forward. They have been very colorful with the terms used for layoffs haven't they? If anybody noticed, all of management uses the same terms when describing LEAN. "EMBRACE IT" It basically means they will make all accounts lean by sending the work to India. Hey IBM, I got something here you can embrace ! Do they actually think if they tell us this is a good thing for us that we will eventually believe it? -Anonymous-
    • Comments 12/21/06: IBM eBusiness Hosting Service call centers, namely eBusiness Customer Care in RTP and eBusiness Call Management Center in Markham (Canada) will be outsourced to India beginning January 2007, eliminating about 26 jobs and retaining 4 jobs (2 1st line managers and 2 team leads). IBM hired twice the amount of staff to replace the two previous teams. Management spent 4 months in planning and notified staff 2 weeks before the transition date. -Anonymous-
    • Comments 12/22/06: One day I walked by a bulletin board in the main hallway of my building (2nd floor 3600 Steeles) and at the top it has a logo with a red heart which reads "IBM Cares". I've always been tempted to take a black marker, color in the heart part, then write beside it "if IBM cares then they wouldn't have shipped my job to India!!". -Anonymous-
  • From the General Visitor's Comment page:
    • Comment 12/16/06: In reference to the OT lawsuit, I called the the lawyers number about 6 months back. They called me and gave me an hour long interview and the lady said she was going to send me a form to fill out in reference, but I never got it. That's why I called after I heard we won the suit and they did have me on the list but there's was no need to fill out a form yet cause they will be sending it out in January or February, so you may still be able to get in on it. Call the number 415-956-1000 x3393 on Monday and see if you can. It doesn't hurt and it should be a significant sum figuring we should have been getting 10-20 hours a week since they forced us to go exempt which was 2003 for me. I thought it strange back then that they just made us exempt and we kept our same jobs which for me was router support. When first going exempt I got a 5% raise then none for 3 years after that so I never did recoop the loss of overtime. -Anonymous-
    • Comment 12/18/06: The IBM vs Rosenburg exempt O/T lawsuit settlement will not include IBM position codes 5305 and 5344 according to the contact number on the case I called. So for those who are/were Sr. I/T Specialists you are not eligible for any money under the settlement agreement. I wonder why these folks are not in the class? -Anonymous-
    • Comment 12/19/06: I was a Network Professional, when they made me exempt to an Advisory IT specialist without OT in 2001. I am included in the OT lawsuit so I think it was what level you were when they took away your overtime and not what you are after OT was gone. -Anonymous-
    • Comment 12/19/06: I spoke with one of the attorney's staff regarding the OT law suite. Was told that it will cover Oct 2003 through present. Was also told that the $65M would be pro rated according to a convoluted formula (overtime worked, service level, etc). Point is that we shouldn't expect a strict correlation to the number of overtime hours worked at time and a half. Was also told to expect a package in the mail around the Feb time frame and that checks would probably go out sometime around Oct 2007. Good luck everyone. -John-
    • Comment 12/20/06: I understand Randy MacDonald, our senior vice-president for HR is building a large vacation home in the Catskill Mountain ski area. Did you know he had IBM GTS employees, on IBM time and expense, completely wire his getaway place? Not a bad perk! I wonder if the stockholders agree? -Anonymous-
    • Comment 12/20/06: To the previous poster about RMac. Stockholders and employees will feel outrageous and upset if this is true. I would suggest that you verify the story again. If this is true, please post back the result. I'm pretty sure there are plenty of people on this board will report to the BOD and the shareholder meeting. I'll personally do it. This type of power abusing does not belong to anywhere, not to mention a public company like IBM. -Anonymous-
    • Comment 12/20/06: All I hear is whine and complain. At work as well as on this website. Here is a news flash people. Joining the union can not hurt you. If you don't want to pay dues, you can still sign up so your potential vote can be counted. Why in the world SSR's have not all signed up is beyond me. They can not send SSR jobs to INDIA. SSR's are hands on in the CUSTOMERS SITE. As they whittle us away and infringe on us more and more for less and less I ask WHY? Does anyone think for a second that management cares enough to improve our lot in life without being FORCED to? As long as we accept the feces they dish out they will keep dishing it. Saying But I need this job is dumb. The only way to insure employment is with a contract. Otherwise you are an employee at will. They can release you anytime for any reason. Which they do. And all people do is whine about it. I guess Management wasn't the only ones that went though spine removal. -EXODUS 2007-
    • Comment 12/21/06: Well that old chestnut, the Business Conduct Guidelines, is making its way to in boxes. Does anyone believe executives pay any more than lip service to this document? I would read this every year but last year, I just skimmed it for changes. This year I ask...why bother? You just sign it to keep your job, not because its meaningful anymore. -Anonymous-
    • Comment 12/22/06: That old chestnut! Kind words, indeed. In 2003, I signed the BCG. In it, was a place for employees to send messages when they wanted to report breaches of the BCG and other issues that needed legal's attention, since you aren't allowed to report them to anyone outside until a cover-up is in place.... Well, I found a problem. I reported it to the ID and some janitor in 590 picked it up and I never got any acknowledgement that the message had been received, much less acted upon. The document is just a legal cover-up to protect errant management from legal inquiries by whistle blowers. I didn't sign it in 2004 or 2005 and no one came to me and threatened me, because they know I now have the goods on them. -Anonymous-
  • From the Pension Comments page:
    • Comment 12/22/06: I joined IBM in 98 because it was the company (out of 3 offers) that had the best pension and medical plan. Now I am in a quandary because that's not the case any more. In fact - the retirement plan has changed two times since I joined IBM. First, I lost 50% percent of my benefits when they went to the cash plan. Now I will lose another 1 to 2 percent of my income that they were putting into the cash plan. Any way you look at it - any time IBM makes a change to retirement they are skimming thousands of dollars from every employee. Plus, I may be paranoid but 401k is pretty risky in my opinion. What if the stock market crashed? What if the value of the dollar plummets? On top of that we can't count on social security.
      So we are screwed if you ask me. What I want to know is this: if IBM doesn't have to keep its promise to pay me a full pension that they promised me when I was hired, then why am I obligated to pay back my education/master's degree money if I leave the company? Can't I change my mind too? Corporations can change their minds when it financially suits them, but the lowly employee would be sued. -Anonymous-
  • IBM employees on employee raises
    • Comment 12/17/06: Salary = 98.5K; Band Level = 8; Job Title = Sr Consultant; Years Service = 3; Hours/Week = 50-55; Your Gender = female; Div Name = gbs; Location = NYC; Message = Just wondering if I'm in the low end or high end for my band? Came in as an experienced hire 3 years ago (15yr industry specialist). Also, does anyone know the range for a Band 9? -Anonymous-
    • Comment 12/19/06: Salary = 72k; Band Level = 8; Job Title = IT Specialist; Years Service = 6; Hours/Week = 40; Your Gender = Male; Div Name = IGS; Location = RTP; Message = Pay is OK - but not keeping up with market/inflation -Anonymous-
    • Comment 12/21/06: Salary = 112,000 in 2005; Band Level = 8; Job Title = Advisory software engineer; Years Service = 39; Hours/Week = 40; Your Gender = male; Div Name = SSD; Location = Tucson; Message = I retired early in 2006. It was the best thing I ever did. I miss the people that I worked with, but I now sleep through the night, and I never worry about IBM any more. -Anonymous-

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:
  • "Are we going to be consultants again?" by "barely_a_consultant". Full excerpt: I really don't believe it of course, but if you see the IBM advertising on innovation and recent w3 posts on what by ibm standards are ludicrously small consulting wins around innovation, you would think big blue has finally realised it mustn't let the world forget that it has business consultants as well, and not just the largest standing army of tech and ERP implementers in the world. And in last year's annual report, there is a line about SCM and S&C being the growth practices for the year for GBS.
    Consultants reading this board, is that enough to start dreaming on? I need a reality check on this one. Not on the old stuff about people policies and stifling bureaucracy, but on future intent. Is ibm serious about consulting again? Has it finally realised that even if it spent a small fraction of its 5 Bn R&D spend on innovative business thinking, it could sweep many a client CXO off her feet? And please, those of you who are not ibm'ers any more, don't rush in with your posts about how that can never be. You guys left, so let those who are still around now do the talking.
  • "You ask the $64 question" by "wonderaboutibm". Full excerpt: And I wish I could give you the silver-bullet answer, but...
    Your post is in some ways a great encapsulation of many, many discussions on this board. I rephrase your question this way: is there a future for functional business consulting -- operational and strategic -- at IBM? I am afraid the answer is: probably not.
    We have some significant organizational roadblocks to overcome if we are to be a glittering success in business consulting:
    • We have to beat our history and our inertia. IBM has always been a technology company (actually, more of a financial engine) than a business partner to its customers. Management interest in business processes waxes and wanes. It hit its apex with the purchase of PwCC -- IBM tried to buy its way into customer business savvy. Management interest in consulting has been waning recently, what with the basic failure of the PwCC merger to deliver what IBM wanted from it, and seemingly more profitable opportunities in software and systems. We are on a real downswing in the attractiveness of services to the IBM management.
    • We have to feed the fat baby. This is not going to happen by seeding small consulting engagements, even exciting ones. Despite what anyone says, the money will not flow from small and medium size businesses; the volume just is not there. We need to hit on the big fat boys, with big-money technical projects. Period.
    Look at how we look at SOA. We dream of enterprise rearchitectures, not really new ways of doing business.
  • "Yes, we have to feed the fat baby, but..." by "barely_a_consultant". Full excerpt: I guess what i am asking is, has somebody realised that besides buying food from the nearest grocery store, you can also plant seeds today in the form of consulting relationships and watch some of them grow into plants and bear fruit to feed the fat baby? And the reasons I am asking are:
    • It may have taken a age, but maybe somebody at HO has finally got it? That there is a different way of running this business which offers longer term protection against the Indian companies and actually tries to beat Accenture at its own game? How long can anyone ignore the obvious?
    • Why else have we gone to town with 'Innovation' - a very far cry from On Demand, if you look at the message closely. With On Demand we were telling the client - what you need is basically the same as what everyone else needs - buy it on tap from us, don't risk investment in your own infrastructure. And now with innovation, we are saying - hey you are unique - come to us and we will tell you how to turn your unique ideas into business success, and by the way, you gotta invest in the infrastructure needed for all that innovation!
    I personally see it as an incredible, and somehow comical turnaround. But - and here is the nub - while you could talk On Demand in purely financial (cost, risk), and vaguely technical terms (autonomic, resilient)- which as you say, are wired into the dna of big blue - you cannot really talk innovation to clients without discussing people, products, processes and markets (or can you? ... where IBM is concerned I cant be too sure. After all, this is the company that took a tech architecture concept called components, regigged and renamed these as 'business components' and told clients it was a great new way of doing strategy!)
    * That's why this post, wonderabout. What do you see at a distance? Another mirage? Or an oasis, finally?
  • "Shape of things to come?" by "wonderaboutibm". Full excerpt: Your questions are perceptive, rational, and even charmingly naive (and I do mean that in a complimentary sense.) But you are asking for the big picture, and I am not bright enough to see that. No one really is.
    There are a few pointers for us, though. Concerning your question about growing business for consulting, that is what all tech businesses should be doing, but that mindset suffers in the quarter-by-quarter mania we suffer though, like too many other corporations. Our senior management has a five-year window (to retirement,) but the options don't flow too well without the relentless devotion to quarterly results. Since our revenue is not growing that quickly, our margins are improving via stringent and almost irrational cost cutting. Projects needing longer-term focus are not getting what they need.
    Then, too, as I said in the previous post, we are not really oriented toward business consulting in the first place.
    I've got news for you: I believe in innovation as much as I believe in motherhood and apple pie. What kind of insipid nonsense is all this bs about innovation? It's marketing -- let's all go to conferences at expensive hotels for great meals, good times, and some paper doll cutting and flapping of the breeze. Meanwhile, the true innovators are storming the gates, like the Bolsheviks with their Molotov cocktails.
    And that leads to my last 'profound' observation: the real future of consulting is in the small newer firms. Our best chance is to buy out some of their ideas before they, too, get too big for their own good.
  • "Don't think so..." by "Bobbruno". Excerpts: I've asked this very question several times, and honestly, I don't believe in that anymore. As others have pointed, IBM is too focused on finance, sales and quarters.
    In this company, real innovation, when it's not acquired (deep pockets can buy a lot), is kept within very controlled lab environments - the rest of the company (and that includes us) is expected to get the pre-packaged products from the shelves (and CBM is one of those things, in case you think I'm talking about SW or HW here) and deliver them to clients with as little hassle as possible.
    That has a lot to do with what IBM believes is the "right" way of doing things - standardize and resell to exhaustion (preferably with a good margin). There is an inherent belief that individuals are either incompetent or untrustworthy, and should be kept in a tight leash. Even though you're told that the company fosters innovation, that managers should fight against inertia and bureaucracy, the fact is that doing that will keep you off your short-term targets. Therefore, you won't get promotions or recognition, and the person who'll get to the actual influence positions is the one who accepted mediocrity and played by the rules. Sand, but it's not news - just a very good example of a "Peter principle" variation. the consequence is that people at the top have no real desire or knowledge of real innovation.
    This is not an environment where consultants thrive - it may be a good environment for ERP implementers and architects/programmers who follow the rules, but not consultants, who are supposed to think for themselves and innovate at each opportunity they get - I've been to courses where people tried to convince me that innovation is about reusing existing assets - give me a break!
  • "Sometimes there is no detail" by "wonderaboutibm". Full excerpt: As a grim amusement, I read through the third quarter scorecards from our illustrious senior management.
    As I expected, GR had virtually NO numerical detail on anything, aside from a vague reference to 40% increase in profit. She did manage to say we had missed targets, including commitments to the IBM Corporation...
    The scorecards have a frame on the right side for graphs, charts, etc., but in GR's page, this is blank.
    The kicker, though, is that other scorecards are much more detailed and specific, and in some of them, the right frame is downright loaded with high-level, but significant, statistical information that really does map out reality vs. target. But no such thing for GBS -- either the comparisons are too painful to show, or basic performance information is being kept from employees.
  • "Riddle me this" by "no_longer_blue_or_bitter". Full excerpt: When was the last quarter that IBM told its employees that the targets were met or exceeded and that paychecks would be fatter because of it?
  • "Coming soon..." by "IGS_Consultant". Full excerpt: Despite cuts to employee raises, bonuses, reimbursement for broadband, cell phones, and telephones, highly restrictive travel policies, IBM still has not managed to save its way to higher earnings. Therefore, according to this highly-secretive memo, these further cost saving measures will be implemented early in 2007:
    Sick Days: We will no longer accept a doctor's statement as proof of sickness. If you are able to go to the doctor, you are able to come to work.
    Personal Days: Each employee will receive 104 personal days a year. They are called Saturday and Sunday.
    Toilet Use: Entirely too much time is being spent in the toilet. There is now a strict three-minute time limit in the stalls. At the end of three minutes, an alarm will sound, the toilet paper roll will retract, the stall door will open, and a picture will be taken. After your second offense, your picture will be posted on the company bulletin board under the "Chronic Offenders" category. Anyone caught smiling in the picture will be sanctioned under the company's mental health policy.
    Lunch Break: Skinny people get 30 minutes for lunch, as they need to eat more, so that they can look healthy. Normal size people get 15 minutes for lunch to get a balanced meal to maintain their average figure. Heavier people get 5 minutes for lunch, because that's all the time needed to drink a Slim-Fast.
    Finally, Thank your for your loyalty to our company. We are here to provide a positive employment experience. Therefore, all questions, comments, concerns, complaints, frustrations, irritations, aggravations, insinuations, allegations, accusations, contemplations, consternations and input should be directed elsewhere.
  • "More" by "Frank_Reality". Full excerpt: Also in 2007... Employees will have to provide their own laptops and computing supplies. The company will no longer furnish one to their employees. Ditto for pagers and cell phones.
    Employees will be billed for their utility use (lights, power, water, heating/cooling, network and space) when on IBM property.
    Employees will be required to rent their parking spaces at the company lot.
    Employees will have to provide their own bathroom paper products. Likewise, office supplies will no longer be stocked on location, employees will have to purchase their own.
    Future Spirit events will be potluck meals. Cost of outings will be charged to the employee and deducted from their pay. Treatment for food poisoning will not be cover by the IBM medical plans.
    IBM will start charging 10% of the employee ECCC contributions as a "franchise fee" to recover the company's costs.
    These are in jest, of course. But I do worry about giving those in power any ideas.


Modern-Day Robber Baron Corner
Today's highly compensated executives face many difficulties, including figuring out how they can possibly spend all of the rich rewards they've earned on the backs of ordinary workers. Take a look at the insider trading of many of our IBM executives—spending the cash from all that stock "acquired at $0 per share" must be a real challenge! Or, imagine the difficulty IBM CEO Sam Palmisano will face spending his $10,000 a day pension when he retires!
As a way of helping out our beleaguered, modern-day robber barons we will periodically feature "spending opportunities" that the "upper crust" of our society may want to take advantage of!
  • Wall Street Journal: Santa's 'Gifting' Helpers. How the Well-to-Do Turn Over Holiday Shopping to the Experts; The $37,000 Gem-Studded Pen. By Stephanie Kang. Excerpts: To some people, hunting for the perfect gift is more of a hassle than a holiday. Some of the wealthiest consumers across the country turn to consultants to find ultra-exclusive, money-is-no-object gifts from around the world. Often, like Donum in Hollywood, these consultants are regional operations; sometimes they're part of large luxury-goods companies.
    Requesting Donum's services are movie studios, independent production companies, talent agencies, Fortune 500 executives, and corporate law firms throughout Southern California. Budgets can start at $1,000 for a single shopper's list to several hundred thousand dollars for a company buying for its entire work force. Gifts run from under $100 for candles or frames, but can quickly skyrocket to $12,000 for a Sooloos digital music system or $37,000 for a diamond-and-emerald-encrusted pen from Italian company Omas. Donum makes its money just like a department store, by charging about twice the wholesale price of an item. Engraving, wrapping and delivery cost extra.

"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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