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Highlights—June 9, 2007

  • Wall Street Journal: IBM's Under-the-Wire Tax Break. By William Bulkeley. Excerpts: The Internal Revenue Service moved to shut a corporate tax loophole last week, just two days after International Business Machines Corp. used it to save an estimated $1.6 billion, according to a person familiar with the transaction.

    On May 29, IBM said it had structured a $12.5 billion stock repurchase to take advantage of funds it earned overseas without making them subject to U.S. corporate tax rates. Tax attorneys call such deals "Killer B" transactions because they are designed to circumvent IRS section 367 B covering U.S. taxes on repatriated earnings.

    On May 31, the IRS announced plans to issue regulations making companies pay U.S. taxes when they buy back their stock, even if the shares are purchased by an international subsidiary. It said the planned ban on the practice would take effect that day, even though the regulations won't be finalized for some time. [...]

    Mr. Rosenbloom said that it is possible that the IRS could challenge IBM's structure on the grounds that it didn't serve any business purpose except reducing taxes. However, other attorneys noted that the IRS had previously asked for comments about such transactions, indicating it accepted them. The new regulations are subject to comments from the public and issuance of final regulations in the U.S. Federal Register. [...]

    The regulations involve what the IRS calls a "Triangular Reorganization." The way it worked at IBM involved forming a new IBM subsidiary in the Netherlands. The unit spent $1 billion in cash and $11.5 billion in borrowed funds to buy 118.8 million shares -- 8% of IBM shares outstanding -- from a group of investment banks that had borrowed the shares from institutional investors. The investment banks will return the borrowed shares with shares they buy on the open market over the next nine months. IBM will cover any added costs the investment banks suffer if its stock rises.

  • Wall Street Journal: IBM Misled Investors, SEC Says. Agency Charges Firm Broke Securities Laws in Making '05 Options Presentation. By Charles Forelle. Excerpts: The accusation came in an administrative action by the SEC against IBM, which was settled by the two parties under terms that allowed IBM to pay no fine or penalty. Without admitting or denying wrongdoing, IBM consented to the SEC's entering a cease-and-desist order. In a statement, IBM noted that the SEC didn't accuse the company of violating fraud provisions of the securities laws. [...]

    In response to questions raised about the April 5 conference call, an IBM spokesman said in subsequent weeks that a portion of the 14-cent impact was attributable to higher pension costs; some analysts, however, disputed that notion. During the presentation, titled "IBM Equity Compensation Expensing," IBM showed a slide illustrating "current" and "adjusted" estimate figures that made no mention of pensions. In any case, the SEC said that IBM officials should have disclosed the options impact as 10 cents.

  • Associated Press, courtesy of Forbes: IBM Settles SEC Probe of Options Report. By Brian Bergstein. Excerpts: An investigation of IBM Corp. by the Securities and Exchange Commission ended Tuesday without penalty, although the government found that the technology company misled analysts about employee stock-option expenses in 2005.

    The SEC said IBM's conduct "violated the reporting provisions of the federal securities laws." However, the agency stopped short of finding that fraud had been committed, and it imposed no fine.

    Nine days before the company released its quarterly earnings in April 2005, IBM's chief financial officer, Mark Loughridge, held a conference call accompanied by a chart showing that if IBM had been accounting for options as an expense a year earlier, the cost would have been 14 cents per share. Loughridge indicated that the 2005 quarter would be similar, and analyst forecasts incorporated a 14-cent charge for options. As it turned out, the cost from expensing options was 10 cents per share. [...]

    The difference mattered when IBM said its first-quarter earnings amounted to 84 cents per share, or 85 cents based on continuing operations. Analysts had been expecting 90 cents, but the forecast would have been 94 cents had the precise options-expensing figure been known. Some analysts suggested that IBM had misled Wall Street about the options figure so as to cushion the disappointing results and hide weakness in the business.

    "The facts here are particularly troubling because the disclosure decision was driven, in part, by management's perception of how the news would be interpreted by analysts," said Scott W. Friestad, the SEC's associate director of enforcement.

  • Yahoo! message board post "Re: SEC says IBM misled investors on expenses" by "ibmaccountant". Excerpt: Settlement? Better described as a whitewash by a pro-big business administration.

    On the other hand, the analysts are now warned and many won't forget they were ridiculed by IBM Communications and Loughridge's gang when they pointed out the "accounting discrepancies".

  • Forbes: IBM Agrees to Acquire Watchfire
  • CNET News: China's new weapon: Low executive pay. By Michael Kanellos. Excerpts: Since high-level executives and other white collar professionals in Asian companies typically make less than their Western equivalents, these companies potentially will have a cost advantage.

    How or even whether the differences in executive salary will impact the market remains unclear: multinational companies are hiring their own executives in these regions, too, after all. Nonetheless, the numbers are tough to ignore: engineers aren't the only "talent" that costs less in developing markets. Executives cost a lot less, too.

    Shanghai's SunTech Holdings, for instance, has moved from being a bit player in solar panels to becoming one of the largest manufacturers in the world. Most of the company's panels end up overseas, and it can produce those panels more cheaply than American competitors for various reasons. Among them: the company isn't lavishing huge compensation packages on its executives.

    "There aren't 10 executives in the company that make more than $200,000," said Steve Chan, vice president of business development at SunTech Power Holdings.

    U.S. execs make far more. In a survey conducted by Forbes last year, the magazine found that the average big company CEO made $3.3 million in salary and bonuses.

  • Forbes: CEO Compensation. Much Too Golden Years. By Elizabeth MacDonald. Excerpts: Fat cat chief executives are almost always used as Exhibit A in the national debate about the rich getting richer. Bolstering that case is a growing body of evidence showing that a burgeoning cohort of chief execs are getting lush compensation deals that last long after they've driven out of the corporate parking lot. [...]

    IBM: Lou Gerstner got a 10-year consultancy contract worth up to $2 million annually, plus expenses and full use of IBM facilities and services, such as office, cars, aircraft and financial planning. He only has to work one month out of the year. His successor, Samuel J. Palmisano, stands to receive more than $3 million in pension annually for the rest of his life after he retires.

  • BusinessWeek: The Real Cost Of Offshoring. U.S. data show that moving jobs overseas hasn't hurt the economy. Here's why those stats are wrong. By Michael Mandel. Excerpts: Whenever critics of globalization complain about the loss of American jobs to low-cost countries such as China and India, supporters point to the powerful performance of the U.S. economy. And with good reason. Despite the latest slow quarter, official statistics show that America's economic output has grown at a solid 3.3% annual rate since 2003, a period when imports from low-cost countries have soared. Similarly, domestic manufacturing output has expanded at a decent pace. On the face of it, offshoring doesn't seem to be having much of an effect at all.

    But new evidence suggests that shifting production overseas has inflicted worse damage on the U.S. economy than the numbers show. BusinessWeek has learned of a gaping flaw in the way statistics treat offshoring, with serious economic and political implications. Top government statisticians now acknowledge that the problem exists, and say it could prove to be significant.

    The short explanation is that the growth of domestic manufacturing has been substantially overstated in recent years. That means productivity gains and overall economic growth have been overstated as well. And that raises questions about U.S. competitiveness and "helps explain why wage growth for most American workers has been weak," says Susan N. Houseman, an economist at the W.E. Upjohn Institute for Employment Research who identifies the distorting effects of offshoring in a soon-to-be-published paper.

    Fly in the Ointment: The underlying problem is located in an obscure statistic: the import price data published monthly by the Bureau of Labor Statistics (BLS). Because of it, many of the cost cuts and product innovations being made overseas by global companies and foreign suppliers aren't being counted properly. And that spells trouble because, surprisingly, the government uses the erroneous import price data directly and indirectly as part of its calculation for many other major economic statistics, including productivity, the output of the manufacturing sector, and real gross domestic product (GDP), which is supposed to be the inflation-adjusted value of all the goods and services produced inside the U.S. (For a detailed explanation of how import price data are calculated and why the methodology is suspect, see page 34.)

    The result? BusinessWeek's analysis of the import price data reveals offshoring to low-cost countries is in fact creating "phantom GDP"--reported gains in GDP that don't correspond to any actual domestic production. The only question is the magnitude of the disconnect. "There's something real here, but we don't know how much," says J. Steven Landefeld, director of the Bureau of Economic Analysis (BEA), which puts together the GDP figures. Adds Matthew J. Slaughter, an economist at the Amos Tuck School of Business at Dartmouth College who until last February was on President George W. Bush's Council of Economic Advisers: "There are potentially big implications. I worry about how pervasive this is." [...]

    Phantom GDP helps explain why U.S. workers aren't benefiting more as their companies grow ever more efficient. The cost savings that companies are reaping "don't represent increased productivity of American workers producing goods and services in the U.S.," says Houseman. In contrast, compensation of senior executives is typically tied to profits, which have soared alongside offshoring.

  • Jim Hightower: American Airline's Executive-Suite Greed. Excerpts: "From the onset," says a mechanic at American Airlines, "I didn't like the sound of that slogan they were throwing around – 'shared sacrifice.' It just didn't ring with any honesty with me."

    He's just one of thousands of American employees who took massive pay cuts in 2003, costing them $1.6 billion every year since. It was necessary, the workers were told, to save the airline from bankruptcy. Share the sacrifice, promised the top executives, and we'll share the gains with you.

    He's just one of thousands of American employees who took massive pay cuts in 2003, costing them $1.6 billion every year since. It was necessary, the workers were told, to save the airline from bankruptcy. Share the sacrifice, promised the top executives, and we'll share the gains with you.

    So, to show his appreciation, Arpey handed out generous bonuses to everyone! Everyone in the executive suite, that is. Arpey personally pocketed a $6.6 million bonus. Four other top dogs split another $12 million in bonuses.

    And the workers? They're to continue sacrificing, not getting a penny of the gain. In other words, just as the mechanic sensed, Arpey was lying to them from the start.

    Needless to say, American's annual meeting in May was a bit "testy," with workers openly calling the executives "arrogant, greedy, selfish, and heartless individuals." Arpey, who had brought dozens of hired security agents into the meeting to protect him from his own employees, added insult to injury by saying that the executive bonuses were granted as a reward for solid performance. And what about the solid performance of the employees? Rather than answer that, Arpey abruptly adjourned the meeting.

  • The Times of London: Indian wage spiral forces TCS to outsource in Mexico. By Ashling O’Connor. Excerpts: The increasing cost of labour in India is forcing the country’s largest software services provider to hire 5,000 employees in Mexico. Tata Consultancy Services (TCS), which opened a software development centre in Guadalajara, Mexico, last week, will outsource the first 500 jobs from India in this financial year. A further 4,500 jobs will follow over the next five years.

    A talent supply crunch in the booming services sector in India, coupled with a sharply appreciating rupee against the dollar, is threatening to knock the country off its perch as the world’s leading outsourcing centre.

    “We see costs rising in India and people becoming less available,” Gabriel Rozman, president of TCS in Latin America, Spain and Portugal, said. “That’s why we’re going to places like Latin America, which has professionals and reasonable costs.” [...]

    TCS is not the only software group to express concern at the rising cost of doing business in India. It and several of its rivals, including Wipro, Infosys and Satyam, have set up operations in China, where an excess supply of well-trained software engineers has kept salary inflation under control. [...]

    The rupee has gained 9.2 per cent against the dollar this year, eroding the earnings of Indian companies that generate a large proportion of their sales in the US. The National Association of Software and Service Companies (Nasscom) the trade body for India’s $48 billion IT industry, has said that the rupee’s surge will blunt the country’s competitive edge.

  • AssetBuilder: The Second Starbucks' Solution. By Scott Burns. Full excerpt: Brooks Hamilton is a figure-it-out-and-do-it kind of guy. An employee benefits attorney who is also a major geek, he is comfortable with both words and numbers. Over the last ten years we've traded spreadsheets, talked about retirement planning, and worked on ways to improve Defined Contribution plans--- the things most people know as their 401(k) or 403(b) plan. Not long ago, we collaborated on a paper, "Reinventing Retirement Income In America" for the National Center For Policy Analysis. (You can find the paper online at www.ncpa.org)

    So it's a little strange to see him sitting pensively or to hear him expressing doubt.

    But that's what he's doing.

    He's worried.

    I ask what's on his mind.

    "The Social Contract," he answers. He says it the way some people would say, "My visa bill."

    "I've just become really unsettled with the hardball way senior management (in Corporate America) wants to play with the masses.

    "I think we're missing a bet. We shouldn't eat our children to avoid starvation. We have too few businesses focused on what's good for the country, too many focused on their very short term business interest," he says.

    "What's the Social Contract," I ask?

    "It's basically a covenant between the worker and the business. It determines the quid pro quo. The worker gives his labor--- and (the contract says) what he gets in return. The rub is that some people think the business owes the worker a fair days' pay for a fair days' work--- that you don't owe him the gift of a pension because you've already paid for the work.

    "The question is whether retirement in dignity is part of the Social Contract. I've never thought that a pension was a gift. The phrase "wages, hours, and other conditions of employment" includes a pension. What you were required to do was structure compensation so it included 'retirement in dignity.

    "What has bothered me is that our business schools have taught slash and burn--- if you can cut payrolls to make a profit, you get an "A."

    "Remember, things have changed. A century ago you might do forty years of work and four years of retirement, all within 50 miles of all your relatives. There was family support. Today, you work forty years in different cities. You go where the job is, you're 1,000 miles from any of your relatives, and retirement lasts a lot longer. If we lose the purchasing power of retirees we're not talking about losing a small amount.

    "So, I'm worried. We're in trouble. What will happen when 20, 30, or 40 million workers retire to despair and run out of money in their 70's?

    "It means you become the executor of your own estate--- you get to sell everything and have the nightmare experience of selling everything you treasure because you want to eat. That's the fate I see in store for tens of millions of American households.

    "But the solution is in plain sight. It's to understand that capitalism is the strongest mechanism ever built by man and if we can sell a Starbucks coffee for $3.50, we can also sell it for $3.55. Yet the entire concept of employee benefits seems up for grabs.

    "We shouldn't be talking about making the profit plan by cannibalizing benefits. You have to make your profit plan while honoring your obligation to employees. If you make your profit plan by cannibalizing benefits, you're not a very good businessman."

    Can American companies really provide " retirement in dignity" just by adding a nickel to the price of a cup of fancy coffee, I asked?

    He responded by telling me two stories, one international and one domestic.

    On a trip to Tokyo he and his wife had noticed fifteen or twenty "Elevator Ushers." The ushers asked each guest what floor they wished to go to, stepped inside the elevator to push the button, and thanked them for being a guest. Impressive--- but Hamilton thought it was a wasteful "make work" practice. They saw the same thing at the major department stores.

    Finally he asked a Japanese businessman, why were they so wasteful with labor?

    "Our culture believes that honorable employment costs far less than your American welfare system. Because all work in Japan, we have no unemployment, no welfare," the businessman answered.

    Confronted with a major business problem, Henry Ford came up with a solution that changed America. Paying $2.25 a day, Ford suffered high turnover and a multitude of work injuries. In 1916, Hamilton noted, the Ford Highland Park plant recorded nearly 200 severed fingers and more than 75,000 cuts, burns, and puncture wounds.

    So Henry Ford doubled wages, creating the $5 a day job. In one stroke he reduced turnover, built skill levels, cut accidents and injuries, increased morale, and created thousands of buyers for his cars.

    In 21st Century America, we just cut jobs, benefits, or both.

    But can you really offer retirement in dignity for just a nickel on a fancy cup of coffee, I asked again.

    To prove his point, Hamilton showed me a spreadsheet. It showed a company whose sales were 5 times payroll that had only 40 percent of its employees contributing only 3 percent of pay to their 401(k) plan and the company match was 50 percent of the first 6 percent of payroll--- not enough for "retirement in dignity."

    "How much", Hamilton asked, "do you think it will cost to offer a good retirement plan, one where 90 percent of employees participate, contribute 8 percent of pay, and get a company match that's 100 percent of the first 6 percent of payroll?

    I told him I didn't know.

    He showed me. Although the cost of the employer match increased 9 times it was still a small amount as a percent of sales--- less than 1 percent.

    "That would add 3 cents to the $3.50 price of a Grande Latte--- or a Happy Meal. Three cents!"

    Maybe Executive America needs to do something more imaginative than cost cutting.

  • SmartMoney: Stanford Professor Slams Office Bullies, Work Jerks. By Lisa Scherzer. Excerpts: Robert Sutton, a professor of management science and engineering at Stanford, has become a reluctant Dr. Phil. Instead of counseling overweight, cheated-on alcoholics, he ministers to victims of workplace bullies and the companies that harbor them. Ever since his book, "The No A--hole Rule: Building a Civilized Workplace and Surviving One That Isn't," came out in March, emails from people eager to unload their you-wouldn't-believe-the-jerk-I-work-with stories inundate Sutton's inbox. (He shares the more interesting ones on his blog.) [...]

    The book addresses the widespread problem of social friction in the workplace and how it can affect morale, undermine performance and cost a company dearly in both talent and money. How much money? Sutton, who also posts on Arianna Huffington's blog, says while estimating the "TCA," or "total cost of a--holes," is difficult, it's an instructive way to think about the costs of putting up with bullies at work. Sutton cites a Silicon Valley company that calculated the cost associated with one of its most highly paid salespeople, a "certified a--hole" who had a terrible temper, insulted co-workers, and had to attend anger-management classes (on the company dime). Managers estimated that costs in terms of time and dollars spent related to this employee's treatment of people totaled about $160,000.

News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
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  • New York Times: Obama in Second Place. By Paul Krugman. Excerpts: Four months have passed since then. So far, all Hillary Clinton has released are proposals to help reduce health care costs. It’s worthy stuff, but it’s hard to avoid the sense that she’s putting off dealing with the hard part. The real test is how she proposes to cover the uninsured.

    But last week Barack Obama, after getting considerable grief for having failed to offer policy specifics, finally delivered a comprehensive health care plan. So how is it?

    First, the good news. The Obama plan is smart and serious, put together by people who know what they’re doing.

    It also passes one basic test of courage. You can’t be serious about health care without proposing an injection of federal funds to help lower-income families pay for insurance, and that means advocating some kind of tax increase. Well, Mr. Obama is now on record calling for a partial rollback of the Bush tax cuts.

    Also, in the Obama plan, insurance companies won’t be allowed to deny people coverage or charge them higher premiums based on their medical history. Again, points for toughness.

    Best of all, the Obama plan contains the same feature that makes the Edwards plan superior to, say, the Schwarzenegger proposal in California: it lets people choose between private plans and buying into a Medicare-type plan offered by the government.

    Since Medicare has much lower overhead costs than private insurers, this competition would force the insurance industry to cut costs — making our health-care system more efficient. And if private insurers couldn’t or wouldn’t cut costs enough, the system would evolve into Medicare for all, which is actually the best solution.

  • Los Angeles Times: High deductibles a pain for some insured. Cash-strapped consumers can end up forgoing needed medical treatment or falling into debt. By Daniel Yi. Excerpts: But the point of insurance is to cover unforeseen events, critics of high-deductible plans say. Plans like Tonik "cherry pick" the healthiest consumers while saddling less healthy and poorer patients with overwhelming medical bills should they become gravely ill or unexpectedly pregnant, critics say.

    "If you can't afford the deductible, it really isn't affordable insurance," said Jerry Flanagan, an advocate with the Santa Monica-based Foundation for Consumer and Taxpayer Rights.

    Nancy Warrington said she and her husband, an electrician, believed they were in relatively good health. But soon after getting their insurance, the couple experienced a series of health problems. None were serious, but all were expensive, including MRIs for Todd's back pain and a skin cancer test for Nancy, which turned out to be negative.

    "It just kept snowballing," Nancy Warrington said. The couple have since moved into a more comprehensive employer-subsidized plan with smaller deductibles after Todd got a job with health benefits, but they are still feeling the effects of their old deductibles. One hospital has tapped into their checking account and collects $82.22 every month, she said.

  • BusinessWeek: Michael Moore Wants to Reform Health Care. Big Pharma is already girding for battle against the filmmaker's latest effort, due in theaters this month. Will the new flick spur change in the U.S.? By Ron Grover. Excerpts: He's rumpled, a little coarse, and shoots from the hip. But Michael Moore, the irreverent force behind such politic-bending documentaries as the gun control manifesto Bowling for Columbine and the anti-war anthem Fahrenheit 9/11, knows how to stir the pot. Just wind him up, and ole Michael will fire away at entrenched political or corporate interests, no matter their size. He even took time during his 2003 Oscar acceptance speech for Bowling to deliver a finger-wagging rant against President Bush's Iraqi policies.

    Little wonder then that the health-care establishment is bracing itself for the release of Moore's next film, the decidedly anti-medical industry Sicko. Moore will begin stumping for his film this week, with a June 5 appearance on Oprah Winfrey's show and then late night chats with David Letterman and Jay Leno. The movie, which is scheduled to hit theaters June 29, wowed audiences in Cannes last month, even reducing some to tears during a heartfelt scene in which an infant dies because she can't get medical care.

  • New York Times: Health Care as if Costs Didn’t Matter. By David Leonhardt. Excerpts: In a saner world, the place where you live wouldn’t have much effect on how doctors treated your back problems. In our world, it can make all the difference.

    In Idaho Falls, Idaho, anyone suffering from the sort of lower back pain that may conceivably be helped by the fusing of two vertebrae is quite likely to have the surgery. It’s known as lumbar fusion, and the rate at which it is performed in Idaho Falls is almost five times the national average. The rate in Idaho Falls is 20 times that in Bangor, Me., where lumbar fusion is less common than anywhere else. [...]

    Still, we shouldn’t be naïve: a lot of people would lose if medical care came to be based more on what actually worked. Right now, drug companies and medical device makers can go to the Food and Drug Administration and get approval for an expensive new product so long as they show that it’s as effective as its predecessor. They can then turn around and suggest to doctors that the new product is more effective than its predecessor. The doctors often profit, too. And many patients demand the latest, most expensive procedure, regardless of the evidence.

    So reforming the system will require a fight — not just over the meaning of the word “universal” but also over finding tough, sensible ways to save money. As David Cutler, one of the Obama campaign’s health care advisers, said, “These things are really hard, so they ought to be in the foreground.”

  • USA Today: Is a little medical coverage that much better than none? By Julie Appleby. Excerpts: Tony Camilleri rushed his pregnant wife, Bridget, to an emergency room in January, fearing she was suffering a dangerous complication with her pregnancy. Luckily, tests showed she was not. Then the Michigan couple began getting bills from doctors and the hospital, for more than $8,000. To his surprise, Camilleri's insurance didn't cover any of it because his wife had surpassed a $2,500-a-person annual limit on what the policy would pay. [...]

    Both men are enrolled in an increasingly popular — and controversial — type of health insurance that gives limited coverage to more than 1 million Americans. Their cases reflect a building debate about whether such policies provide a false sense of security, and raise the question: Is a little coverage that much better than none at all? [...]

    Under limited-benefit plans, "people think they have insurance, get sick and find out that they don't," says Beverley Brakeman of Citizens for Economic Opportunity, an advocacy group in Connecticut. [...]

    Insurers are targeting the estimated 39% of employers who currently don't offer health insurance. "The market has a potential 14% to 16% annual growth rate," says Eric Motter, vice president of marketing for Cigna's emerging markets segment. Cigna began offering limited plans last year after purchasing Star HRG from HealthMarkets.

New on the Alliance@IBM Site:
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  • From the Job Cuts Status & Comments page (Note: There were a massive number of posts to this page during the last week. The following is a sampling of the large list of posts received by the Alliance@IBM.)
    • Comment 06/03/07: More cuts in June in SWG in RTP. More programming and test jobs to be outsourced to India during late 2nd quarter and 3rd quarter. Loose lipped 2nd line said that most development and test positions in SWG would be in India and China by 1/1/08. Good luck and may the last one out turn out the lights. -rtpguy-
    • Comment 06/03/07: I had another call today from someone who was let go on Saturday. They worked 12 hour shifts in Southbury as a contractor.They knew something was up as soon as they heard the agency mgr's voice on the other end of the phone. The funny thing is that when he told me, he was laughing so hard I couldn't understand him. He's not worried. He's been thru this 5 times already. The first time he was layed off as a regular ibm employee, the 2nd time he was layed off as a AT&T employee, and the last 2 times as a contractor (working in various IBM positions). This makes the #5 layoff within the past 11 years. Each time he was layed off and re-hired, his salary took a hit (for the worse). How's that for a stellar career? Anyone still think there is a future in the I/T industry in the US?
    • Comment 06/03/07: From a reliable source, I've heard that 28 Accounts payable employee's were laid off last week in Endicott. The source was one of the layoffee's. He said the jobs were offloaded to India and they trained the India employee's right here in Endicott. -Anonymous-
    • Comment 06/03/07: The resource actions going on are indeed serious. But let's not allow hyperbole (intended or otherwise) draw attention away from what is going on. Claiming that this action is worse than in 92 is plain stupid at best or the comments of a troll at worst. The reports of the number of employees being laid off are higher than reality. Unfortunately there is no way to tell who is simply trolling for attention and who is trying to discredit the few legitimate reports. The reality of the situation is bad enough. -racerxny-
    • Comment 06/03/07: I was told by my mgr here in Atlanta that I was "selected" for this layoff last week. On Friday, my BUE asks me if I am "okay". When I asked her why our group was "selecting" 10 people for the layoff, but hiring a "new hire training class" of 15 college grads/professional hires in mid June, she advised that it was 1) "IBM's way of looking good to the community, and, get this, 2) lowering expense as college grads are cheaper." - So as I sit in my IBM cubicle finishing out my 30 day sentence, I can only wonder what the future holds for such a mismanaged company. Surely this cluster **** isn't what Thomas Watson Sr and Jr. had envisioned ... -Scott the Vet over 50-
    • Comment 06/04/07: AS400 ops in Boulder cut 10 jobs or 50% Last Thursday -- odcs ops has cut 2 more totaling about 10 now - all contractors. Have team leads that don\'t even know their people are gone until after it happens. Team leads probably next. -Boulder cuts-
    • Comment 06/04/07: Sorry to hear about Boulder AS400 Ops...I actually had to call AS400 Ops in Boulder this weekend for a 2 minute task....it took them over 2 hours to do it due to other requests etc...our client was well pissed... -Danger Mouse-
    • Comment 06/04/07: Because of all the layoffs I decided to take another job. Only problem is that I owe 1 year of academic assistance to IBM. Do you think they will chase me for this? My reasoning in that I don't think I should pay this back is simply this....if IBM can change my retirement plan on a whim and let me go on a whim, then why should I be held to a higher standard than my employer and be told I have to honor my commitment to repay. Any thoughts? -Raleigh Guy Leaving-
    • Comment 06/04/07: i was missed again.... missed by all the customers who are now suffering because i am gone.... no down time in almost 2 years... now dealing with many problems.... no one there looking out for them.... i feel for them, having money isnt bad, its the love of money is what corrupts those in high places...... tap tap tap.... time to get a reading on the moral compass.... -lou cipher-
    • Comment 06/04/07: To Raleigh Guy Leaving - Did you sign anything? If not, screw 'em. Presumably they pressured you, like everyone else, into signing something, but at least you can make it as hard as possible for them to collect. I guarantee they will come after you, no dollar amount is too small. -Was in Rochester-
    • Comment 06/04/07: To "Raleigh Guy Leaving", Yes, they will want their money back :-) See http://w3-01.ibm.com/hr/us/hrforms/data/sepsum.PDF-ibmer-
    • Comment 06/04/07: SWG also had layoffs last week, I was informed by my manager. Manager would not tell me how many -Mother Jones- Alliance reply: According to a RA pack we just received there were 134 people cut.
    • Comment 06/04/07: 2nd line called and told me that I was safe but the rest of WW Technical Sales in SWG is facing a blood bath. She said that PM's would be the first out the door. Only those who are customer facing are safe. -rtpguy-
    • Comment 06/05/07: Raleigh Guy Leaving: My 0.02 cents...NO, they will not chase you down for the money. I know of an ex-employee that left way before they were suppose to and they did not make an issue of it. -Anonymous-
    • Comment 06/05/07: I received notice on Monday that I was being let go. What stinks is that the contract I was on was terminating and I was accepted for the position I was just let go by. If the manager knew this was coming why did he make the offers to hire on additional staffing. I could have hired back to the company that outsourced me in the first place and would not have to be looking for a new job. Also 5 more positions were posted on the account that just let me go and the posting date ended before I was notified I was being let go. It is sad when a company post your position, closes the posting and then lets you go. Mgr told me the positions posted were to be filled globally. In laymen's terms by non US workers. -One of Many-
    • Comment 06/05/07: Raleigh guy leaving: I was looking at a managers exit interview checklist. It mentions academic assistance owed, and sounds like they may want a check from you. -Remotely RA'd-
    • Comment 06/05/07: Congress is now starting to be come alarmed about "job shifting" of US jobs to 3rd world labor pools. IBM is a leader in "Job Shifting" and even consults or companies on how to cheat US workers out of pension, benefits and jobs... Perhaps it is time to write your public servants about what IBM is going and support any bills that will limit job shift for the mere sake of greed. -StopJobShiftinUSA-
    • Comment 06/06/07: To: Raleigh Guy, IBM will try to get back every dime you owe them. I didn't use the medical benefits in the last few years when I was an employee because my wife had a better plan, so they ended up paying me $5 each pay period from the allocation. We'll there was a final $5 payment in the last check that shouldn't have been and I must have gotten a half dozen notices after I left trying to bill me for the $5 I owed IBM. Since I had already signed the covenant which was supposed to put closure on everything, I figured screw them and just ignored the bills until they finally stopped coming. I wouldn't be surprised, though, if one of these days a collection agency calls me to ask me to pay the balance due or it shows up on my credit report. And that's just for a measly $5. I can guarantee you that your tuition charges will be deducted from your settlement amount before you even get it. -Anonymous-
    • Comment 06/07/07: I see much talk about IBM shipping jobs to India... but I don't see that same talk also mentioning that jobs are going to China, Romania, Argentina, Brazil and the like. My department has had to start "training" new team members in Argentina (SAs). They are lacking a lot of advanced troubleshooting skills. -TrainingMyReplacments-
  • From the General Visitor's Comment page:
    • Comment 06/03/07: iSeries and pSeries manufacturing and assembly will be outsourced to Ireland. -rtpguy-
    • Comment 06/06/07: Oh yeah, wasn't IBM lauded for disclosing options reporting for stock before they were required to do so back in 2005 if I recall? Yeah, they thought they could fool us all. No surprise. The real surprise is that the impotent SEC imposed no fine or penalty or even any admission of wrongdoing or fraud and even the "slap on the wrist" must have just tickled IBM. -IBM_in_bed_with_SEC-
    • Comment 06/07/07: IBM's motto used to be "Think". That was replaced by "Cheat", and that was replaced by "Stink". Immoral, unethical and now illegal executive leadership now dominates this once hallowed company. -Underground-
    • Comment 06/08/07: Love to see IBM cheating America by loopholes in taxes. You expect a corporation of this size and clout to do the right thing versus CHEATING.. It just shows what this current management team has become.. WHORES Screw your employees.. enslave third world workers at dirt wages and no benefits. Sell out your own country to save a buck. This resulting in the deaths of US workers, destroying families and damaging the family structure.. for what ? during record times.. more money for management. I sure pray that there is a special place in hell for our management Sore Sphincter -samp@us.ibm.com-
  • Pension Comments page
  • Raise and Salary Comments
    • Comment 06/04/07: Anyone hear that they got an MBA (market pay adjustment) yet? If so are you willing to let us know and what your salary was and is now after the MBA? -sby_willie-
    • Comment 06/04/07: For those lucky enough to get a raise: Don't expect much more if any over 3% regardless of your PBC. Those with PBC "2" will get little if any, 2+ you might get one but don't count on it, PBC "1" you'll probably get one but it'll be a joke and if it doesn't insult your intelligence then you are officially brain dead! Oh, by the way, that is less than the cost of inflation. Be happy... you have not been RA'ed (YET).. LOL -Anonymous-
    • Comment 06/05/07: Salary = 114K; Band Level = 9; Job Title = Senior I/T Consultant; Years Service = 25+; Hours/Week = 60+ (including travel); Div Name = ISSW; Location = Mobile; Message = No meaningful raise in over 5 years (had a couple of 2%-ers years ago), despite solid 2+ ratings and exceeding every performance objective. Morale is in the toilet. -Anony Mouse-
    • Comment 06/06/07: Anybody heard anything about why the compensation tool is down and why employees can't access their compensation under w3? We're 6 days into the new salary period and it's suspicious that this tool is down. -Anonymous-
    • Comment 06/06/07: Band Level = 7; Job Title = PM; Years Service = 8+; Hours/Week = 48+; Div Name = 07; Location = W@H; Message = I was a 2+ - you know what I got - a boot out the door and yet people have the nerve to complain about a 3.5% increase. I haven't seen an increase like that in 4 yrs. People it's time to wake up and smell the manure. -Screwed Over-
    • Comment 06/06/07: The compensation tool is always down for the first 2.5 weeks of June. It's so you can hear the (lack of) raise from your management instead of just on a web page. The page reopens after the 15th. -none-
    • Comment 06/06/07: For those of you who have asked about the Compensation page being unavailable, all you have to do is call the HR number on that page and ask them what your current salary is. That's what I did and they told me my new salary without any hassles. -Anonymous-
    • Comment 06/06/07: Salary = $102K; Band Level = 8; Job Title = Advisory Engineer; Years Service = 9; Hours/Week = 45; Div Name = STG; Location = East Fishkill; Message = No raise since 2003 and I was just told no raise again. I am at 102% of my band/job salary range. Funny because I was told in 2003 that I was at 98% and I have not changed job title or band. This means the range has been changed downward !!! Anyone else experience this ? Solid 2 performer every year. I'm sick of this company - time for me to move on elsewhere. -Rick-
    • Comment 06/06/07: IBMers, you can find out your raise (or lack there of) via the automated employment verification system located here : http://w3-01.ibm.com/hr/hrinfo/howto.nsf/0/02792e9bc9f2551a8525636a003eaf83?OpenDocument Scroll down to the "Active employees - employment verification and total compensation verification" section of the page and follow the instructions. Two IBMers that received raises this year have verified it. One whose manager had told him his raise and one who did not. -ibmer-
    • Comment 06/06/07: "For those of you who have asked about the Compensation page being unavailable, all you have to do is call the HR number on that page and ask them what your current salary is. That's what I did and they told me my new salary without any hassles." I'm calling tomorrow! Can't wait for my management to not notify me and I can't wait to find out before the June 15th pay stub to find out. I advise everyone who has not found out of their raise status to do the same! Maybe HR might see what is non communication or lack of timely communication is going on by management to employees. Randy Mac are you listening or do you give a friggin damn? -raise?-
    • Comment 06/07/07: To view your raise if you got one do the following. I have done this for years and it always works. Go to you PPA and click on estimate a payment under the act section on the left side of the page. Now add a year to your current age on the form and click on calculate. It will bring up a page with you payment options you can choose from. Now click on the view how this benefit was calculated link in the middle of the page and it will show your monthly pay effective 6/01/2007. It works 100% of the time..Hurry and check before they close this loop hole. -salary update-
    • Comment 06/07/07: I used the employment verification option mentioned below... Salary = ~110K; Band Level = 8; PBC Rating = 2+; Raise = ~3%; -Another Yawn of a Raise-
    • Comment 06/07/07: Salary = 120k; Band Level = 8; Message = PBC Rating = 2 Raise = 3% -S&C South East-
    • Comment 06/07/07: Salary = 80k; Band Level = 7; Job Title = Software Engineer; Years Service = 28; Hours/Week = little as possible; Div Name = SWG; Location = RTP, NC; Message = Just got my 0% raise....5 years in a row -VerySoreButtNow-
    • Comment 06/07/07: Salary = 62k; Band Level = 6; Job Title = Consultant; Years Service = less than a year; Hours/Week = 40; Div Name = GBS; Location = DC metro; Message = Just talked to my mgr, and was shocked when I received a 5% raise! It makes me wonder how under paid I am for what I do, to get that large of raise without being with IBM for a whole year. I am happy to have a job still, above all. -Skippity Doo-
    • Comment 06/07/07: Band Level = 8; Years Service = 9; Hours/Week = 50+; Message = I went to PPA...no frickin\' raise...do you know if this includes the supposed market adjustment or not? I am sick of this crap. -just1waiting-
    • Comment 06/07/07: 'Salary Update' That is very slick....this was the only method I was able to determine my raise. The VRU option or speaking with a rep at the ESC did no good...all they said was to talk w/your manager. Too bad your method won't work next year after the pension plan is frozen. Regardless my manager finally contacted me today. I have no idea why they wait so long..they should be doing this on June 1 or June 2 at the latest. It's a 10-15 minute conversation. I'm sure it's more HR's control than theirs. -Anonymous-
    • Comment 06/07/07: Salary = $49k; Band Level = 6; Job Title = prof. accountant; Years Service = 1.3; Hours/Week = 40-45; Div Name = BTO; Location = Tulsa; Message = Well, I had my salary meeting today - nope, no raise "I'm already at the mid-point". Where's the incentive to work? To achieve? To do your best when there is no expectation of a pay raise. I told my manager that not getting a raise is unacceptable & that I want to appeal it. Maybe I'm idealistic but I'll keep on being the squeaky wheel until they say shut up or give me a raise to make me be quiet. -troubled in tulsa- Alliance reply: Also get all your co-workers that didn't get raises together and be a big squeaky wheel! Let us know your progress.
    • Comment 06/08/07: Salary = 120000 pa; Job Title = Civil Technician; Years Service = 7yrs; Hours/Week = 40hrs; Div Name = Transport; Location = Gauteng; Message = I want to know if this salary is market related for my position. -Anonymous-
    • Comment 06/08/07: Salary = 114K; Band Level = 8; Job Title = Advisory Engineer; Years Service = 7; Hours/Week = 40; Location = RTP; Message = raise=4%; PBC=1 (3years in row) -softwaretester.rtp-
    • Comment 06/08/07: Salary = 89,000; Band Level = 7; Job Title = Architect/Specialist; Years Service = 12; Hours/Week = 47; Div Name = 07; Location = Boulder; Message = I didn't notice it last year but the compensation statements now show the market range (according to IBM) in salary per month instead of the normal annual salary range (hiding something?). If you multiply these numbers out to an annual salary the market range compensation has gotten smaller? From the past (Band 7):
      • 2000 $50,784 - $107,892
      • 2001 $55,608 - $114,156
      • 2002 $55,608 - $114,156
      • 2003 $56,724 - $116,436
      • 2004 $56,724 - $116,436
      • 2005 $56,724 - $116,436
      • 2006 $53,508 - $109,848
      • 2007 $55,524 - $112,740

      This might be due to the salary changes based on location (another game). However, I work at the Boulder site where the median house costs $500,000+. IBM is playing accounting games to save money at our expense. By the way, I've been a band 7 for 10 yrs. I've been team lead several of those years, an architect, ratings of 1's, 2+'s, and nothing lower than a 2. -tired of the games-

    • Comment 06/08/07: Salary = 82000; Band Level = 8; Job Title = systems support; Years Service = 9; Hours/Week = 40; Message = just finished talking with manager and 0 raise. first time in my career not getting anything. I get told that i'm 108% penetrated. What does that have to do with anything if someone is doing their job well they should be compensated for it.. I am a consistent 2+ performer. -pissed off beyond pistivity-
    • Comment 06/08/07: Salary = $88,747.00; Band Level = 9; Job Title = Sr. Software Engineer; Years Service = 30; Hours/Week = 45+; Div Name = ITD; Location = ny; Message = 2+ rated, last year 1 rated. After all the hype re: MBA and TCR all I got was 3.5%. Range for my position is $98K to $200K. Nice way to treat top contributors. -Jeepster-
    • Comment 06/08/07: Salary = 49,000/yr; Band Level = 7; Job Title = db admin / coordinator; Years Service = 7; Hours/Week = 45; Div Name = 07; Location = Roch; Message = ((sorry i typed the last entry, this one is right)) If I\'m doing the math right I have about a 4% raise in store. Seems surprising from what I am seeing here although, admittedly, I am probably at the very bottom of the pay scale right now for a band 7 and solid 2+ performer. Heck, I might even be below the bottom. I don\'t know what all gets counted in as compensation, though, and whether that skews the numbers. Guess I will just wait to see if my math is right when they finally set up our 1-1\'s. The depressing part is that all of my family\'s taxes and medical and life insurance and all that comes out of me. So I won\'t actually see much net once the tax-gouging is done on each pay statement. But I\'m not going to have a pity party.. at least some raise appears to be in my future, even if I\'m doing the math wrong. I\'ve been worried for months about not even having a future here at all so I am just plain relieved right now. Still too scared to celebrate. Oh, and I found some stuff online about the MBA and my job family 24A was listed as not being considered this year for a market based adjustment at all. So this ~4% is it for me, folks. -BadAtMath-
    • Comment 06/08/07: New MBA grid moved the salary plan up for my band. I got 0, zip, nada. My salary is now down 11% related to the new vs old grid. -Anonymous-
    • Comment 06/08/07: Salary = $123K; Band Level = 8; Job Title = Engineer; Years Service = 27/age 54; Hours/Week = 40-45; Message = 2+ rating, 3% raise, 14% over band midpoint. So much for the hoopla over lack of raises, again. -Jimmy G.-
  • PBC Comments
    • Comment 06/07/07: Prior Yr PBC = 2; This Yr PBC = 3/2; Message = To Appealed and Lost and others interested in the Appeal Process. I know of another friend who also appealed a 3 rating and had it changed to a 2. And that was his second 3. I created a 30 page document to present before the Review Panel. I had 3 witnesses to also present and 6 reference letters. The Panel Review consists of 2 managers and 3 employees randomly picked. You and your manager present to them. They keep you separated from your manager so you are not presenting in front of them. I just noticed that access to the Appeal site has been denied. ...good luck...take advantage of a process that is in place to help you. HR came thru for me in this instance. -Skeetum-
Vault Message Board Posts:
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Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. A few sample posts follow:

  • "I left..." by "Wok N Off". Full excerpt: and I did...get that much of a raise, that is - more even. Only way to get your market value is to move around. The consulting model simply encourages this practice. If you stay, you will be duped into feeling special by getting small raises and feeling lucky that you got them. Fact is, the market adjustment they communicated earlier this year is the actual amount they were going to give you anyway, yet categorized it differently. For instance, if you got a 20% increase for a level increase, they would break it down like 7% increase for the promotion, 7% "market adjustment", and 6% merit (or some other bs breakdown).

    Fact is, you already started at a low base, so the 20% increase is what you should have been paid in the first place. Its all pr and there is no way you would get that increase staying in the same position internally. Hence, you gotta leave - which is what they count on since it is the model to replace you with cheaper resources - either offshore or newbies straight out of b-school.

    You want market rate? You gotta jump. Simple as pie.

  • "The Big Question" by "ancientblueconsultant". Full excerpt: The real unknown for clients who invest in global resources is the potential consequences of the inevitable continuous movement of the placement of your work to the cheapest geography.

    Frankly, I give India 2-3 years before they have to show value or the work will be moved elsewhere that is cheaper.

    Now the question is: Will the Indians allow the movement of work and opportunity out of the country as unobstructed as the US and ECM countries have allowed?

    As a CEO, are you comfortable in being able to answer to your board of directors that question? Has the pursuit for the lowest priced IT by your CIO clouded your judgment and placed the company in a potential strategic risk situation?

    How do you think CEOs that have critical infrastructure operating in Poland and Russia feel right now with the escalating tensions between those geographies and the US?

    If India went back to the government it had in the 70's when it threw US companies out of the country and nationalized everything, firms like the Blue Pig would have a real financial liability, if not brand destruction.

    Hmmmm....there may be a good consulting opportunity as an independent forensic offshore outsourcing lawsuit trial SME!

  • "Annual Increases - starting Jun 1" by "LivingWithThePig". Full excerpt: I believe the raises are going into effect June 1st - but managers have from June 5th or 6th to June 12th or 13th to notify employees. Obviously, it takes a LOT of time to notify 20-30 people each; plus it's really not important that the employee knows what he/she got; and finally they would probably need a couple of weeks to prepare for either a mass exodus or severe disgruntlement leading to the non-traditional actions identified by Dose in one of his earlier emails :)
  • "lol" by "Bigbluescrew". Full excerpt: Folks have been without a single raise in 5 years.. take the gruel they give you and get back to work ;-) In al reality.. take a look around you. They are send our American jobs offshore- GR to save a few cents. IBM has purposely not given raises and encouraged the poor morale (IMHO) to cause IBM'ers to flee...it's cheaper than severance. How many top notch performers have you seen leave on their own. Raises won't happen. Our current raises don't match the cost of living increases. Its over... put a fork in it.

    You can possibly grow thru band increases, if you have a good manager that supports you. Its tough as hell to get a band bump, but it will get your pay into a better sweet spot were its more likely to get you an increase to get you to the median pay.

    But after the recent turn of events, I cannot even vouch for this path. Polish up the resume and keep your eyes open on the outside market. There are tons of good companies out there.

Modern-Day Robber Baron Corner:
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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 to $20,000 a day pension when he retires!

As a way of helping out our beleaguered, modern-day robber barons this site will periodically feature "spending opportunities" that the "upper crust" of our society may want to take advantage of!

  • New York Times book review: Lifestyles of the Rich. By Alex Beam. Excerpts: All good journalism is really travel writing. You prepare for a serious story the way a foreign correspondent would. You buy the maps, you learn the language, you hang out with the locals — not just the taxi drivers! — and then you write.

    That’s what Robert Frank has done. He writes the Wealth Report column for The Wall Street Journal. (Who writes the Euchred by Capitalism column, I wonder?) In his new book, “Richistan,” he posits the existence of a little-known country within our country. This “parallel country of the rich was once just a village, he argues, but now it’s an entire nation.

    The data bear Frank out. It was a huge deal when John D. Rockefeller became the country’s first billionaire. Adjusted for inflation, he had $14 billion — less than the net worth of each of Sam Walton’s five children today. There were an estimated 13 American billionaires in 1985. Now there are more than 1,000. In 2005, America minted 227,000 new financial millionaires, men and women with more than $1 million in investible assets. There are as many millionaires in North Carolina as there are in India. And so on.

    Frank argues that the rich are “financial foreigners” within their own country. They have their own health care system, staffed by “concierge doctors.” They have their own travel network of timeshare (or private) jets and destination clubs. For her birthday, one 11-year-old “aristokid” pleads to fly commercial, “to ride on a big plane with other people. I want to see what an airport looks like on the inside.” [...]

    Frank also plumbs Richistan’s secret status codes. You might have thought that a Mercedes SLK or a Rolex were flash possessions. Wrong! In Richistan, they are reverse status symbols. The affluent drive Mercedes; the rich drive Maybachs. Franck Muller hardly advertises their bejeweled watches, which top out around $600,000, because they might attract the wrong kind of attention. Like yours. [...]

    If “Richistan” is travel journalism, then ... do we want to go there? Not much. The people sound dreadful and not very happy, to boot. But consider the alternative. Frank gets a glimpse of the world outside when he attends Fort Lauderdale’s International Boat Show, right after Hurricane Wilma has plowed through town. “Thousands of residents in the poorer sections of Fort Lauderdale (most of them black or Hispanic) were left homeless,” Frank writes, “sweating through the tropical heat, without electricity.” Meanwhile, at the Bahia Mar Marina, a chocolate fountain gurgled and the $20 million yachts and vendor pavilions were “perfectly chilled.”

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.