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Highlights—July 26, 2008

• MarketWatch: IBM earnings up 22% on services, software deals. By Rex Crum. IBM Corp. on Thursday said second-quarter profit rose more than 22% from a year ago as the technology and services giant reported sales of almost $27 billion, led by strong growth in the company's software and services businesses. Additionally, IBM felt strongly enough about its performance that it raised its full-year earnings forecast to at least $8.75 a share from $8.50 a share. ...

  "It was probably the best quarter Big Blue has had in recent memory, if not ever," said Bob Djurdjevic, president of Annex Research. "Wall Street doomsayers and recession buzzards had better look for trouble outside the IT industry, for things could not be better in this sector." ...

  IBM also said it signed new services deals worth $14.7 billion, up 12% from a year ago, giving the company a total backlog of $117 billion in services deals.

• The following are selected comments from readers of the MarketWatch article:
  • I retired in 1995, at that time I received my medical benefits as part of my retirement package. Then about 2 years later I had to start paying for the medical (= retirement pay cut). I returned to the active IBM payroll in 2002, at IBM request. My retirement was suspended and I was told that it would resume when I next left IBM. In 2007 (after 5 years with NO increase in salary) I did leave again, my retirement was started again but at a lesser amount. Now my medical benefits take half of my retirement pay. YES I am glad to know that the big wheels are doing wonderful when we, who made IBM great, are not even getting a Thank You.
  • I don't know much about business, but I know something about common decency, and the manner in which IBM treats its employees is nothing short of disgraceful. While executives are making obscene salaries and cashing in even more obscene amounts of stock, most US employees received no raises at all. My first-line manager had the audacity to tell me that there was no money for raises because this was "the worst year ever". If record profits qualify as "the worst year ever", then words have no meaning. IBM lies, obfuscates, and makes life as miserable as possible for its employees in order to incite them to quit.

    It's not much of a stretch to say that the environment at IBM is psychologically abusive. The constant threat of layoffs, the deliberately-circulated ominous rumors, management's incompetence, and the strangling red tape we all deal with, all combine to create a workplace that breeds anger and resentment, and stifles both productivity and creativity.

    I'd like to respond to the commenter who asked why we don't quit. Most of us would love to quit, and intend to as soon as we can. But when you're the breadwinner of a young family, or in any situation where others depend on you to provide for them, quitting your job--no matter how miserable it is--is not a trivial matter. Many IBM sites are in places where there aren't many other employers to choose from, complicating things even more. Most of us signed onto a very different company than IBM is today, and as much as most of us would love to quit, the practicalities can make it almost prohibitively difficult. IBM knows this, and takes full advantage of it.

  • Other reader comments for the MarketWatch article are available in last week's edition of these highlights.
• The Register (United Kingdom): IBM misses memo on economic slowdown during Q2. By Austin Modine. Excerpt: IBM has yet again shrugged off the global economic slowdown with second quarter profits leaping 22 per cent and revenues rising. Although improvements were reported across most operations, IBM's bread-and-butter services division was the star of the show. "I've got to say that this is one of the best quarters I've ever seen," said CFO Mark Loughridge, during the companies quarterly investor conference call.
• The following are selected comments posted by The Register readers in response to the above article:
  • Try STG Modular Systems if you think the grass is Greener. By Anonymous Coward. STG is now the poor boy of IBM UK and Modular,,, oops sorry System x and BladeCenter (it changed again!) is the poor boy of STG. We have a new general manager who refuses to acknowledge our existence, and I have SUN and Lenovo beating at the door with hugely better offers. Now that's the way to get a payrise!
  • It's really not that tough. By Blockhead. Dear Employee, You are not receiving a pay rise because the employment market in your locale does not currently demand it and we are smart enough not to pay beyond market price in any economic transaction. You may expect us to apply the same discipline with our supplier contracts and in negotiating business with our client base. Yours, etc.
  • Exploitation. By Anonymous Coward. Same story here, in SWG (contradicting the earlier post about life being OK here - it's no different). I'm another 2+ performer, I'm another one with zero pay rise. It doesn't matter that I have direct responsibility as part of a very small team for nearly $2M revenue last year. I echo previous comments about our leadership. Thomas Watson must be spinning in his grave. He started this company under Quaker beliefs, hence the egalitarian approach - such as the "single status company" tenet that has been quietly erased, along with "respect for the individual". We now appear to be under the leadership of a very real "Gordon Gekko".

    It's bad enough without Gordon emailing us all to rub it in; to paraphrase, "hey, what a great year it's been, and if we work hard it's just going to get better!". If this is a good year, I'm not sticking around again for a bad one... I've seen not far short of 20 years in IBM, and I can tell you that this is probably the worst period for employee morale that I have ever seen. I'm serious.

    Looking wider than just our own immediate circumstances, these cost-cutting circumstances might result in a nice bottom-line for IBM in the short-term; mid- to long-term however, the future doesn't look so rosy. Those who leave will be the best (trust me, I've seen a few go already and I KNOW they are missed), those who stay will be the ones who know they're not up to scratch and might find it difficult to find another position, let alone survive in it.

    What Palmisano has instigated here is a form of inverse-evolution of the IBM workforce; it's not "survival of the fittest", it's "departure of the fittest". IBM will become a shell of its former self, staffed by those who are either aren't really up to scratch or are so disillusioned they no longer perform to their capacity.

    Advice to any shareholders reading this - by my reckoning you'd be advised to sell up within 12 months. I think you're "safe" to the end of the year - Palmisano will make sure of that - but the staff losses are really going to start to bite, and with that, so will the results.

    Me? I've got a job interview at a competitor coming up. The easy route for me would be to go to a Business Partner - but if I do that I'm still effectively working for IBM, it's win-win for them. No, if I go, I'm going to a competitor. IBM has had more than its pound of flesh from me, I want some of it back.

  • Dreadful company - treats employees abysmally. By Anonymous Coward. What great news this is. It means (yet again) a load of fat americans with their snouts in the trough do very well thank you while the vast majority of hardworking IBMers get little or nothing. Why do we bother? There's no incentive to work here. Morale is on the floor, management are weak and ineffectual, talent isn't rewarded, and cliques rule. There's only one thing for it ...
  • I already have interviews. By Anonymous Coward. I work in data sensitive situations which are being quietly offshored, and let me tell you once its gone its gone, no matter how bad it is. You WILL now get fired for buying IBM :)
  • Read between the lines. By Anonymous Coward. I'm a contractor for IBM in the UK (hence AC) on the Services side. Understandably a lot of my IBM colleagues are seriously upset by this. But you have to understand what's going on here. What IBM would like to do is sack everybody on the Services side and set up cheaper, more profitable operations elsewhere. They can't do that, it would cost a fortune in redundancies, they would alienate a large percentage of their customers, and would be logistically impossible. So they are doing it incrementally, which means a gradual reduction in the workforce.

    Now the last thing you want to do as a company if you want to get rid of people is encourage them to stay with decent pay rises, pensions, etc. You piss them off enough that enough people vote with their feet, and bingo! - no redundancies to pay. Not only that, but you can turn around to your customers and say 'sorry Guys we really can't get the skilled staff here in the UK, but we've got lots in India who can do a job'. In the meantime the loyal IBMers are the ones who stick around long enough to allow IBM to make the transition before they lose their jobs too. I've seen it happen elsewhere. What can you do about it? Find another job!

  • IBM = In Bad Management. By Anonymous Coward. IBM gave me an opportunity. Only to teach me how worthless this Corp is. I have been under pay for 3 years, with no help from the so called w3 and HR. Those 9 years were hard learning. No matter how good and hard i work i only hit a wall of bad management (my direct line is useless and does not care), we are hammered with empty talk and notes. Nothing positive here. W3 is no more then a propaganda machine, PBC's are predefined, targets are complete fib and IBM HQ are living the good life among themselves. I was proud to be an IBMer, now i am miserable and a shame.
  • Pissed off Uk IBMer. By Anonymous Coward. You guys getting pay rises are lucky been 5 years yes FIVE since i got a rise and in that time been a 1 or 2+ performer. I would not trust IBM management one inch, all you get is the usual nonsense about times are hard, yeah for us poor sods looking after their systems, its all empty promises.

    Now the support is going to Hungary which is a no brainer, someday IBM will realise it's its techies that keep the company afloat - how many Salesman are gonna work for No money when the salary system crashes due to it being run by a load of people who 1_ don't speak english; 2) haven't a clue what they are doing; 3) are cheap. I've been here 30 years and just waiting to walk with a nice big wedge. As to pensions well forget it, even people who work for pensions UK are getting out of the schemes as its not worth paper its printed on And they wonder why the office is empty at 4.30!!!

  • You couldn't make it up if you tried. By Anonymous Coward. 70% of 1's are not getting a payrise. 80% of 2+'s are not getting a payrise. Fortunately the execs have been trousering some very nice options just recently.

    Little wonder that in the UK it is 37 hours and everyone is done. We have a clueless exec team that while being very concerned about morale, do nothing to affect it. In fact, they make it positively worse by sending notes out that congratulate us for our hard effort. It's like an episode from "Are you being served?" where young Mr. Grace says "you've all done very well", and exits stage left. As HR remind us, people are not leaving. So, that's alright then.

  • Other reader comments for the Register's article are available in last week's edition of these highlights.
• New York Times: Given a Shovel, Americans Dig Deeper Into Debt. By Gretchen Morgenson. Excerpts: Years of spending more than they earn have left a record number of Americans like Ms. McLeod standing at the financial precipice. They have amassed a mountain of debt that grows ever bigger because of high interest rates and fees. While the circumstances surrounding these downfalls vary, one element is identical: the lucrative lending practices of America’s merchants of debt have led millions of Americans — young and old, native and immigrant, affluent and poor — to the brink. More and more, Americans can identify with miners of old: in debt to the company store with little chance of paying up.

  It is not just individuals but the entire economy that is now suffering. Practices that produced record profits for many banks have shaken the nation’s financial system to its foundation. As a growing number of Americans default, banks are recording hundreds of billions in losses, devastating their shareholders.

  To be sure, the increased availability of credit has contributed mightily to the American economy and has allowed consumers to make big-ticket purchases like homes, cars and college educations. But behind the big increase in consumer debt is a major shift in the way lenders approach their business. In earlier years, actually being repaid by borrowers was crucial to lenders. Now, because so much consumer debt is packaged into securities and sold to investors, repayment of the loans takes on less importance to those lenders than the fees and charges generated when loans are made. ...

  For decades, America’s shift from thrift could be summed up in this familiar phrase: When the going gets tough, the tough go shopping. Whether for a car, home, vacation or college degree, the nation’s lenders stood ready to assist. Companies offered first and second mortgages and home equity lines, marketed credit cards for teenagers and helped college students to amass upward of $100,000 in debt by graduation. Every age group up to the elderly was the target of sophisticated ad campaigns and direct mail programs. “Live Richly” was a Citibank message. “Life Takes Visa,” proclaims the nation’s largest credit card issuer. Eliminating negative feelings about indebtedness was the idea behind MasterCard’s “Priceless” campaign, the work of McCann-Erickson Worldwide Advertising, which came out in 1997.

  Mortgage lenders took to cold-calling homeowners to persuade them to refinance. Done to reduce borrowers’ monthly payments, serial refinancings allowed lenders to charge thousands of dollars in loan processing fees, including appraisals, credit checks, title searches and document preparation fees. Not surprisingly, such practices generated dazzling profits for the nation’s financial companies. And since 2005, when the bankruptcy law was changed, the credit card industry has increased its earnings 25 percent, according to a new study by Michael Simkovic, a former James M. Olin fellow in Law and Economics at Harvard Law School.

  The “2005 bankruptcy reform benefited credit card companies and hurt their customers,” Mr. Simkovic concluded in his study. He said that even though sponsors of the bankruptcy bill promised that consumers would benefit from lower borrowing costs as delinquent borrowers were held more accountable, the cost of borrowing from credit card companies has actually increased anywhere from 5 percent to 17 percent.

• Wired: Former VP of HP Charged with IBM Trade-Secret Theft. By David Kravets. Excerpts: A former Hewlett Packard vice president is being charged with trade-secret theft for allegedly forwarding "confidential" IBM sales information to his HP superiors, according to court documents filed in U.S. District Court in San Jose. Atul Malhotra, the HP vice president for imaging and printing services, was fired from his job in September 2006, a company spokeswoman told Threat Level on Tuesday.

  According to a charging document (.pdf), Malhotra was the director of IBM global printer sales between 1997 and 2006. Two months before he moved to HP, he requested and received an internal memo titled "IBM Global Services, CC Calibration Metrics," which was marked "IBM Confidential" on each page, according to court records. The authorities said a pricing coordinator for Armonk, New York-based IBM informed the defendant that, "given the sensitive nature of the material, please do not distribute." ...

  Emma McCulloch, a spokeswoman for Palo Alto-based HP, which has been embroiled in its own spy scandal, said in a statement that "The activity with which Malhotra is charged was in direct violation of clear HP policies, including HP’s standards of business conduct." McCulloch said "HP detected this activity, conducted an internal investigation, terminated Malhotra from his employment, and self-reported the activity to all appropriate enforcement agencies and to IBM. HP has cooperated fully with the government’s investigation."

• In a Vault message board post, "ancientblueconsultant" comments on the IBM trade-secret theft. Full excerpt: In the old days, this executive would have brought with him his entourage with him to HP one of him would have warned him of the stupidity of how he did it. I guess now that they are screwing even their staffs they can't even convince them to join other company's with them. You sow what you reap. If you don't show the value of loyalty, you won't get loyalty back. Note that I said HOW he did it, not what he did. Strict ethics is not a required skill for IBM executives. How can you be ethical in an amoral company? HP, once again shows it's more of a quality and ethical company than the Blue Pig. This has happened a number of times over there and it shows they are on their toes when it comes to ethics. Ever hear of an IBM executive thrown in jail by his peers for this type of transgression at the pig? Yep, you've got your answer.
• Yahoo! IBM Employee Issues message board: "GM retiree health cuts will cause sticker shock" by "mr_quarkwrench". Full excerpt: Actually, IBM doesn't lay people off, layoff implies one will be rehired when the work picks up again. My uncle was laid off from Lockheed many times over his career and now has a fine pension and health benefits. IBM fires people. The first mass firings started in the '80s when they asked for volunteers by offering buyouts. However, some "volunteered" only after a closed door discussion with their managers. -- Don
• Yahoo! IBM Employee Issues message board: "Re: Don't let the door hit you in the ..." by "ibmaccountant". Full excerpt: Very well said, quarkwrench. You are fired, cast off as a used "resource" no longer needed, just like a worn hammer or broken screwdriver. Termination is even too kind of a word for what they do to "resources" they can't easily exploit anymore.

  The only difference between this brand and most other brands in the world is that the other brands deliver on some sort of morality and compassion and are willing to consider bringing back the worn or broken people they call assets into the family as valued equals, not as lower life forms called "contractors" or "supplemental resources" with no implied or moral commitment to them.

  At the brand called IBM, you are easily exploitable or they aren't interested in you as a "resource". That's why they cherish innocent, willing youth they can ravish and grind to a mass of human used pulp in places like the IBM Global Slaves Division. Don't call it working for IBM. Call it legalized prostitution of your time, reputation and good health at the cost of your good name, life and family well being.

  Funny.....most moral institutions and brands called their people "assets" IBM is one of the few that calls human beings resources. Even armed forces, sending young soldiers, sailors, airmen and guardsman to death call them "assets" all the way to the end because they know the moral value of life, unlike the cold hearted management of IBM.

• Washington Post: Raiding the Retirement Stash. By Michelle Singletary. Excerpts: Would you still put money in a tax-advantaged retirement fund if you couldn't touch it until you retired? And when I say you couldn't touch it, I mean you couldn't take out loans or withdraw funds under any circumstances. If Congress were rewriting the rules for 401(k) s and similar retirement plans, that's what the Washington-based Pension Rights Center would recommend. Why this hard stance from a consumer-oriented group that works hard to protect and promote retirement savings?

  A new study found that an increasing number of employees are raiding their retirement funds by taking out loans against their 401(k) accounts. Strangled by debt and rising consumer prices, workers are turning to these plans as the only stash of cash they have. "The result is that families leverage their future retirement security to ease their present financial insecurity," wrote Christian E. Weller and Jeffrey B. Wenger, authors of "Robbing Tomorrow to Pay for Today: Economically Squeezed Families are Turning to Their 401(k)s to Make Ends Meet." The report was issued by the Center for American Progress. ...

  The report says that over a 15-year period, loans against retirement savings accounts increased fivefold in inflation-adjusted terms, to $31 billion in 2004, up from $6 billion in 1989 -- an increase of more than 400 percent. Between 1998 and 2004, an average of 12 percent of families with 401(k) plans borrowed from them.

• New York Times: Update: New Proposed Legislation on 401(k) Debit Cards. By Ron Lieber. Excerpts: A few weeks ago, I wrote a column about the wisdom of taking loans against your 401(k) account. The story mentioned a company called Reserve Solutions that allows customers to access their loan via a debit card at an A.T.M. or any merchant that accepts Visa. Skip to next paragraph There’s a lot about Reserve Solutions system that is advantageous. Rather than getting their 401(k) loans in a lump sum, which is how the loans often work, borrowers in the Reserve Solutions system can draw down money as they need it. That helps reduce the amount of interest. And if they leave their employer, they don’t have to pay the loans back right away, unlike the usual 401(k) loans. ...

  Over 10 years ago, I read in the paper that Bank One was offering access via a card to 401(k) loans, and I thought, this is outrageous. America has to save. If people need to access their 401(k)s because of unusual circumstances, that’s one thing. But to encourage people to take money out with a card is encouraging all the wrong values. So I said then that I was going to put forth legislation, and the bank dropped it and I thought it was over.

• New York Times: Who Wants to Retire Later? (Don’t Laugh). By Harry Hurt. Excerpts: WORK longer and retire later? The very idea sounds depressing, especially to overworked, underpaid, aging baby boomers like me. But we may have no choice if we want to avoid a precipitous decline in our accustomed standard of living. That is the basic thesis of “Working Longer: The Solution to the Retirement Income Challenge,” by Alicia H. Munnell and Steven A. Sass (Brookings Institution Press). ...

  Ms. Munnell and Mr. Sass define succinctly the problem faced by baby boomers, and for that matter, by all Americans who aspire to retire now or in the near future. They note that the nation’s retirement system, as embodied by Social Security and Medicare in the public sector and I.R.A.’s and 401(k) plans in the private sector, is contracting in its ability to replace workers’ lost income — even as life expectancy is increasing. ...

  So what do we do about the looming retirement income crisis? Ms. Munnell and Mr. Sass recommend that people postpone their retirements from age 63, the current average, to 66. Interestingly enough, 66 was the average back in 1962. They also say that it is time to look at raising the earliest eligibility age for Social Security benefits. (It is currently 62.)The authors write that four more years of work alters the ratio of retirement to working years from 1 to 2, meaning 20 years of retirement and 40 years of work, to almost 1 to 3, or 16 years of retirement and 44 years of work. ...

  As a baby boomer, I strive for the best, but I have learned to expect the worst. It may be a stretch to ask government to act rationally. Asking my contemporaries to recognize that it is in their long-term interests to delay the immediate gratification of retirement may be wishful thinking. As far as many of us are concerned, the Who’s rock anthem of 1965, “My Generation,” still says it all: “I hope I die before I get old.”

• Yahoo! IBM Retiree message board: "Re: IBM’s Pay Cut is Bad Symbolism" by "bits_bytes_and_bugs". Full excerpt: Lest any of you question abouthadit's post, the 2080 target is for real. Not only is it hours, it's billable hours. Education is typically NOT billable.

  Suppose an older employee has 5 weeks of vacation, two weeks of non- billable time for education, 7 holidays, 5 personal choice holidays and 3 sick days (to make the math easier). That's a total of 10 weeks of time off. To reach the minimum 2080 hours and to rate no less that a 3 PBC, that person has to work 24% overtime or 9.6 hours of overtime per 40 hours week.

  If you want more than a 3 PBC, you'll put in more than that.

  Employees will never see that 2080 figure in print because IBM doesn't want that used against them in a possible legal case. I do have a hardcopy of manager foils with the date on them. Not long ago, there was a proposal to up that 2080 to 2160, primarily for GBS employees. Any resemblance to the IBM services business to a sweatshop is merely coincidental -NOT!

• Yahoo! IBM Retiree message board: "Re: IBM’s Pay Cut is Bad Symbolism" by "flatsflyer". Full excerpt: The real question is how many hours customers are billed. Even if an employee fails too make his/her 2080, I'll bet the "PIG" is still billing the customer for the whole ride. You can't possibly believe that IBM would give up multi Billion, (i.e.) 75,000 employees, 100 hours each, $300. billing rate, pretty soon you talking Executive Bonus. The 3,500 Gredy Bastards could get an easy $100,000 each very simply and without lifting a finger. Now you really don't THINK they would condone such a scheme, do you?
• Yahoo! IBM Retiree message board: "Re: IBM’s Pay Cut is Bad Symbolism" by "alwaysontheroad4bigblue". Full excerpt: Actually, there's a constant battle that goes on between consultants (or their managers) and the IBM management that is responsible for profit and loss on the project. Consultants are directed to bill as many hours as possible in order to increase utilization for their organization. IBM management responsible for profit and loss on the particular project, on the other hand, do everything they can to minimize the number of hours billed, because that affects profitability. It's not unusual for projects to be "capped"...i.e. no more than 40 hours per week can be billed.

  Also, it's becoming common now for projects to request and accept only low-band consultants, or "global resources." Even band 8's are now difficult to place. This, of course, means that projects are staffed with young, inexperienced consultants who now work without the benefit of more senior mentors...because projects can't "afford" senior people. It's a formula for failure, of course, but a formula that appears to be well established.

• Yahoo! IBM Retiree message board: "Re: IBM’s Pay Cut is Bad Symbolism" by "thekanck". Full excerpt: When a "1" performer in a VERY GOOD year for IBM is typically getting a salary increase that does not even keep him/her even with inflation why would ANY employee care about making sure they met their 2080 target? Sorry, my cynical comment for today.... TK
• Yahoo! IBM Retiree message board: "Re: IBM’s Pay Cut is Bad Symbolism" by "alwaysontheroad4bigblue". Full excerpt: In addition, many GBS employees must travel to their assignments, and travel time is *not* billable. Door-to-door travel time if you're traveling a time zone away is easily 12 hours a week when everything goes right (rare for air travel these days). 20 hours a week isn't unusual if you're talking two time zones or coast to coast.
• CNN/Money: IBM Opens Service Management Center of Excellence in India. Excerpt: IBM today announced the opening of the IBM Service Management Center of Excellence in India which will act as the regional hub for IBM Tivoli service management software and strategy. The Center has been designed to develop specialized focus and skills in high value areas such as telecom, security, automation and asset management. This first of its kind Center has been established in Pune. The Center will be staffed by IBM Service Management experts from around the world and will provide infrastructure and resources for enablement and education; client engagement support to sales team and business partners; and facilities for proof of concept, demos and workshops. It also will offer certification and joint education programs with local universities, access to industry models, best practices and proven methodologies based on IBM's worldwide service management experience.
• The Motley Fool: IBM's Cheaper Than You Think. By Tim Beyers. Excerpts: IBM: Center of the tech universe. Most importantly, IBM offers investors instant tech diversification. Big Blue competes with Oracle and Microsoft in databases and other infrastructure software; Intel in chips; Sun Microsystems and Dell in servers; and Accenture in services. No other firm covers so much, so well. ...

  You'd need an army comprised of the world's smartest people to accomplish what IBM does regularly. Good luck hiring them; most already work for Big Blue. That's why it owns more patents than anyone else. At one time, it even considered selling R&D outsourcing services. With so much brainpower, IBM can afford to take risks, as it has in broadly adopting open-source software and ideas. Its newest idea is to put $1.5 billion into semiconductor manufacturing facilities in New York, IDG News service reports.

• Reuters: IBM sells $1 bln 3-yr floating-rate notes-source. Excerpt: International Business Machines on Wednesday sold $1 billion in three-year floating-rate notes, said a market source familiar with the sale.
• PlanSponsor: One Fifth of DB Participants Had Plans Frozen. Excerpt: More than one fifth of active defined benefit plan participants have had their plans frozen as part of the continuing trend for employers to redirect new employees to a defined contribution program, a new report says. The Government Accountability Office (GAO) report prompted a statement released Monday by U.S. Congressman Earl Pomeroy (D-North Dakota) calling the report "disturbing." The GAO report, entitled "Defined Benefit Pensions: Plan Freezes Affect Millions of Participants and May Pose Retirement Income Challenges," said 3.3 million Americans will have lower pension income because of the defined benefit freeze trend.

  "The accelerating trend in pension freezes is disturbing, especially as employers face greater economic pressure today," Pomeroy said in the statement. “For older workers, a frozen pension can leave them with little time to make up for the loss in income under a 401(k) plan” ...

  “GAO found that sponsors decided to freeze pensions for two main reasons - because of the impact on cash flow and funding volatility, both of which have increased under PPA (Pension Protection Act),” Pomeroy continued. “Unfortunately, faced with greater uncertainty employers may decide that offering a pension no longer makes good business sense. More frozen pensions would mean a big loss for workers who already are increasingly less confident about their retirement security.”

• Wall Street Journal: U.S. Pushes for Clearer Disclosure of 401(k) Fees. By Daisy Maxey. Excerpt: It soon may be easier for investors to understand and compare expenses for investment choices in 401(k) plans. The Labor Department on Tuesday revealed proposed rules meant to clearly lay out the fees and expenses associated with each investment option, along with any administrative costs. It proposed the regulations would be effective for plan years beginning on or after Jan. 1, 2009. Companies offering 401(k) and other employee-benefit plans would be required to disclose to participants the investment options available, fee and expense information, past performance data, comparable benchmark returns and a Web-site address. Retirement-plan providers would be required to provide a description of fees and expenses charged to participants and beneficiaries for plan administrative services, such as legal, accounting and record keeping charges, as well as how those charges will be allocated to their individual accounts.
• US News and World Report: Cracking Into Your Nest Egg Early. By Emily Brandon. Excerpts: The Pension Rights Center in Washington, D.C., is advocating a zero tolerance for preretirement access to 401(k) accounts. "While this might mean that some employees would not contribute quite as much to their 401(k) plans, it would also mean that what they did contribute would be there for retirement," the center says in a statement for the U.S. Senate Special Committee on Aging, which held a hearing on reducing 401(k) losses caused by loans and withdrawals last week.
• Human Resource Executive: 'Golden Coffins' Offer Big Payouts. By Andrew R. McIlvaine. Excerpts: Lavish payments to deceased executives are being publicly revealed due to the SEC's revised disclosure rules. Such transparency may soon lead to their demise, but the need to attract and retain the most talented executives will remain.

  To the list of golden parachutes and golden handcuffs, add "golden coffins": lavish death benefits for CEOs that can include massive severance payments made to an executive's estate after he or she dies. According to an analysis of federal filings in June by the Wall Street Journal, companies such as Nabors Industries, Occidental Petroleum, Shaw Group, Lockheed Martin and others have promised their CEOs and their families death benefits of up to hundreds of millions of dollars.

  At Nabors Industries, CEO Eugene Isenberg's estate will receive a "severance" payment of at least $263 million if he dies this year, according to the Journal. The estate of Brian L. Roberts, the CEO of Philadelphia-based Comcast Corp., will receive a $298 million "severance" if he dies, while the estate of Ray R. Irani, CEO of Los Angeles-based Occidental Petroleum, will receive $115 million after his death. ...

  However, Rich McHugh, a partner at the law firm of Dow Lohnes in Washington, who specializes in employee benefits and compensation, says that, while there's no "consistent rationale" for golden coffins, they do play an important role in the war for talent. "It's all about attraction and retention of these executives," he says. "You've got to stay competitive." ...

  Golden coffins have also been pushed by compensation consultants, who are, in many cases, brought in to justify excessive compensation packages, says Fugate. "They impress upon the board the need to 'stay competitive' with a list of 'comparable firms' by offering these perks," he says. "It's all about keeping up with the Joneses. And no one says, 'No.' " Johnson says he nearly always counsels compensation committees to turn down requests for golden-coffin packages by CEO candidates. "These things are expensive, a pain to administer and they drive a wedge between management and employees," he says.

• Knowledge@Wharton: 'Don't Touch My Perks': Companies that Eliminate Them Risk Employee Backlash. Earlier this summer, when employees first learned of a Google plan to upgrade and dramatically raise the price of its day care program, they wept, according to an article in the New York Times. The price for infant care rose from $1,425 to $2,500 a month and the cost for two children in the day care program went up from $33,000 to $57,000 a year. The two-year waiting list of 700 families fell off by more than half. And Google, which has enjoyed a largely charmed reputation in the press, was chided in the Times headline for making a "rare fumble" with the changes to its daycare program.

  Wharton faculty and compensation experts say the flap over Google's decision to change its employee day care program illustrates the difficulty in eliminating any employee perk. "Once you have the perk, to take it away is seen as a violation of a psychological contract you have with your employee," says Wharton management professor Nancy Rothbard.

  Employee perks can range from traditional offerings -- such as a company car, use of the corporate jet and extended retirement benefits -- to highly personalized perks, such as personal trainers, laundry service, and pet-friendly offices. At Google, parents get $500 to spend on takeout dinners during their first weeks with a new baby. ...

  Wharton management professor Sigal Barsade agrees. "I do not recommend taking away perks, but if a company has to, management needs to remember that taking things away from people almost always leads to feelings of unfairness," she says, noting that employees typically come to feel that even a small perk is something they "own." To remove it is one of the most direct routes to employee anger, which in turn, leads to lower levels of motivation and retaliatory behavior. The retaliation can take on a psychological form, such as less commitment to the job, or a behavioral form, such as working less hard. "If management does such a thing, it has to be very sure to explain very, very clearly why it was necessary -- in a way that seems fair to the employees," says Barsade.