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Highlights—December 12, 2009

  • Hudson Valley Times Herald-Record: IBM layoffs at Sterling Forest could mean loss of tax breaks. By Michael Levensohn. If IBM eliminates jobs at its data-recovery center in Sterling Forest, it will lose some of the tax breaks it enjoys there under a new agreement with the Orange County Industrial Development Agency. The five-year, five-month extension of the payment-in-lieu-of-taxes arrangement runs through May 28, 2015. The PILOT has existed since 1993, and has been the IDA's largest source of funding. The annual payments typically run between $600,000 and $750,000, enabling the IDA to build up a sizeable war chest and fund such initiatives as the Orange County Business Accelerator, an incubator that opened recently near Stewart International Airport.
  • A Resource Action: Job Destruction blog, by Rick Clark. RPI President On Innovation - CNBC.com. Excerpts: RPI President Shirley Ann Jackson was on CNBC Tuesday, Dec. 1, to talk about innovation and job creation in the United States. Jackson is on President's Council of Advisors on Science and Technology and the board of directors at IBM among other accomplishments.

    I watched the interview on Tuesday, and I would like to know why Caruso-Cabrera did not ask this question: IBM has laid off 10,000 employees so far this year, while hiring 50,000 overseas. What can you do to get IBM to participate in job growth, and not job destruction, in the United States ?

    The more I think about this, the more disturbed and angry I become. The topic of the day on Power Lunch was job creation. So they have on a woman who is on the board of directors at IBM. IBM has done as much as any company in the United States to destroy U.S. jobs in 2009. Not only are they offshoring jobs (10,000 U.S. jobs shed, 50,000 foreign workers hired, net gain 40,000), but they help other companies outsource (read: offshore) jobs too. Heck, they even applied for a patent for software to help companies offshore jobs !!! I'd be willing to bet that IBM is directly or indirectly involved in 50,000 to 100,000 (or more) U.S. employees becoming unemployed this year. As I've said before, IBM and other companies are using this recession as a smoke screen to shed older, expensive U.S. workers and replace them with young, foreign, cheap labor.

  • Yahoo! IBM Employee Issues message board: "Re: What Moffat Worry? He Better Worry!" by "nyjints5". Full excerpt: I guess maybe I should clarify to what extent I'm grateful to IBM. I was a kid (less than 5 years old) when my father joined IBM in the early 1950's. We didn't have much until that time. Growing up, I lived in a very nice neighborhood, I got to go to a good school, and I got to go to college. College was out of the question for my three older siblings. From the early 1950's to the early 1990's, courtesy of IBM, the quality of life for my parents, my wife and I and our kids, plus my older brother and his kids was what I'd term excellent. That much I'm grateful to IBM for.

    Then 1992 hit, and IBM started its slide into the abyss. I'm NOT grateful to IBM for anything past 1992. After that year, they can kiss my ass. I too will never forgive or forget. I take a lot of delight in the Moffat scandal because he soiled IBM's reputation like he did. I take every opportunity I get to tell non-IBM'er how bad IBM is as a company to work for. I make damn sure my college age kids understand how bad IBM sucks, as I NEVER want them to even THINK about applying for a job there.

    I've been screwed and I know it. My kind of paybacks won't do much damage to IBM, but at the very least I'm not sitting idle and doing nothing. It's good therapy for my soul.

  • International Business Times: Ex-IBM exec denies SEC charges on Galleon. By Grant McCool. A former senior IBM Corp executive denied being involved in a sprawling hedge fund insider trading case and asked a court on Wednesday to dismiss civil charges by the U.S. Securities and Exchange Commission. Robert Moffat, who was replaced as head of the IBM hardware division on October 30, did admit to speaking to co-defendant Danielle Chiesi of hedge fund New Castle. Some of the other defendants also denied the charges or did not answer them in court filings on Wednesday.

    Moffat "denies that he provided material nonpublic information" on IBM, Sun Microsystems Inc and Advanced Micro Devices Inc, his lawyers said in papers filed in Manhattan federal court. ...

    Moffat's lawyers said their client "admits that in January 2009 IBM was conducting preliminary due diligence concerning Sun, denies knowledge or information sufficient to form a belief to the truth of allegations that Sun provided IBM with its Q2 2009 earnings results in advance of a January 27, 2009 announcement." Moffat was one of several IBM executives involved in performing preliminary due diligence on Sun in January, the court document said. It said Moffat "admits that Chiesi and he communicated from time to time during early 2009."

  • Workforce Management: Commitment Issues—Restoring Employee Engagement. Restoring employee engagement, especially among disenchanted top performers, may require companies to make significant investments in their people despite the sour economy, experts say. Firms that don’t move quickly to bridge the widening gulf between employer and employee do so at their own peril. By Ed Frauenheim. Excerpts: Companies are missing the big picture these days when it comes to employee engagement. And if they don’t widen the lens soon, firms could find themselves crippled in their efforts to claw out from the recession, abandoned by their best workers once hiring picks up and left behind in an emerging business era of greater transparency, interactivity and social responsibility. ...

    If businesses want fired-up, dedicated employees today, they must act boldly. And bold may not be cheap. Real progress on engagement all but requires more investment in people. What’s more, merely papering over the employer-employee disconnect with a few token programs is unlikely to solve the problem. Instead, what’s needed is a fundamental renewal of the relationship between firm and worker—a connection currently marred by mistrust and anxiety at many companies. ...

    Firms are overly focused on rewards and punishments, says Dan Pink, author of the new book Drive: The Surprising Truth About What Motivates Us. Companies “should move past their outdated reliance on carrots and sticks,” Pink says. “That was fine for simple, routine 20th-century tasks. But for creative, conceptual 21st-century work, companies are much better off ensuring that people have ample amounts of autonomy and that their individual efforts are hitched to a larger purpose.” ...

    That point dovetails with one employee priority today—trustworthy leadership. A recent report by staffing firm Randstad asked 2,200 American employees about traits of their ideal employer. Nearly three-fourths said their dream employer “has an active leadership who serves the company [not themselves],” up from 58 percent last year. ...

    In addition, organizations in the Watson Wyatt study failed to recognize the way employees—in particular top performers—prize job security. Job security was cited as a reason for joining an organization by 37 percent of top-performing employees. That made it the second-ranking reason after “nature of work” for top performers. Thirty-three percent of employees overall mentioned job security, putting it in a tie for second place. Security didn’t make the top-five list for employers when they were asked why employees join an organization.

  • Jim Hightower: CEOs sacrifice workers while enriching themselves. Full excerpt: Funnyman, Bob Newhart, used to do a comedy bit in which he portrayed a commanding officer addressing his troops on the eve of a big battle. The commander spoke bluntly about the bloody horror the troops would face and the certainty that many of them would not survive. The officer rallied them with appeals to courage and sacrifice, then concluded by saying, "My only regret is that I, personally, will not be able to go with you."

    That's a perfect expression of today's corporate ethic as practiced by chief executive officers. With bloody ruthlessness, CEOs constantly sacrifice workers in the name of global competitiveness, but the chiefs never seem to join in the sacrifice. We've recently been given another example of this disparity in a report on corporate pensions by the Government Accountability Office.

    The GAO found that four of the largest corporate bankruptcies of the last 10 years were disastrous for the employees' pension funds. Prior to their bankruptcies, United Airlines, US Airways, Polaroid, and Reliance Insurance had underfunded their employees' retirement plans by $11 billion – money essentially stolen from the workers. The corporations then abandoned any responsibility for the pensions, turning the obligation over to the federal government under a program that pays only a fraction of what is owed to the employees.

    But guess which employees did not suffer any cut at all in their retirement money? Right – the four CEOs. Indeed, as they were underfunding and axing the workers' pension plans, the four chieftains quietly pocketed a total of nearly $50 million in retirement pay for themselves.

    Bob Newhart's joke has become a nightmare for millions of workers. It’s time for congress to tie CEO pensions to the value of their employees' retirement funds.

  • USA Today: Employee benefits bounce back as raises, 401(k) matches slowly return. By Laura Petrecca. Excerpts: The height of the recession saw slashes of 401(k) matches, merit-based raises and bonuses by businesses of all sizes in bids to conserve cash. But nearly two-thirds of firms that froze salaries last year will begin to offer raises again, according to a new report from human resources consultancy Towers Perrin. And a third of those that sliced 401(k) matches plan to increase or restart those company contributions next year. Employer surveys from other human resource consultants, such as Watson Wyatt, have also echoed this trend.

    The benefits-bolstering sounds benevolent, but the moves aren't all altruistic. "There is a need to motivate and engage people," says Fred Crandall, a Watson Wyatt senior consultant. A decent benefits plan helps retain staffers who are considered valuable. Even in a down economy, "There is always a market for high-quality talent," Crandall says. As the economy recovers, such benefits will help to keep workers on board. "When you start coming out of a recession, people remember how they were treated," he says. "Some people who feel like they've been given a raw deal will jump ship."

New on the Alliance@IBM Site
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  • Job Cut Reports
  • General Visitor's Comment page
    • Comment 12/07/09 Still amused that there are Lou Gerstner defenders who believe he saved the company. The money he "saved" by laying off more people (and half my family) than any other company in history as of 2007 data, was then squandered on huge salaries and egregious stock options for him and his VPs. He also made some questionable purchases of companies costing billions of dollars just as the internet rendered made many of these company's products irrelevant. The problem now is that the upper management continues to promote those who think like they do. I support the Alliance and I too have a long memory about what happened in the 1990s. I never spent the salary increases I got. Saving money will be my way out of here, and a union is our only collective answer to protect ourselves from a sociopathic management. 25yrs_and_counting -Anonymous-
    • Comment 12/08/09 It is a sad commentary that people can be such simpletons (or management trolls) as to think that there was anything good about Lou Gerstner's tenure at the helm of IBM. None of the firings and other cost cutting measures taken by Gerstner were necessary. If IBM could weather the Great Depression without laying anyone off, then certainly IBM could have dealt with a slight economic downturn... which was created by the very executives who are now at the helm. Perhaps it is because it was the great Pension Grab of the late 90's rather than the death of full-employment that motivated some to unionize. As time goes by and those of us who remember those days are fewer and fewer, younger employees will need to get involved and point to how IBM's future plans will affect them negatively. I haven't given up on my fellow dinosaurs but it sure is getting more difficult. -RacerX-
    • Comment 12/10/09 I have seen the posts by many here telling my co-workers to join the Alliance. Is it working? -member- Alliance reply: Unfortunately it is not. There were Alliance members that were part of the over 10,000 jobs cut this year. Many are still unemployed and due to finances have had to drop their membership. For those still working the economy has put a severe strain on the family budget. The bottom line is that we are losing members and only gaining a few every month. So we appeal to those that can: please join the Alliance as a full member or associate member. The Alliance has been sending out mailings (not cheap) to hundreds of employees the past 2 months with information on the Alliance and encouraging them to join. For those not members on this board please join. For those that are members, sign up others.
    • Comment 12/11/09 Happy Holidays to all that remain! It has been 2.5 years since I left big blow. Lots of stress, no sleep due to being on call, under paid, overworked. Constant threats of layoffs and managers who don't recognize good workers. I have to tell you all over and over again there is life on the other side. Now I am praised for my work, get good raises, real Christmas parties, not the joke of a morning gathering in Southbury where they had mini bagels and mini coffee cups, and oh yeah, a real Christmas bonus. My advice to those that are left, move on and get on with your life. Life is too short to work at IBM. Happy Holidays and good luck. -Gone_in_07-
    • Comment 12/11/09 Just been told by friend in Atlanta Call/Sales Center in Smyrna GA that all client reps have to apply for the positions they hold now. The number of people effected in GA is 50-75, hard to know exact numbers. I do not know if the people in other call centers in TX and Canada will be doing this too. Managers of these teams have been applying for other jobs for last couple months. These jobs are supposed to be posted on jobs website starting next week so present employees will be competing with employees from everywhere for their own jobs. The question came up-- if present employee is not selected to keep his job, will they be eligible for a separation pkg or are they out of luck? -Anonymous-

      Alliance reply: Severance pay as part of the separation package is not guaranteed. They are also "at will employees". RA packages have included severance; but remember, IBM can change these packages at any time. If people want to end the guessing games they need a union contract that management must follow.

    • Comment 12/11/09 Are you saying they sold the Call Center, so the Client Reps have to interview at the new company. Or came up with a plan to make IBM employees interview for their same job? If they make them interview, then they can do that across IBM. How can people sit and not join the union? We have absolutely nothing to protect us. People, tell me please, when is enough going to be enough? -Young Lady-
  • Pension Comments page
  • Raise and Salary Comments IBM CEO Sam Palmisano: "I am pleased to announce that we will not only be paying bonuses to IBMers worldwide, based on individual performance, but that they'll be funded from a pool of money nearly the same size as last year's. That's significant in this economy -- and especially so, given the size of the 2007 pool. Further, our salary increase plan will continue, covering about 60 percent of our workforce. As always, increases will go to our highest performers and contributors. We should all feel good about the company's ability to invest in people in these very concrete ways."
  • PBC Comments
  • International Comments
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
Minimize
  • American Medical News: Aetna prepares for loss of 600,000 members as it raises 2010 prices. Executives say the company can be more profitable by dropping some business -- the same decision the plan has made before. By Emily Berry. Excerpts: In a conference call with investment analysts to discuss the company's third-quarter earnings, Chair and CEO Ron Williams told analysts, "The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering." Aetna President Mark Bertolini laid out how the company planned to raise prices to improve the company's profit margin. He said the firm had "implemented a combination of underwriting enhancements, pricing actions and plan design changes, intended to ensure that each customer is priced to an appropriate margin." ...

    He said Aetna's decision comes from a system that encourages insurers to drive away sicker members -- a strategy not unique to one insurer. "They're running a business, and their obligation is a very singular one: to increase shareholder profits." ...

    It's not unusual for executives to promise that profitability will take priority over membership growth. Some of Aetna's competitors are taking similar steps in 2010 and have done so in the past. Angela Braly, WellPoint's president and CEO, told investors and analysts in 2008 that the company "would not sacrifice profitability for membership." She was referring to some insurers "buying membership" by reducing prices to boost overall growth. ...

    Gibbs said simply raising prices probably would not get Aetna what it wants. That actually tends to result in sick people who are more "desperate" for coverage to keep it, and healthier groups to drop it. Instead, Aetna might change benefit designs, scaling back prescription drug coverage, for example, which sicker populations tend to value but healthier ones don't notice as much. "There's a rule of thumb out there that 20% to 25% of the people account for 75% to 80% of health care costs," he said. "Avoiding that segment is probably the quickest route to making a lot of money."

  • Urban Institute: The Secrets of Massachusetts' Success: Why 97 Percent of State Residents Have Health Coverage. By Stan Dorn, Ian Hill, Sara Hogan. Abstract: Less than two years after Massachusetts' 2006 reform law was implemented, 2.6 percent of residents were uninsured—the lowest proportion ever recorded in an American state. The state's individual mandate alone does not explain this result, since it is not enforced against adults with incomes at or below 150 percent FPL or children. During a multi-day site visit, researchers identified several factors contributing to Massachusetts' high enrollment, including an intensive marketing campaign; use of data to establish subsidy eligibility for newly-insured residents; an integrated eligibility system serving multiple subsidy programs with a single application; and healthcare provider/community-based organization-driven application assistance.
  • Medical News Today: Health Care Spending Will Account For One-Fifth Of GDP In 2018; Federal Government Will Pay More Than 50% Of Those Costs, According To CMS Report.
  • Reuters: Democrats: Private Medicare plans waste billions. Excerpts: A number of insurers, including Humana Inc and UnitedHealth Group Inc, offer such plans known as Medicare Advantage as an alternative to traditional fee-for-service Medicare coverage for the elderly and disabled. "But as this report shows, Medicare Advantage insurers are squandering billions of dollars on overhead costs -- in fact, they spend 10 times the amount per beneficiary as traditional Medicare," said House Energy and Commerce Committee Chairman Henry Waxman. ...

    From 2005 to 2008, Medicare Advantage insurers reported $27 billion in expenses unrelated to care, according to the report released by committee, which looked at 34 such insurers. It also pointed to millions spent on executive compensation and company retreats in Hawaii, Cancun, Mexico and other exotic locales. Health insurers Aetna Inc, Cigna Corp, Coventry Health Care Inc and WellPoint Inc were among those surveyed by the committee.

  • Washington Post: If 'public option' is no longer an option in Senate bill, then what? Benefits of deal debated. Federal agency would oversee national plans. By Alec MacGillis. Excerpts: While confusion reigned on Capitol Hill on Wednesday over the prospects and details of a Senate deal to replace a government-run insurance plan with other measures, it is not too soon to ask what the proposal would mean for regular people.

    The short answer -- subject to Senate revisions -- is that those without employer-provided insurance would have more options for buying coverage, but if they are younger than 55, their money would go to a private insurer, no matter what. Rates would be more competitive than what they are offered now, but possibly less so than under a "public option." And if they are between 55 and 64, they might be able to buy into Medicare early, though at what prices remains to be seen. ...

    The nonprofit status of the proposed plans would not necessarily guarantee low costs -- many private insurers today are technically nonprofit. Nor would the plans' nationwide scope and oversight by the OPM guarantee better rates -- premiums for the federal employee benefit plans, which serve 8 million people (including the members of Congress), increased by nearly 9 percent this year. "I don't know what it does beyond provide some political cover for somebody," said Robert Berenson of the Urban Institute. "It'll be the same insurance companies applying to the national exchange as would be in the state exchange.

  • Huffington Post: Health Care Reform: Sifting Through the Suboptimal Solutions. By Arianna Huffinton. Excerpts: If the fight over health care reform has proven anything, it's just how broken our system has become -- from the crippling influence of money on our politics to the way the modern misuse of the filibuster has taken away the power of the duly elected majority and handed it to a handful of bought-and-paid-for senators (yes, I'm talking about you Joe Lieberman). ...

    One by one, Congressional leaders who said they would not support a bill without a public option have come to the conclusion that, on second (or third or fourth) thought, they actually will. Leaving aside what this does to the already tattered trust the public has in their representatives, is a progressively watered-down public option preferable to a Medicare expansion combined with a national non-profit insurance plan similar to the one offered to federal employees, regulated by the Office of Personnel Management?

  • Huffington Post: How a Few Private Health Insurers Are on the Way to Controlling Health Care. By Robert Reich. Excerpts: The public option is dead, killed by a handful of senators from small states who are mostly bought off by Big Insurance and Big Pharma or intimidated by these industries' deep pockets and power to run political ads against them. Some might say it's no great loss at this point because the Senate bill Harry Reid came up with contained a public option available only to 4 million people, which would have been far too small to exert any competitive pressure on private insurers anyway.

    To provide political cover to senators who want to tell their constituents that the intent behind a robust public option lives on, the emerging Senate bill makes Medicare available to younger folk (age 55), and lets people who aren't covered by their employers buy in to a system that's similar to the plan that federal employees now have, where the federal government's Office of Personnel Management selects from among private insurers.

    But we still end up with a system that's based on private insurers that have no incentive whatsoever to control their costs or the costs of pharmaceutical companies and medical providers. If you think the federal employee benefit plan is an answer to this, think again. Its premiums increased nearly 9 percent this year. And if you think an expanded Medicare is the answer, you're smoking medical marijuana. The Senate bill allows an independent commission to hold back Medicare costs only if Medicare spending is rising faster than total health spending. So if health spending is soaring because private insurers have no incentive to control it, we're all out of luck. Medicare explodes as well.

    A system based on private insurers won't control costs because private insurers barely compete against each other. According to data from the American Medical Association, only a handful of insurers dominate most states. In 9 states, 2 insurance companies control 85 percent or more of the market. In Arkansas, home to Senator Blanche Lincoln, who doesn't dare cross Big Insurance, the Blue Cross plan controls almost 70 percent of the market; most of the rest is United Healthcare. These data, by the way, are from 2005 and 2006. Since then, private insurers have been consolidating like mad across the country. At this rate by 2014, when the new health bill kicks in and 30 million more Americans buy health insurance, Big Insurance will be really Big.

    In light of all this, you'd think the insurance industry would be subject to the antitrust laws, so the Justice Department and the Federal Trade Commission could prevent it from combining into one or two national behemoths that suck every health dollar out of our pockets (as well as the pockets of companies paying part of the cost of their employees' health insurance). But no. Remarkably, the Senate bill still keeps Big Insurance safe from competition by preserving its privileged exemption from the antitrust laws.

  • New York Times editorial: Can We Afford It? Excerpts: Republican critics have a fiercely argued list of reasons to oppose health care reform. One that is resonating is that the nation cannot afford in tough economic times to add a new trillion-dollar health care entitlement. We understand why Americans may be skittish, but the argument is at best disingenuous and at worst a flat misrepresentation. Over the next two decades, the pending bills would actually reduce deficits by a small amount and reforms in how medical care is delivered and paid for — begun now on a small scale — could significantly reduce future deficits. Here is a closer look at the benefits and costs of health care reform:

    STATUS QUO IS UNSUSTAINABLE. More than 46 million Americans have no insurance, and millions more have such poor coverage that a severe illness threatens bankruptcy. Small employers are dropping coverage because of the cost. Those lucky enough to have insurance are struggling with higher premiums and co-payments, and worry that if they are laid off they could lose coverage. Without reform, that bad situation will only get worse. The Commonwealth Fund, a respected research organization, warned that the average premium for family coverage in employer-sponsored policies would almost double in the coming decade, from about $12,300 in 2008 to $23,800 in 2020, with part paid by workers and part by employers. Premiums are also soaring for individuals who buy their own coverage directly.

    BUT A TRILLION DOLLARS? Both the House and Senate bills would cover more than 30 million of the uninsured, and fully pay for it — in part by raising taxes (either on wealthy Americans or high-premium health plans and certain manufacturers and insurers) and in part by cutting payments to health care providers and private plans that serve Medicare patients.

    A trillion dollars is still a lot of money, but it needs to be put in some perspective. Extending Bush-era tax cuts for the wealthy would very likely cost $4 trillion over the next decade. And the Medicare prescription drug benefit, passed by a Republican-dominated Congress, is expected to cost at least $700 billion over the next decade. Unlike this health care reform, it became law with no offsetting cuts and very little provision to pay for it.

News and Opinion Concerning the U.S. Financial Crisis
Minimize "It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.

  • Wall Street Journal: Goldman Blinks on Bonuses. Top Executives to Forgo Their Cash Awards in Bid to Stamp Out Furor Over Pay.By Suzanne Craig. Excerpts: But the changes are only for 2009 and don't necessarily affect more than 31,000 other Goldman employees, consultants and temporary workers. That group includes traders and other employees who are fueling most of this year's revenue and profit surge, putting them in line for sharply higher bonuses early next year. In addition, Goldman gave no indication in its announcement that it will buckle to pressure to rein in overall pay levels. ...

    Goldman's compensation and benefit pool is on track to top $20 billion this year, a record that would be equivalent to nearly $800,000 per employee. The payout comes just a year after Wall Street's failed gamble on real estate and other high-flying assets backfired, roiling stock markets and throwing the U.S. into recession.

  • New York Times op-ed: Gone With the Windfall. By Paul Wilmott. Excerpts: In Britain the first shots have just been fired by Alistair Darling, the chancellor of the Exchequer, our very own, very unlikely Wyatt Earp. On Wednesday he introduced a windfall tax of 50 percent to be paid by banks on discretionary bonuses above $40,000. (France is considering a similar tax.) So if a banker receives a million-dollar bonus, his bank will have to hand over $480,000. And he still pays income tax on the full million.

    The idea is nice and simple. It is intended to encourage banks to retain cash, perhaps as a buffer against hard times. This makes a pleasant change from the depressing use of taxpayers’ money for the same purpose, which seems to be the current policy.

    Already people have started looking for loopholes. No doubt Goldman Sachs has its tax avoidance scheme in place, as it always seems to be mysteriously one step ahead of governments in these matters. (Goldman has announced that it plans to reward its top executives around the globe in stock rather than cash.) But I suspect that the Inland Revenue, Britain’s tax authority, will jump very heavily on anyone trying to use clumsy ploys to avoid the tax, like redefining employment as partnerships or nominal relocation of place of work. ...

    Perhaps by dropping big bonuses in favor of big salaries there will be less incentive for traders to bet your money on that game of pitch-and-toss. Once they’ve reached their target for the year they can relax knowing that they won’t get fired and that there’s no further upside for them. Possible net result: Less risk-taking, simpler and safer products. Perhaps banking will become a smaller business, and as boring as it used to be.

  • Bloomberg News, courtesy of ABC News: U.K. taxes banker bonuses at 50%; U.S. sees bonuses rising 60%. By Ian Katz. Excerpts: U.S. lawmakers already wary of expanding the government's role in running financial companies probably will avoid matching the U.K.'s tax on banker bonuses that was announced Wednesday. "We don't think it is at all likely that Treasury-IRS would impose a 50% tax on banker bonuses," says David Schmidt at compensation firm James F. Reda & Associates. "This pay cut would likely cause an exodus of talent."

    U.K. Chancellor of the Exchequer Alistair Darling levied the one-time tax and said he will raise income taxes after elections next year. The tax applies to discretionary payments of more than 25,000 pounds (about $41,000) and will be paid by the banks. ...

    Goldman Sachs, Morgan Stanley and JPMorgan Chase combined will hand out $29.7 billion in 2009 bonuses, up 60% from last year, according to analysts' estimates. The three banks repaid aid received last year and aren't under the review of U.S. pay czar Kenneth Feinberg, who is overseeing compensation at seven companies. ...

    A U.S. bonus tax is a "great idea" that is justified by the taxpayer-funded bailouts, says Clyde Prestowitz, president of the Economic Strategy Institute. "Goldman Sachs and the others may be making tons of money, but they wouldn't be making anything without the bailout, which saved them."

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.

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