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“IBM employees and their communities continue to see IBM cut employee jobs while shifting the work offshore,” Tom Midgley, president of the Alliance@IBM, said in a statement. "This destruction of IBM jobs is unacceptable, and we will be sending a message to IBM—'Stop off-shoring our jobs.'"
“The recent termination of 2,500 IBM U.S. employees shows that IBM clearly does not value the experience and expertise of U.S. workers,” Lee Conrad, national coordinator of the Alliance, said in a statement. “To have IBM U.S. employees help transfer work out of the country and then get terminated is outrageous and a threat to all jobs and our economy.”
IBM shares fell in electronic trading after the close of regular markets, losing about $5 a share after having gained about that much during the day. “Lack of growth,” explained Robert Djurdjevic, president of Annex Research in Hawaii. “Sure, IBM profit is up. But its first quarter revenues were flat overall, with software being the only major growth segment.”
Alone, I warned our leaders that we should not reward these global giants with an even larger giveaway of corporate welfare, without getting confirmation that such funds would not be used to outsource American jobs. Not even a few years prior, we found IBM cashing checks from taxpayers while simultaneously patenting a new technology specifically designed to outsource New York jobs. Sadly, instead of learning from the past, IBM was handed another $400 million in incentives, direct and indirect. As small businesses everywhere are shutting their doors, I spoke out about the fact that this was an unacceptable risk without written confirmation to protect American jobs.
Now, once again, we are seeing IBM layoff hardworking New Yorkers. These new layoffs are deeply troubling and once again show why my demands that NY state demand specifics from IBM were legitimate. Let it be clear, a private corporation does and should have free reign to operate freely, but when they accept taxpayer benefits we must make sure that those dollars and our jobs are truly protected. We must hold IBM accountable for any direct or indirect benefits they receive from NY taxpayers. They have already received hundreds of millions of dollars from New York State taxpayers. We have a right to know what concessions were secured as New York decided to give $400 million to a group of companies that are known for off shoring jobs. ...
The incentives handed to IBM should have in return delivered a commitment to keep jobs in New York. They also could have been divided into 1,600 or more small business loans, spreading opportunity to new businesses and entrepreneurs statewide. In fact, a portion could have immediately went to fix bridges, roads and crumbling infrastructure, putting thousands of New Yorkers back to work. Instead, we have once again made a deal, evidently without written guarantees, with a global outsourcing giant and the taxpayers are now left holding the bag as employees get pink slips. I don't care if I have to continue to be the sole voice on this, this is unacceptable.
Reducing employees by more than three quarters in three years is a bold and difficult task. What will it leave behind? Who, under this plan, will still be a US IBM employee in 2015? Top management will remain, the sales organization will endure, as will employees working on US government contracts that require workers to be US citizens. Everyone else will be gone. Everyone.
Now industries and businesses change all the time because they have to or want to. Big companies and small have to adjust to the realities and changing reward structures of their markets and cultures. Or they change to better adapt to new opportunities. But what’s happening at IBM is different than that. It’s different because this incredible American success story, if it continues to follow its current course, will utterly fail. It’s different, too, because neither IBM management nor Wall Street seem to have the slightest notion of the peril facing the company. My deepest fear is they simply don’t care. ...
This is the first thing to understand about the IBM of today: the company is being run by executives who for the most part don’t understand the products and services they sell. The IBM of today is a sales organization. There is nothing wrong with sales if you can also deliver, but increasingly IBM can’t deliver.
The reason IBM can’t deliver is also explained well by Steve Jobs. It’s IBM’s maniacal fixation on process, once a strength but now a cancer.
“Companies get confused,” Jobs told me. “When they start getting bigger they want to replicate their initial success. And a lot of them think well somehow there is some magic in the process of how that success was created so they start to try to institutionalize process across the company. And before very long people get very confused that the process is the content. And that’s ultimately the downfall of IBM. IBM has the best process people in the world. They just forgot about the content.”
In this instance content means the deliverable, whether a product or service. IBM smugly thinks it knows so well how to do things that they can export their entire business model to cheaper labor forces in less expensive places to do business. While this is correct to a very limited extent it has been embraced as religion in Armonk.
IBM seems to believe it is cheaper to replace a skilled worker with two or three unskilled workers to do the same job. That is like hiring nine women to make a baby in one month. While it looks good on paper it is not practical and is not working. The language barrier for IBM’s Indian staff is huge, for example. Troubleshooting, which was once performed on conference calls, is now done with instant messaging because the teams speak so poorly. Problems that an experienced person could fix in a few minutes are taking an army of folks an hour to fix. This is infuriating and alarming to IBM’s customers.
Selected reader comments follow:
As you can imagine, this does not make for a optimal business environment, much less one that is pleasant for the employees. The resource actions, LEAN, cost-cutting atmosphere, etc. are all symptoms of the bigger problem, in that IBM cannot maintain high value for the business. To put it bluntly, management has run the company into the ground.
For its part, the top executives have focused on financial engineering — preserving stock value while they themselves cash out at opportune moments. IBM’s 2015 plan is just another example in a long line of financial tricks.
The real “crime” in this whole scenario is that people are confused about what IBM actually is. At its heart, IBM has become a financial engineering operation masquerading as a technology firm. The corporate emphasis is not on product or services (“content” per Steve Jobs), but on EARNINGS PER SHARE. Once you understand and accept that fact, everything starts to make sense.
You don’t have to like it…but that’s the way it is.
Since (2) has already been done, to redouble EPS again to $20 per share will require an even greater rate of US job elimination than we have seen in the past.
They have also done other little things. Yes, retirees can purchase health insurance through IBM, but retirees are placed into their own insurance pool rather than being co-insured with all employees. Result: (much) higher rates. Result of higher rates: retirees cannot afford health insurance ==> retirees die sooner ==> lower pension costs for IBM ==> higher EPS!
I have joined Alliance@IBM, and I am appalled by the number of people who haven’t. The union is only as strong as its membership. And working in a dispersed organization makes it harder to band together. Like most of my colleagues, I work from home (thereby saving IBM a bundle on infrastructure), and I wouldn’t even know where to go to picket on April 24th.
As they learn, they get better, and walk out the door and get hired at a higher salary. Even call centre workers who have mastered the American mid-western accent go for a premium. As the workers get better, they can get hired for more money elsewhere until they reach equilibrium with us in the developed world. The ones who are paid crap will _deserve_ to be paid crap. They are the ones who couldn’t climb the learning curve.
Offshoring for cheap labour a short term fix with no long-term sustainability.
When you used to talk to your local Customer Account Manager in Oshkosh Wisconsin and may have actually met them versus a nameless faceless email or 1-800 “help #” to help with a problem – how would you react?
And if that economy is booming, the worker becomes experienced, and if they are smart, they shop for a higher paying job. This turnover problem is big in India to the point that a top engineer or computer programmer can make almost as much as a North American programmer. In relative purchasing power terms, they are actually paid better than us. But IBM is not hiring these top-flight people; they are hiring what the can find for $2-$5/hour. And those are NOT the best & brightest.
Don’t go overseas for cheap labour — go overseas for _quality_ labour. And if you do that, you’ll still find North Americans competitively priced.
Management is feeding naive little “first workers” with dreams of careers and grandeur. Meanwhile, most employees are simply too dumb to contribute anything beyond their daily work, and management is a clusterfuck. Literally.
I’m leaving ASAP. I just pity our customers and Business Partners who get shafted with our piss-poor work (due to processes and the need to engage 50 different IBM organizations to get anything done).
The IBM rot is visible globally across IBM and at every level. Get out while you still can.
While he is rightly disparaged for what he did to the employee retirement plan and benefits, Lou Gerstner did recognize that IBM needed to change the way it did business. He took care of the hemorrhaging and allowed the product technical folks do what they did best. That was create products instead of spending all their time managing and creating processes. When he left I had 5 levels of management between he and myself (I was always a worker bee). When I retired there were 11 levels of management between myself and Sam Palmisano. Unfortunately Sam Palmisano and the current executives do not understand that a company needs creative, dedicated employees to excel and be able to service it’s customers.
I lay part of the blame on the changes many business schools went through in the late 60′s and 70′s. Around this time they started teaching that the only duty of a company was to the shareholders. Prior to this the common thought was a company needed to balance the needs of the stockholders with those of society and employees. So how best to align executive needs with those of the stockholder? Provide executives with income plans that included large number of stock options. This has also resulted in the executives becoming more powerful than the lay stockholders as their shares increased.
Another philosophy that popped up around this time was the idea that management was the company and a company was nothing more than a brand. As long as management could sell the brand the underlying products were unimportant. Much to my chagrin IBM has embraced both of these business philosophies. The end result is while IBM saw it’s 100 year anniversary it will not see its 200th.
We all know about these earnings-per-share targets, believe me. We’re reminded every time we hear from upper management. What I have to ask you, though, is did you actually see a written-down internal plan that lays out this specific 78% reduction in US headcount? I realize that you probably need to protect a source here, and like I said, it’s not even remotely surprising, but please humor me and tell me that you had a real piece of paper in your hands. (Okay, a PDF on your screen. Or a Lotus Notes presentation. Or whatever.) Frankly, that would be almost as eye-opening to me, that they’d actually write this stuff down and then proceed full steam ahead like there’s any chance in hell most of us will even be here in 2015.
(But nothing should shock me anymore. I know this.)
I don’t have a lot to add to Mr. Cringley’s comments other than to say he makes some very good points and, If I were an investor (sold my position when I left) holding the stock for long term value…I’d be VERY concerned about an approach to managing for shareholder value that is predicated of divesting the corporation of American workers. If I were a client I’d worry about the very same things…
What I will comment on is the appalling lack of balanced press coverage on this topic. The majority of IBM-focused press coverage in leading business publications (Forbes, Fortune, WSJ, NYT, Economist) and trade magazines alike uniformly reflects the whitewashed view of management, fails to appropriately question the company’s strategy and NEVER EVER tackles the central issue of why a corporation with such a proud American heritage…a company that literally would not exist were it not for the effort and toil of generations of U.S. workers…is permitted to receive an outrageous host of U.S. tax breaks, cheats and dodges while it pursues a business strategy of firing most of its existing American employees.
In part the answer to the question on the lack of balanced press coverage is that Armonk is a bully…and more than willing to use a big stick on any journalist who dares challenge the status quo. But it’s also a general comment on the spineless nature of big media. Kudos to Cringley for giving the Armonk flacks the middle finger. I wish more so-called journalists and editors had his balls…
I’m not talking about massive environment altering changes. I’m talking about making a small minute change that isn’t even service affecting and would not have been noticed by the customer unless you specifically told them what you did.
On top of that, due to the number of people involved, you also need an extra group specifically assigned to “coordinate all that coordination”. Add another group of 10 people on a team. It’s just ridiculous!!
The big question for me, since IBM now has no employees, just owners and resources, why anyone not at the executive levels is not sitting down, taking it easy and waiting for the inevitable ax that will come? I know the Indians on the whole, don’t work that hard and have no allegiance.
I guess the executives are counting on the continuance of IBMers hard work and professionalism until they realize in the next 32 months that they’ve been had.
One other angle to the IBM story Bob. We purchased Cognos for BI five years ago. They were superb with support, maintenance, training, etc. Then IBM wrote a big check and bought Cognos.
Once Cognos was assimilated into the IBM machine, they tried to double my annual support saying the product was now priced by “value”, eliminated most of the convenient training, and support dipped.
Want to talk to IBM about support costs? You get to talk to their global support sales staff that knows nothing about Cognos.
Their business model is close to the mafia.
I hope someday a really good lawyer gets his claws into a good lawsuit and can bring some justice to ex-employees. They deserve it.
Oh, the off shoring of payroll, etc to the Philippines is major fail. The icing on the cake? HR Partners in the US are beyond useless and have to call the Employee Services Center to get answers (which are usually wrong / varies on what rep you get.
Randy MacDonald is disliked throughout the entire HR community. And dislike is a kind word.
IBM used to have the customer’s best interests at heart. Two of the three commandments of IBM’s Old Testament were “Best Possible Customer Service” and “Excellence in All Things.” They were taken very seriously as guiding principles. But then again, so was the third commandment, “Respect for the Individual.”
These three commandments were replaced in 2003 with new ones, including, “Trust and personal responsibility in all relationships.” Sadly, both of these seem to be missing to the degree that I would not trust any commitment made by IBM unless it is signed by a VP or higher who has the authority to make it happen.
Some IBMers have been targeted for layoffs because they work remotely. Supposedly, they aren’t as effective when they aren’t face-to-face. At the same time, we are asked to stay up late for conference calls with China, India, Russia, and Australia, and for some reason, that’s supposed to work just fine.
My favorite is how they gut internal support organizations (workstation support, build groups, help desk, development tools) to “save money”, then make highly paid engineers do it individually, while not slipping any dates, with fewer people to produce the products. Then they can point out how unproductive American workers are, further bolstering their case for offshoring.
Some executives are going to make a bundle of money meeting their 2015 targets. I’m not sure how there will be a business beyond that date, however.
An array of overseas ‘research centers’ has been established. All IBM intellectual property is being transferred to China, India, Brazil, and anyplace that’s cheap to staff. I don’t believe anything anyone in IBM says anymore. Nobody should.
The bottom line, don’t listen to big blew executives, watch what they do, and the main thing they do while singing blue skies, is sell like the place is on fire…
2015 Strategy Roadmap Rollout: Questions and Answers
1. Why is important for IBM to have the 2015 Roadmap?
Answer: The 2015 Roadmap articulates IBM’s overall financial objectives to investors. Internally, the roadmap provides a framework within which we can execute our strategy, with specific parameters by which we can measure progress along the way. Enabling STG & ISC line managers with this information, information that managers can then expand on and help their teams interpret, is empowering. The goal, ultimately, is for all of our managers to help all of our employees better understand their role and related contributions to the company’s achievement of the 2015 Roadmap.
2. What are the biggest risks or inhibitors to the success of the 2015 Roadmap?
Answer: The biggest risks to success are in areas such as a) new business areas, where we must develop new product capabilities and skills, b) areas of aggressive growth which require significant share gains, including acquisitions which must be integrated, c) economic risks which impact our clients, and d) competitive risks such as unforeseen strategies or breakthroughs.
3. Are we achieving our transformation goals, what are the key measurements you are paying attention to, and what should we be focused on?
Answer: Key measurements include revenue and PTI, share vs. competition; specific focus on growth initiatives, and shifts in our revenue mix (such as the ratio of SW/HW, increase in proportion of Growth Markets/Major Markets, as well as platform mix). For example, storage is a growth area for us, and we expect storage revenue to lead our platform growth at 12% CGR.
4. How can we use this 2015 Roadmap information to empower line managers and employees to do their jobs with less bureaucracy?
Answer: The 2015 Roadmap is a framework to describe how we will achieve the financial targets we have set for ourselves by 2015. Knowing the details of the strategy will help employees to better understand the business opportunities we are pursuing and the challenges we face. This in turn will help employees to recognize the importance of the investment decisions we make and subsequent trade-offs. With this insight, managers and employees will become more empowered to align their work and deliverables to achieve our strategic goals.
5. Many employees are confused because they believe there is a disconnect between strong business results and record earnings being reported by IBM and the constant cost-cutting and lack of investment in employees and capital for STG and ISC. Why does there seem to be such a disparity?
Answer: Our 2015 roadmap calls for PTI growth as well as revenue (or top-line) growth. To achieve PTI objectives we must be efficient, and that means controlling costs. This allows the funding of future investments. While investments will be stable or reduced in some areas, increased investments are targeted toward growth areas (such as the IBM growth priorities of BAO, Cloud, Smarter Planet, and Growth Markets).
6. How will ISC be integrated in the 2015 Roadmap? How will it impact ISC employees?
Answer: ISC will be integrated into IBM’s 2015 Roadmap by helping provide solutions that delight clients and IBM shareholders. This will be achieved by Creating Smarter Value Chains, Driving Effectiveness and Enabling Growth with a series of big plays to enable these strategic areas. This strategy will support IBM’s Operating Leverage by continuing to drive $6B in Product and Services cost take-out (in support of margin) annually; contributing $1.6B of Value Services Productivity through radical transformation, workload prioritization, smarter Supply Chain analytics, and increased productivity. Lastly, ISC will contribute to balance sheet improvement through cash optimization initiatives, driving inventory turns improvement of 7% (2011-15); improve days sales outstanding by maximizing collections thru O2C / Blue Harmony and optimizing accounts payable terms. ISC will be a showcase for implementing transformation and supporting key IBM growth initiatives. ISC employees are foundational to this framework. Through leadership development programs, like talent accelerators, the enhancement of global experiences and learning, we are building broad and deep (T-shaped) skills. ISC is ensuring employee development is part of the everyday thought process, and not just a once a year skills assessment.
7. Blue Harmony has caused many problems with paying sales commissions in 2011. How can we prevent it from happening when we implement it in fulfillment systems?
Answer: The commissions’ related defects seen with the initial release of Blue Harmony, can, for the most part, be attributed to late testing with data that differed from production. The interfaces were delivered late in the cycle and the test environment for R0.5 did not contain the range of data that would have allowed the team to first test each component in isolation, and then test the complete solution. Specifically, the limited time available for test meant that each component had to be tested individually in parallel. We tested that the interfaces selected all the data elements from the total test universe, as designed. We also tested that the data was sent to and received by the FMS system. What caused the defects was the inability to include end-to-end test scenarios where the data sent and the data received and interpreted were examined to ensure the business rules and conclusions drawn from the interface results were accurate. Had that been done, the majority of defects related to converted invoice and customer data, as well as middleware mappings for marketing code indicators, would have been exposed in test, rather than in production. There simply was not sufficient time. These issues have now been identified, corrected, and implemented in production. As we move to subsequent releases, we are using these valuable lessons learned. Our process integration team is ensuring true end to end testing with better data, and where possible, real data, to ensure this doesn’t happen in future implementations for Sales Commissions or other areas.
8. Will the STG employee population grow as a result of continued business success and revenue growth? If yes, where will that growth take place?
Answer: IBM and STG will continue to invest in resources in areas that are driving revenue and profit growth as well as investing to attract and maintain critical skills that support our technical and growth initiatives. Due to the future revenue and share growth coming from the emerging global markets, we anticipate that we will have the majority of the hiring and population growth occurring in the growth markets.
9. IBM’s global resources strategy is to grow the employee populations in the Growth Markets. This is causing a lot of fear and uncertainty about layoffs or, at a minimum, no career opportunities for employees in the Major Markets (in other words globalization is putting our jobs and careers at risk). Does the 2015 Roadmap provide any clarity or sense of direction for long-term career growth in the Major Markets?
Answer: As you see in the Roadmap, the STG Major Market revenue plans to grow by 2% while the Growth Markets revenue plans to grow by 11%. The Major Markets continue to be a substantial revenue source for STG so although the greatest growth is seen in the geographic area of the Growth Market countries, employees in the Major Markets should plan to develop their skills to be competitive to support the 2015 Roadmap plans.
10. There has been very little vitality hiring in the Major Markets and the signal this sends is that in the future IBM will no longer locate jobs in the Major Market countries. Is this a fair interpretation and how does this affect the long-term career planning for the current employees?
Answer: IBM will continue to locate jobs in the Major Market countries. Through 2015, 70% or more of IBM’s revenue will continue to come from the major markets. This will require us to maintain a level of strength in the major markets to successfully deliver on our business commitments.
11. In the Growth Market countries the labor markets are tight and attrition rates are high, many IBM employees feel their best opportunities to get ahead (promotions and salary increases) are to leave IBM and go to work for another company. How can we stem this trend? Do you think sharing the 2015 Roadmap will help employees better understand their long-term career opportunities?
Answer: Sharing the 2015 roadmap will highlight both the expansion in the growth markets and the strength and contribution of the major markets, hopefully helping employees to understand the business strategy and realize how their role fits in. We will continue to focus on retaining our best performers through all vehicles at our disposal; including superior management practices, skills and career development opportunities, and differentiated compensation.
12. Tight expense controls have helped bring our costs down, but have built up a lot of bureaucracy and red tape. Is there any concern about the frustration and wasted time this has created? Is anyone doing anything about it?
Answer: There is a team, being lead by Elizabeth Baker, currently looking at our expense controls and processes across all brands. The purpose of the team is to propose a consistent, better defined and streamlined process for expense controls and approvals.
13. Travel expenses have been tightly controlled for a long time, with little to no discretion allowed for line managers, is there any let up in sight?
Answer: Travel in IBM will continue to be focused on Customer facing, Revenue generating events. Non-Customer travel will not return to levels that employees were accustomed to a couple of years ago. We will continue to have an exception process to review requests for Non-Customer / Revenue generating travel that makes business sense and supports our initiatives.
14. It appears that we’re decreasing our investments in the System z Brand, does that mean it has a lower priority in our technology portfolio?
Answer: System z is still very important to the STG portfolio. The point of having a portfolio is that each element plays its own role; System z makes an important contribution in terms of PTI (including the rest of the IBM stack). The investments made over 40+ years have made this possible; we are leveraging those investments and making the incremental investments needed to deliver continued customer value.
15. What is the future strategy for the Power platform?
Answer: The Power strategy is to drive revenue growth through aggressive share gains vs. competitors (HP, Oracle/Sun), expansion of the target market with Power Linux, and alignment with key IBM initiatives (Smarter Planet, BAO, Cloud). Workload
16. Many employees have high workload levels with no let up in sight and no recognition of how hard they are working. With more aggressive deadlines and a push to do more work with fewer people, employees are feeling like they’re pushed to the brink. Do the executives recognize this and are there any plans to address the workload issues?
Answer: IBM’s senior leaders recognize that today’s business environment is more competitive, globally integrated, and faster paced than ever before. The incredible effort and hard work of our teams around the world is recognized, as are the workload and engagement concerns. We hope, and expect, that all employees continue to look for new ways of doing their work to streamline processes, improve efficiencies and increase productivity. There are teams of managers and employees throughout STG & ISC who are working on transformation initiatives with these very objectives in mind; such as the STG/ISC Climate Council. Over the past century, IBM’s greatest achievements have arisen from the contributions of committed and energized IBMers. If you see a way to evolve the way things are done or have ideas how to improve the way we work or lessen a burden, speak up and share your ideas.
17. Major market employees feel pressured to pick up the slack for the major market employees who have been let go while the growth market employees are not up to speed to fully trained or ready to take on the workload. Are these issues being addressed with the 2015 Roadmap?
Answer: Yes, a key element of the strategy now through 2015 consists of training and mentoring of employees in the growth markets, as well as establishing centers of competency and support systems to get them up to speed and productive.
18. Employees seem concerned that there’s minimal investment for their skills development and career growth, does the 2015 Roadmap help us clarify where we should be investing in skills development and career vitality?
Answer: Yes, this is one of the benefits of having such a framework for execution of our strategy. It identifies the growth areas (e.g. IBM growth priorities, as well as STG growth such as software, storage, networking…) so that we know where to focus our efforts.
19. How much are we investing in the skills development for our employees?
Answer: The WW STG / ISC combined budget for education for 2011 is approximately $25M. Our current expense guidelines specifically identify key education initiatives that are supported.
20. What are the plans to address a potential skills, experience and leadership gap that is likely to occur when employees in the Mature Market geographies start to retire in large numbers?
Answer: In STG, as we work on our skill development plans, we will include actions to be sure to transfer knowledge and skills where necessary. We will also plan to utilize the workforce flexibility programs available in IBM.
21. What steps are we taking to improve the productivity of our sales and technical sales management teams?
Answer: Improving sales and technical sales productivity is a critical enabler to free up capacity that can be deployed to competitive and growth selling. We are optimizing our sales coverage across STG and IBM, and also leveraging our extended sales team (BPs and ibm.com) through continued destacking. As we increase the ratio of technical sales to sales, we will also shift the focus of technical sales more in the direction of pre-sales. The Sales Transaction Hub is a major productivity aid, as it frees up seller time by allowing them to offload several back office functions (e.g. pricing, proposals, contracts). And finally, skills continue to be of major importance in improving effectiveness and productivity, with a continuing emphasis on solutions which is consistent with our strategy.
22. With continued business success, will we be able to invest more in employee recognition and rewards programs?
Answer: Our 2011 Budget for employee recognition and awards is $4M, which is at the appropriate level given our financial model. Our financial performance will continue to be the deciding factor for what is affordable.
Questions and Answers
23. What are we doing to recognize top performers so we don’t lose them to competitors?
Answer: We continue to strategically invest in retention to ensure we can retain key employees. This year we funded additional investments worldwide in the STG employee salary program with particular focus on key countries. Managers had flexibility in the delivery of TCR to put more focus on lower paid contributors. We made significant investments in 2011 in our sales plans, particularly the PSP plan, to help retain sellers, and announced new recognition programs which should help to retain our top performers. Additionally, we continue to invest in skills development and career growth opportunities. The IBM Career Framework allows all IBMers to identify the competencies and skills required to succeed in their current role, as well as what expected for future career growth, and to locate learning opportunities to develop those skills and competencies.
24. There is no recognition (monetary or non-monetary) for employees who get a “2” PBC rating, but they are still being told they’re valuable contributors. Most employees who get a “2” rating feel there are too many mixed messages and feel dejected about the rating. Is the line management or HR team doing anything about this?
Answer: Our business is only capable of succeeding to the extent that ALL of our employees continue to contribute and drive it forward. As a company, we have to make difficult decisions related to the optimal spend of limited funding. There are programs specifically designed to apply to all of our solid performing employees – GDP, the MBA program (when we’re able to fund, like in 2010 for most job families), Eminence and Excellence recognition, career development, etc. There are other programs (TCR, sales recognition, etc.) where we have chosen to more strongly differentiate and recognize the contribution of our top contributors. All in all, there is a blended approach that, as a company, we feel is appropriate and what we’re able to effectively manage.
CLAIMS: Project managers can cap hours at 40/week even when the worker is putting in 50-60 hours in a week, even on a green-dollar project. Subsequent projects size based on CLAIMS reports and therefore are under-sized. GIGO.
Priorities: “The fours goals of IBM are first quarter, second quarter, third quarter and fourth quarter” — an IBM VP announced this back around 2000 at a big group meeting. I should have looked for an eject handle at that point. IBM’s once standard setting for customer service has decayed because, to a bean counter, “Customer service does not add to share-holder value this quarter”.
Off-shoring only works when the skill/experience levels are even but the labor costs vary greatly. Where I work now we’ve got a competent team in Bangalore, but, 5 years ago, it didn’t look like IBM chose as well from what I was seeing. Granted, in the last 5 years the labor costs have narrowed given the revolving door on the HR departments in India.
I was caught in the RIFtide of 2007 at IBM and, as near as I can tell, the bean-counters only considered the lowest-value hat I was wearing… out of the 5 hats. “You don’t have to kill millions of people to turn them into statistics, all you need is a spreadsheet” – me.
Somehow the intangible values of each employee never seem to be considered– inventiveness, enthusiasm and teamwork… and a lot can be seen in how the PBC (Personal Business Commitment) categories changed when Palmisano took over: “Win, Execute, Team” became “Win, Execute”. The “High Performance Workplace” tended to reward those good at writing memos and flushed out the team-players since everyone was in competition to hold a job. Those of us who felt that we *all* needed to succeed together as a team were amongst the first to go.
When your employer tells the rank-and-file to “think of share-holder value” there is a problem; I’ve always believed that, when you take care of your customers, they will continue to buy from you… which automatically takes care of the share-holders. Of course, with the “fiduciary responsibility” rules for institutional investors, share-holder loyalty is an obsolete term.
Perhaps the best thing IBM can do for their share-holders is to liquidate the company, providing one big pay-out, and then no more worries when it comes to servicing current– or pre-existing– customers.
Does that mean I feel I’m safe from the resource actions? No way. Even though my colleagues and my first and maybe second line management recognize that I contribute greatly to IBM in my own small way, as far as Ginny and Sam and Randy are concerned, I’m just another disposable cup that can be replaced with a cheaper piece of cardboard that was manufactured overseas. It’s a guarantee that I’ll be one of the 78% because I’m just a couple years away from being eligible for retirement. It’s age discrimination, it’s illegal, but IBM will spin it so I got fired for performance reasons, not because they want to save a few bucks by not allowing me to retire.
You may ask why I don’t leave… I’ve considered it very seriously. Fact is, the current project I’m working on is THE BEST JOB that I’ve had my entire career and I really am having fun with it in spite of all the uncertainty. Do I feel entitled to my job? Well, maybe I can explain it to you this way. I am a citizen of the United States of America, which was founded on the premise of its people having the rights of “life, liberty and the pursuit of happiness”. I’ve busted my butt all my life in the pursuit of happiness and in this country, you really do need to have some type of gainful employment in order to avoid having the constant worry (and its resultant unhappiness) of how you’re going to feed your family.
I also have a social responsibility as a citizen of this country. I pay my taxes, I volunteer, I try to make sure that my kids have the same ethics and personal responsibility that I was raised with. Our government has ensured that corporations now have the same rights as individuals. Therefore, any corporation that operates in this country and benefits from tax incentives should share the responsibility of contributing its fair share back to the country for the good of ALL (not just its executives and shareholders). Otherwise, those tax incentives are just another form of welfare being paid out to someone that doesn’t qualify.
‘These numbers don’t include the perks – the use of the corporate jet, the corner offices – a lot of the compensation that doesn’t get listed on the public files.’ ...
IBM Louis V. Gerstner Jr.; 1993-2002; $189,005,929.
IBM, on the other hand, is a public corporation that bids on government contracts and major investors include public pension plans. It should insist that they will not tolerate discrimination of any kind in their dealings. Shame on Rometty for not speaking up and setting an example for millions of young girls in the United States. While I am sure that she rose to the top of IBM by not rocking the boat, she is the CEO now. She can afford to do the right thing and speak out against discrimination. ...
IBM’s biggest money maker is its Global Services business, which also employs the most people. Ten years ago Global Services was an even larger part of IBM but the company is now making a lot less on its contracts, and the turnover of business is brisk. It is in Global Services where you see the most jobs being shipped offshore But the problem is the offshore teams often lack the skill and experience to do the work, problems mount, customers like (most recently) The Walt Disney Company get upset and leave. ...
Today at IBM the US workers who try to save the business are the first in line to lose their jobs. Management accountability is gone. The people who mess up get to keep their jobs; and those trying to retain the business lose their jobs.
Advice to Senior Management:
Advice to Senior Management: Stop focusing on the short term, and do things that will help the long term health of the company. Realize that employee morale is key to increased productivity and quality. Stop replacing your US workforce with global resources. Global resources should do the work in their own countries, and US resources should do the work in the US.
Cons: I found working at IBM I was constantly under pressure to change who I was. On one project where I achieved recognized results, I still routinely heard, "you don't belong here". On another, I got mixed messages from management every day - first they'd tell me to change my behaviour to become less creative and more corporate, but then in reviews tell me I should "just be myself". It was a very frustrating experience overall. I would absolutely not recommend IBM as a workplace for anyone who wants to develop creative solutions to problems.
Advice to Senior Management: You often focus so much on your revenues that you lose sight of what's good or right for your clients. I know how important the numbers are for a publicly traded company; however, clients choose IBM because they trust the brand. Be careful you don't become so fixated on making budget that you put that brand in jeopardy.
IBM pays for retiree medical costs out of general operating funds. When you "spend" your FHA money for health insurance premium, IBM deducts the amount from your notional account. Then IBM pays any actual costs for your health care from its general funds.
Be aware that you have no rights to the FHA funds, and retirees in general have no rights to IBM provided health care. IBM can change the rules and take it all away at any time.
There is a very wide range of T.D.F.’s, and that may be a problem because they have a whiff of the old Wild West about them: just about anything goes. For example, Morningstar found that among three dozen funds with a target retirement date of 2025, the percentage of fund assets invested in stocks ranged from 38 to 86 percent, with an average of 70 percent. The retirement investment industry and Washington regulators have basically left it to investors to figure out what their T.D.F.’s contain, and to decide if their plan dovetails with their risk and return expectations. ...
But automated simplicity isn’t a magic bullet. “The potential problem is that the T.D.F. you are given isn’t really that good,” Professor Statman says. For example, a recent survey by Callan Associates, an investment consulting firm, found that 63 percent of such funds used actively managed funds and that an additional 17 percent used a mix of active and index-based funds. Historically, active management has been less effective than passive index-based investing. “The fact is, after investment fees are subtracted, active management is a loser’s game,” says Tom Idzorek, global chief investment officer at Morningstar Investment Management. ...
On an asset-weighed basis, the average annual expense ratio charged on target-date funds is 0.61 percent, according to Morningstar. Vanguard, which has an average charge of 0.18 percent for its T.D.F.’s, is the only major manager that emphasizes index-based funds for them. Target-date funds that are actively managed tend to have annual expense charges above 0.70 percent — though many exchange-traded funds charge less than 0.30 percent.
Numbers don’t lie, right?
But as this article about pension funds trying to improve their performance using alternative investments reminded me, we need to understand what we’re up against when we start searching for an amazing, index-beating manager, fund or investment.
Turns out that finding the next Warren Buffett is not impossible. But it is highly improbable. Think I’m too pessimistic? Consider these three points carefully...
By the time it reaches the workplace, the pipeline has become a veritable sieve.
Even a degree in computer science isn’t enough to propel some women into programming jobs. On average, about 18 percent of computer science degrees go to women, and the Bureau of Labor Statistics reports that 19 percent of software developers are women. But experts say that at many prominent tech firms, where coding is king, the percentage of female programmers is in the single digits.
Part of the problem, say those familiar with the hiring process, is with the recruiting itself. Some women are put off when they go for interviews and are interviewed only by men. And some companies hold 24-hour “hackathons” for recruits, reinforcing the profession’s geeky, high-testosterone stereotype. “There’s a bias in the system,” said Madeline Heilman, a psychologist at New York University who studies gender stereotypes. “It affects women’s willingness to go into these situations because they know what they’re in for.”
Pay levels for IT workers in the UK over the past eight years or so have not undergone the large shifts you would expect to see in an industry suffering from a skills crisis, says Dr Jonathan Liebenau, reader in Technology Management at the London School of Economics. “In looking at historic wages we don’t see the sort of fluctuations that would support the argument that employers are finding it consistently difficult to find people,” he said. ...
And despite the warnings of skills shortages in the coming years, each year industry finds enough IT workers to satisfy its demand, Liebenau added. “If you look at historical surveys of industry they’ll always say they haven’t got enough people for the future and yet they’ll always demonstrate that the year before they found enough people,” he said.
In the US, Hira said, unemployment among IT workers is about double that of other college graduates. IT workers also generally take positions that they’re offered, he said - not what would be expected in employees’ market.
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Of course, government health-care programs and policies are largely responsible for these rising costs in the first place. To begin, the design of Medicare is terribly flawed: Because the program pays providers of care based on the volume of their services, it creates a massive incentive for inefficiency and overuse. And because Medicare is the biggest payer in most health-care markets in America, that incentive badly distorts the economics of the entire sector. Furthermore, the Medicaid program inflates costs by (among other policies) having states control how the program is run while the federal government pays most of the bills. The result is that neither party has both the incentive and ability to keep costs in check.
White House health adviser Jeanne Lambrew said Blahous' analysis wrongly charges that some savings are "double counted." She said government estimates from the Office of Management and Budget and from the non-partisan Congressional Budget Office show the 2010 law would lower federal deficits over a 10 year period.
"This new math fits the old pattern of mischaracterizations about the Affordable Care Act when official estimates show the health care law reduces the deficit," Lambrew, deputy assistant to the president for health policy, wrote in a blog post on the White House website.
You may wonder what methods Blahous used to obtain a more accurate measure of the bill’s cost. The answer is that he relies on a simple conceptual trick. Medicare Part A has a trust fund. By law, the trust fund can’t spend more than it takes in. So Blahous assumes that, when the trust fund reaches its expiration, it would automatically cut benefits.
The assumption is important because it forms the baseline against which he measures Obama’s health-care law. He’s assuming that Medicare’s deficits will automatically go away. Therefore, the roughly $500 billion in Medicare savings that Obama used to help cover the uninsured is money that Blahous assumes the government wouldn’t have spent anyway. Without the health-care law, in other words, we would have had Medicare cuts but no new spending on the uninsured. Now we have the Medicare cuts and new spending on the uninsured. Therefore, the new spending in the law counts toward increasing the deficit, but the spending cuts don’t count toward reducing it.
So saving Medicare money isn’t a deficit reduction, because Medicare is going to run out of money and cut benefits anyway. Right?
OK, this is crazy. Nobody, and I mean nobody, tries to assess legislation against a baseline that assumes that Medicare will just cut off millions of seniors when the current trust fund is exhausted. And in general, you almost always want to assess legislation against “current policy”, not “current law”; there are lots of things that legally are supposed to happen, but that everyone knows won’t, because new legislation will be passed to maintain popular tax cuts, sustain popular programs, and so on.
Hull and her late husband purchased a long-term-care insurance plan in 1997 that was supposed to cover their medical and living expenses during the final years of their lives. After paying premiums for a decade, Hull's health declined and she was diagnosed with Alzheimer's disease five years ago. She moved into an assisted-living facility in 2008.
Ability Insurance, which changed names several times during the years Hull paid premiums, cut her off two years later, the Billings Gazette reported. Although the company agreed to resume her benefits last year, it refused to pay the bills from the time during which it wouldn't cover her. The Montana jury decided the insurance company had breached its contract with Hull.
"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.
That was the case a half century ago.
Unfortunately, it’s not the case today. For the past three decades, top executives have been rewarding themselves with mega-million dollar compensation packages while American workers have suffered an unrelenting disappearance of middle-class jobs. Since the 1990s, this hollowing out of the middle-class has even affected people with lots of education and work experience. As the Occupy Wall Street movement has recognized, concentration of income and wealth of the top “1 percent” leaves the rest of us high and dry. ...
What a difference three decades makes! Now mass layoffs to boost profits are the norm, while the expectation of a career with one company is long gone. This transformation happened because the U.S. business corporation has become in a (rather ugly) word “financialized.” It means that executives began to base all their decisions on increasing corporate earnings for the sake of jacking up corporate stock prices. Other concerns — economic, social and political — took a backseat. From the 1980s, the talk in boardrooms and business schools changed. Instead of running corporations to create wealth for all, leaders should think only of “maximizing shareholder value.”
When the shareholder-value mantra becomes the main focus, executives concentrate on avoiding taxes for the sake of higher profits, and they don’t think twice about permanently axing workers. They increase distributions of corporate cash to shareholders in the forms of dividends and, even more prominently, stock buybacks. When a corporation becomes financialized, the top executives no longer concern themselves with investing in the productive capabilities of employees, the foundation for rising living standards for all. They become focused instead on generating financial profits that can justify higher stock prices – in large part because, through their stock-based compensation, high stock prices translate into megabucks for these corporate executives themselves. The ideology becomes: Corporations for the 0.1 percent — and the 99 percent be damned.
The reaction from many commentators was a howl of outrage. The president was being rude; he was being partisan; he was being a big meanie. Yet what he said about the Ryan proposal was completely accurate.
Actually, there are many problems with that proposal. But you can get the gist if you understand two numbers: $4.6 trillion and 14 million.
Of these, $4.6 trillion is the revenue cost over the next decade of the tax cuts embodied in the plan, as estimated by the nonpartisan Tax Policy Center. These cuts — which are, by the way, cuts over and above those involved in making the Bush tax cuts permanent — would disproportionately benefit the wealthy, with the average member of the top 1 percent receiving a tax break of $238,000 a year.
Mr. Ryan insists that despite these tax cuts his proposal is “revenue neutral,” that he would make up for the lost revenue by closing loopholes. But he has refused to specify a single loophole he would close. And if we assess the proposal without his secret (and probably nonexistent) plan to raise revenue, it turns out to involve running bigger deficits than we would run under the Obama administration’s proposals.
Meanwhile, 14 million is a minimum estimate of the number of Americans who would lose health insurance under Mr. Ryan’s proposed cuts in Medicaid; estimates by the Urban Institute actually put the number at between 14 million and 27 million.
So the proposal is exactly as President Obama described it: a proposal to deny health care (and many other essentials) to millions of Americans, while lavishing tax cuts on corporations and the wealthy — all while failing to reduce the budget deficit, unless you believe in Mr. Ryan’s secret revenue sauce.
That’s roughly $42,000 an hour. Or $700 a minute. Or $12 a second.
Think of it this way: In the time it took to read those words, you could’ve pocketed $100. Finish this article and — well, you do the math. ...
Of course, most of us can’t begin to wrap our heads around pay figures like these. An American with a bachelor’s degree, after all, typically makes $2.3 million, not in a year, but over a lifetime, according to a recent study from Georgetown University.
Data on C.E.O. compensation in 2011, albeit preliminary, confirm what many of us already know: the top brass generally do much, much better than the rest of us, whether times are good or bad. After the ups and downs of the recent boom-bust years, pay among the 100 best-paid chief executives at big American corporations held fairly steady in 2011, according to Equilar, which reviewed C.E.O. compensation for The New York Times. Here are some numbers worth knowing...
What makes it a real hot-button issue is that presumptive Republican presidential nominee Mitt Romney is this particular loophole's poster child.
Under current tax law, certain kinds of financiers, including private equity investors and some managers of hedge funds, are allowed to treat bonuses like long-term investment income, called carried interest, taxable at the maximum 15 percent capital gains rate. Others have to pay up to 35 percent taxes on their labor income. The cost to the U.S. Treasury is more than $1 billion a year.
One of the main reasons Romney paid 13.9 percent in taxes on his $21.7 million income in 2010 is that a big chunk of that income came from performance bonuses still trickling in from private-equity investments he managed during his career at his former firm, Bain Capital. ...
Several other Democratic candidates are prepared to weigh in, including Ohio Sen. Sherrod Brown. "Wealthy hedge fund managers can make more than $2 billion each year, yet pay a lower tax rate than most middle class Ohioans because of a special tax break," Brown told HuffPost. "If hedge fund managers paid the regular income tax rate, we could reduce the deficit by $23 billion over the next decade."
"I asked Warren Buffet in a meeting we had recently, 'Have you ever had a Swiss bank account?' He said, 'No, there are plenty of good banks in the United States,'" Durbin said.
"So I started asking people: 'Why do you have Swiss bank account?' One, you believe the Swiss Franc is a stronger currency than the United States dollar. And that is apparently the decision the Romney family made during the Bush presidency. And secondly, you want to conceal something. You want to hide something. Why would you have a Swiss bank account instead of one in the United States? I would like to ... ask the press to really press some of these questions, the obvious questions. When is the last time a presidential candidate for the United States had a Swiss bank account? I think the answer is never."
The average tax rate, including payroll taxes, for the middle 20 percent of U.S. families will be 15.9 percent in 2015, according to an estimate by the Tax Policy Center, a nonpartisan research group in Washington. Of the 217,000 households that would be affected by the Buffett rule, only 4,000 will have incomes exceeding $1 million and tax rates below 15 percent, under slightly different measures of income and taxes by the center. ...
Under current law, capital gains and dividends are taxed at a top rate of 15 percent while wages and other ordinary income are taxed at as much as 35 percent. A new 3.8 percent tax on unearned income takes effect in 2013. ...
High earners including Buffett and Republican presidential candidate Mitt Romney would be “clobbered” by the Buffett rule, Williams said. Measured as a share of adjusted gross income, Romney, the co-founder of Bain Capital LLC, paid a 13.9 percent rate for tax year 2010, according to tax returns released by his campaign.
Corporate chief executives and professional athletes like Albert Pujols with multimillion-dollar salaries would see less of a change in their tax rate because their pay is taxed as ordinary income. High-income households with a mix of ordinary and capital income have rates between 15 and 30 percent. Their taxes would go up under the Buffett rule although they already pay more than middle-class households do. ...
“If you make more than a million dollars annually, then you should pay at least the same percentage of your income in taxes as middle-class families do,” the president said in an April 3 speech in Washington. A 30 percent tax rate “shouldn't be too much to ask,” said Seth Larson, a spokesman for Whitehouse. “Those who can afford it should pay a little more in taxes,” Larson said. “This has been a guiding principle of our tax code for generations, and the Paying a Fair Share Act would simply restore that balance.”
No one in Washington believes the Buffett Rule has any hope of passage this year. It's largely symbolic. The vote will mark a sharp contrast with Republican Paul Ryan's plan (enthusiastically endorsed by Mitt Romney) to cut the tax rate on the super rich from 35 percent to 25 percent -- rewarding millionaires with a tax cut of at least $150,000 a year. The vote will also serve to highlight that Romney himself paid less than 14 percent on a 2010 income of $21.7 million because so much of his income was in capital gains, taxed at 15 percent.
Hopefully in the weeks and months ahead the White House and the Democrats will emphasize three key realities:
Any serious person looking at these three realities would conclude that the rich should be paying far more. It's not just a matter of fairness; it's also a matter of patriotism.
The president has said it is unfair for millionaires to pay a lower tax rate than the middle class, and will defend his tax policy against accusations that it is a form of wealth distribution.
"When we guarantee basic security for the elderly or the sick or those who are actively looking for work, that doesn't make us weak," he said Tuesday. "What drags our entire economy down is when...the gap between those at the very very top and everybody else keeps growing wider and wider and wider and wider."
Many of the reasons are widely known: Rebounding from a financial crisis takes an excruciatingly long time; the huge decline in housing values has reduced Americans’ purchasing power; large corporations are making do with fewer employees — at least, in this country.
But what really sets the current recovery apart from all its predecessors is this: Almost three years after economic growth resumed, the real value of Americans’ paychecks is stubbornly still shrinking. According to Friday’s Bloomberg Economics Brief, “the pace of income gains is well below that of the past two jobless recoveries and real average hourly earnings continue to decline.”
The Bloomberg report cites one reason for this anomaly: Most of the jobs being created are in low-wage sectors. According to Bloomberg, fully 70 percent of all job gains in the past six months were concentrated in restaurants and hotels, health care and home health care, retail trade, and temporary employment agencies. These four sectors employ just 29 percent of the country’s workforce but account for the vast majority of the jobs being created.
Among the economy’s better-paying sectors, construction still has an unemployment rate of 17 percent. Given the persistence of mass foreclosures, the continuing decline of housing values and Republicans officeholders’ reluctance to allot public funds even for paving roads, construction isn’t coming back anytime soon. ...
Profits and dividends are up and wages are down — which is why, as University of California economist Emmanuel Saez has documented, all income growth in the United States in 2010 went to the wealthiest 10 percent of households, and 93 percent to the wealthiest 1 percent. Profits and dividends are up largely because wages are down, as JPMorgan Chase chief investment officer Michael Cembalest has documented. “U.S. labor compensation,” Cembalest wrote in a newsletter to the bank’s major investors last year, “is now at a 50-year low relative to both company sales and U.S. GDP.”
Why is this recovery different from all other recoveries? Because American workers have lost all their bargaining power. That’s a function of ongoing high unemployment levels, but not only that. The 1981-82 recession had even higher rates of joblessness, but wages didn’t continue to decline during the ensuing recovery. There have been two fundamental alterations in the U.S. economy since Ronald Reagan was president, however. First, American multinational corporations now locate much of their production abroad. Second, with the rate of private-sector unionization down to a microscopic 6.9 percent, workers have no power to bargain for higher pay. Employers can serenely blow them off — and judging by the data, that’s exactly what employers are doing.
But there are factors contributing to the high price of oil that we can do something about. Chief among them is the effect of “pure” speculators — investors who buy and sell oil futures but never take physical possession of actual barrels of oil. These middlemen add little value and lots of cost as they bid up the price of oil in pursuit of financial gain. They should be banned from the world’s commodity exchanges, which could drive down the price of oil by as much as 40 percent and the price of gasoline by as much as $1 a gallon.
Today, speculators dominate the trading of oil futures. According to Congressional testimony by the commodities specialist Michael W. Masters in 2009, the oil futures markets routinely trade more than one billion barrels of oil per day. Given that the entire world produces only around 85 million actual “wet” barrels a day, this means that more than 90 percent of trading involves speculators’ exchanging “paper” barrels with one another.
Because of speculation, today’s oil prices of about $100 a barrel have become disconnected from the costs of extraction, which average $11 a barrel worldwide. Pure speculators account for as much as 40 percent of that high price, according to testimony that Rex Tillerson, the chief executive of ExxonMobil, gave to Congress last year. That estimate is bolstered by a recent report from the Federal Reserve Bank of St. Louis.
In a story headlined, “For Big Companies, Life Is Good,” The Wall Street Journal reports that big American companies have emerged from the deepest recession since World War II more profitable than ever: flush with cash, less burdened by debt, and with a greater share of the country’s income. But, the paper notes, “Many of the 1.1 million jobs the big companies added since 2007 were outside the U.S. So, too, was much of the $1.2 trillion added to corporate treasuries.” ...
Corporate taxes today are at a 40-year-low -- even as the executive suites at big corporations have become throne rooms where the crown jewels wind up in the personal vault of the CEO.
Then look at this report in The New York Times: Last year, among the 100 best-paid CEOs, the median income was more than 14 million, compared with the average annual American salary of $45,230. Combined, this happy hundred executives pulled down more than two billion dollars.
What’s more, according to the Times “… these CEO’s might seem like pikers. Top hedge fund managers collectively earned $14.4 billion last year.” No wonder some of them are fighting to kill a provision in the recent Dodd-Frank reform law that would require disclosing the ratio of CEO pay to the median pay of their employees. One never wishes to upset the help, you know. It can lead to unrest. ...
So what do these big moneyed nabobs have to complain about? Why are they whining about reform? And why are they funneling cash to super PACs aimed at bringing down Barack Obama, who many of them supported four years ago?
Because, writes Alec MacGillis in The New Republic -- the President wants to raise their taxes. That’s right -- while ordinary Americans are taxed at a top rate of 35% on their income, Congress allows hedge fund and private equity tycoons to pay only pay 15% of their compensation. The President wants them to pay more; still at a rate below what you might pay, and for that he’s being accused of – hold onto your combat helmets -- “class warfare.” One Wall Street Midas, once an Obama fan, now his foe, told MacGillis that by making the rich a primary target, Obama is “[expletive deleted] on people who are successful.”
And can you believe this? Two years ago, when President Obama first tried to close that gaping loophole in our tax code, Stephen Schwarzman, who runs the Blackstone Group, the world’s largest private equity fund, compared the President’s action to Hitler’s invasion of Poland.
That’s the same Stephen Schwarzman whose agents in 2006 launched a predatory raid on a travel company in Colorado. His fund bought it, laid off 841 employees, and recouped its entire investment in just seven months – one of the quickest returns on capital ever for such a deal.
I’m going to pay double Romney’s rate on a mere fraction of his income. But you won’t get any class-war envy from me about a man worth upward of $250 million paying the same rate as someone earning, say, $55,000 a year. Nope. There’s a larger point here than the inequality one, compelling though it is.
Remember: The tax return is a blueprint for how to earn and spend money. It encourages us to do some things and discourages us from doing others.
One disincentive, comparing Romney’s taxes to mine: don’t work. The tax code discourages work, certainly for the rich. And Romney’s plan for the future would further discourage work for poor households with children or those paying for their kids to go to college.
Take a look at Line 7 of the 1040, the one where you report wages, salaries and tips — work. It’s from your W2. Romney, of course, had no wages, salaries or tips, which can be taxed at up to 35 percent. His biggest disclosure is Line 13, capital gain — paper profits — where he weighs in with $12,573,249 from 2010. On that, he pays a mere 15 percent. ...
Better to do no work and pay taxes at a far lower rate on capital gains or a category Romney shares with certain hedge fund managers: compensation from his Bain Capital days also taxed at 15 percent called carried interest. ...
Another disincentive, as mentioned: don’t send your kids to college. Currently, I can apply for the American Opportunity Tax Credit, which gives families paying tuition a cut of up to $2,500 on taxes owed — a meaningful break.
Romney knows something about college. He has two degrees from Harvard. Three of his five sons — Tagg, Matt and Josh — have M.B.A.’s from Harvard, giving the family a coxed scull of Crimson-red advanced degrees. It’ll cost you about $84,000 a year to attend Harvard Business School, with tuition, housing and related expenses.
But don’t try getting a tax credit for that under a President Romney: his plan calls for eliminating this college incentive, along with doing away with an expanded credit for working families with children at home. ...
I’m not fluent enough in Internal Revenue Service argot to understand why I probably should have stashed some money overseas. But with a Swiss bank account and holdings in Bermuda and the Cayman Islands, Romney by example demonstrated another kind of incentive — invest in foreign countries while paying the absolute minimum in taxes to your own nation.
“I pay all the taxes that are legally required and not a dollar more,” Romney said earlier this year. ...
So, taking my cue from the social engineers who’ve manipulated the code, I’m looking to follow Romney’s example next year: work less, stash money overseas, certainly don’t pay for junior year in college. And, of course, complain about my burden.
The president paid $162,074 in taxes with an effective federal income tax rate of 20.5 percent, according to the returns. ...
The Obama return showed that the president and his wife Michelle contributed $172,130 – about 22 percent of their income -- to 39 different charities. By far their biggest contribution -- $117,130 – went to the Fisher House Foundation, a Maryland-based foundation that provides free housing and help to wounded members of the military with at least one Fisher House at every major military medical center. The Obamas also reported $5,000 contributions to the Boys and Girls Club of Greater Washington, Habitat for Humanity and Sidwell Friends School.
If Republican front-runner Mitt Romney reaches the White House, he will push for the top 1 percent of American earners to save an average of $150,000 in taxes, according to an analysis of his tax plan by the Tax Policy Center. In a second Obama administration, these Americans would pay about $83,000 more than they do now.
For the top 0.1 percent, the difference is even more stark. Romney’s plan would save them an average of $725,000. President Obama would raise their taxes by $450,000. ...
In Massachusetts, Romney did little to reverse the trend of income inequality that was happening in his state. And his work at Bain Capital embodied a pure distillation of American capitalism in which higher returns for investors, not worker pay, were the highest priority. If elected, Romney has pledged to curb deductions and other tax benefits for high-income households, but he has not been specific. ...
“I think it’s fine to talk about those things in quiet rooms and discussions about tax policy and the like,” Romney said in January on “The Today Show.” “But the president has made it part of his campaign rally. It’s a very envy-oriented, attack-oriented approach, and I think it will fail.” ...
Average weekly wages for workers rose slightly more than they did nationally while Romney was in charge. In Massachusetts, wages went up 4.1 percent from 2002 to 2006, adjusting for inflation. Nationally, they rose 3.2 percent.
But those gains were not spread evenly. Those who worked in investment banking and securities trading saw their average weekly wages rise 60 percent, from $2,707 in 2002 to $4,852 in 2006, according to census data adjusted for inflation.
Meanwhile, weekly wages for employees in retail dropped 3 percent. Manufacturing workers saw a rise of 5.5 percent.
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