Wall Street Journal CareerJournal: The Wall Street Journal maintains an archive of articles pertaining to retirement issues at http://www.careerjournal.com/myc/benefits/retirement/index.html. Included in this archive are several articles by Ellen Schultz, who has been instrumental in bringing pension and retiree issues to light.

December 2001:

• Fortune: Warren Buffett on the Stock Market. In this article, Mr. Buffett compares the pension fund future return assumptions used by IBM, GE, GM, and Exxon in 1982 to those used in 2000. In 1982 when returns on long term government bonds was 10.4%, IBM assumed a conservative 5.5% return on its pension funds. In 2000 when long term bonds yielded only 5.5%, IBM assumed a 10% return. Excerpts: "I'm a sporting type, and I would love to make a large bet with the chief financial officer of any one of those four companies, or with their actuaries or auditors, that over the next 15 years they will not average the rates they've postulated." ... "Heroic assumptions do wonders, however, for the bottom line. By embracing those expectation rates shown in the far right column, these companies report much higher earnings--much higher--than if they were using lower rates. And that's certainly not lost on the people who set the rates. The actuaries who have roles in this game know nothing special about future investment returns. What they do know, however, is that their clients desire rates that are high. And a happy client is a continuing client." If link is broken, view Adobe Acrobat version [PDF--217 KB].
  
  
• Morningstar.com: Tearing Through Padded Profits. Excerpt: "In fact, IBM has padded its earnings by more than $400 million, or $0.50 a share, in each of the past two years thanks to its overfunded pension plan. General Electric added $1 billion to its profits last year, or $0.30 a share. Because such additions can compose a goodly chunk of a company's annual profit, they can help plump up a company's growth rate. GE increased its pretax income by $2.3 billion in 1998; of that, almost $700 million came from an increase in pension income. Hardly pocket change."
  
  
• Morningstar.com: The Easiest Way in the World to Make Money. Excerpts: "If you're an investor, the easiest way in the world to make money is by reading Warren Buffett. But if you're a company, the easiest way to make money is to simply assume that your pension plan will have high returns in the future." ... "IBM, for example, reduced its costs by about $1.2 billion in 2000 just because its pension plan was overfunded, and a billion dollars isn't chump change even for a firm as gargantuan as Big Blue. IBM's pretax income last year was about $11.5 billion, so the pension plan contributed meaningfully to the company's 2000 results. The real kicker is that about $200 million of the gain is attributable simply to IBM's decision to raise its expected future return on plan assets from 9.5% to 10%. That's it--an extra $200 million in profits simply by assuming that pension assets will appreciate at 10% per year in the future."

November 2001:

• Plan Sponsor (cover article): Mad as Hell. Excerpt: "Janet Krueger still spends part of every day thinking about how she can put right what she feels IBM set wrong back in 1999. That is the year the company converted its defined benefit plan to a cash balance formula. Krueger was part of a crusade that accomplished what many would have viewed as an impossibility; she helped lead a movement that convinced Big Blue to alter its pension strategy, broadening by 35,000 the number of individuals it would allow to opt out of the cash balance plan and stick with the old-style annuity plan. Ultimately, the traditional plan was offered to anyone who was older than 40 years of age and had more than 10 years of service at the time the plan was switched. However, three years after quitting a 23-year career as an IBM software consultant, Krueger is not satisfied."
  
  
• Motley Fool: More Earnings Shenanigans. Excerpts: "Earnings manipulations have reached crisis proportions, says Whitney Tilson, who in this article explains two of the leading tricks of the trade: big bath accounting and the manipulation of earnings using gains in the value of pension funds. Investors should pore over their companies' SEC filings to arm themselves against potentially misleading information." ... "According to Bear Sterns, 'aggregate 2000 operating income for the S&P 500 is approximately 3% lower when adjusted for retirement benefit income.' But the impact on earnings is much larger for some companies. IBM (NYSE: IBM), for example, would have had operating income in 2000 that was nearly $2 billion (or 17%) lower than it reported had there been an adjustment for service cost (the present value of the retirement benefits earned by the employees working during the current year) and income from its pension fund and other retirement benefits."

October 2001:

• Business Horizons. The Effects of Adopting Cash-Balance Pension Plans. Excellent article. Excerpt: "The negative effect on older workers has led to a number of recent legal actions questioning whether these plan conversions are discriminatory. In addition to Congress, four federal agencies--the IRS, the EEOC, the Labor Department, and the GAO--are now investigating the question of age discrimination in converting to the cash-balance plans. Tax deductions may be disallowed if plans are found to discriminate." Note that the 1999 IBM conversion is used as the main case study in the article! If link is broken, view Adobe Acrobat version [PDF--52 KB].
  

August 2001:

• Morningstar: Optimists Make More Money. Excerpts: "By simply assuming a higher future rate of return on their pension assets, companies can reduce their pension costs, since they don't need to contribute as much to the pension fund. Just as in the example above, this simple change in the expected rate of return implicitly plumps up the company's bottom line by reducing the amount of money it has to set aside to pay future retirees." ...
  
  "IBM, for example, reduced its costs by about $1.2 billion in 2000 just because its pension plan was overfunded, and a billion dollars isn't chump change even for a firm as gargantuan as Big Blue. IBM's pretax income last year was about $11.5 billion, so the pension plan contributed meaningfully to the company's 2000 results. The real kicker is that about $200 million of the gain is attributable simply to IBM's decision to raise its expected future return on plan assets from 9.5% to 10%. That's it--an extra $200 million in profits simply by assuming that pension assets will appreciate at 10% per year in the future."
  
  "So what if these rosy predictions don’t come true? Well, if the returns on pension assets turn out to be appreciably worse than the approximately 9% that the average large company is expecting, all that juicy pension income will go away, and companies will have to start paying into their pension plans as well. Moreover, the absurdity of these high expected returns will become increasingly apparent, and when companies revise them downward, the funding status of their pension plans will look even worse."

  "The bottom line is that if you own shares of a company with a traditional pension plan, make sure you check to see how much of its profits are coming from pension assets rather than its core operations--not to mention the profits that flow simply by virtue of unfettered, unrealistic optimism." If link is broken, view Adobe Acrobat version [PDF—71 KB].

July 2001:

• Barron's: Red Handed? Analysts worry that pension gains smack of cookie-jar accounting. Excerpts: "Indeed, pension accounting is beginning to raise a lot of eyebrows on Wall Street. For example, a June report from Credit Suisse First Boston entitled "A Pension Accounting Primer" noted that pension income contributed about 12% to the pretax profits of the 30% of companies in the S&P 500 that report pension income." ... "Jack Ciesielski, publisher of the Analyst's Accounting Observer, notes that 'the easiest and most direct way for a company to boost the current year's reported earnings is to raise the expected rate of return on pension assets.' If you do that, during the year, 'it will go right to the operating line,' he says."
  
  "While overfunded pension plans can make a company's earnings look good, it is very difficult for a company to actually tap into the funds and use them for operations without paying big tax penalties. 'When you see pension income, it doesn't hold the promise of having the cash go back to the company and the shareholders,' Ciesielski says. 'But if companies can't tap pension funds for general corporate purposes, executives whose compensation is tied to earnings performance can benefit from overfunded plans' contribution to the bottom line.'" If link is broken, view Adobe Acrobat version [PDF--55 KB].
  
  
• MotleyFool.com: Fool on the Hill: Know Your Earnings. Excerpts: "Still, the list of companies that have benefited from pension income contains some of our most respected and well-established businesses. The world's largest computer company, IBM, realized an $820 million gain to its after-tax bottom-line because of pension gains in 2000, according a Forbes article (free membership required) earlier this year. That 63% improvement in pension profits in part was accomplished because the company increased the expected return on its pension fund from 9.5% to 10%."
  
  "Investors care about earnings because that's what should ultimately benefit them, either in the form of stock buybacks, dividends, or additional investment in a company's business. Earnings that stem from pension assets, however, won't ever benefit investors because the Employee Retirement Income Security Act prohibits companies from using pension assets for any purpose other than benefiting plan participants. Thus, while excess pension income might make its way to the income statement, you won't see any of it."

  "In addition to the pension fund participants, some of the biggest benefactors of pension income can be company executives." If link is broken, view Adobe Acrobat version [PDF--56 KB].

  • Linda Guyer reminds us that when Jimmy Leas said this same thing to Lou Gerstner at the IBM annual meeting, Mr. Gerstner accused him of being either naive or malicious to say such things.

June 2001:

• Wall Street Journal: Gains in Pension Plans Give Boost To Many Firms' Quarterly Results. Excerpts: "Despite the stock market's dreadful performance last year, the nation's largest companies continued to receive large earnings boosts from gains in their pension plans, according to a study released this week." ... "Moreover, Mr. Ciesielski notes, pension assets belong to pensioners, not stockholders, even though the earnings streams produced by these assets show up in companies' income statements. The pension gains, Mr. Ciesielski says, often 'make management look like sluggers, when actually they're just regular hitters.'" If link is broken, view Adobe Acrobat version [PDF-64 KB].
  
  
• Wall Street Journal: While Executives See Their Pensions Grow, Regular Workers See Their Benefits Shrink. Excerpts: "It's also part of a little-known sideshow to the spectacle of surging executive compensation in recent years. Word of CEOs rewarded with millions of dollars for enhancing profits through layoffs has often provoked public indignation. But the ever-widening gap in retirement income between regular workers and executives has gone largely unnoticed by regulators, policy makers and investors. That's true even though in the past decade, many big companies have been setting up or improving special retirement packages for their highest-paid employees while freezing or trimming pension, medical and other retirement benefits for millions of lower- and middle-income workers."
  
  "International Business Machines Corp. discloses that it has an executive pension plan and reports the plan's liability separately -- but not the liability for a second, less-elite IBM executive pension plan. A spokeswoman confirms this. In January 1995, IBM moved the bulk of its work force into a 'pension-equity' plan, saving the company hundreds of millions of dollars by reducing benefits, even as it set up its special pension plan for executives. A spokeswoman says IBM found that its plan for the regular work force was 'overly generous' compared to other companies' plans. She says IBM also sweetened contributions to its 401(k) plan after deciding that that program was less competitive." If link is broken, view Adobe Acrobat version [PDF-107 KB].
  
  
• Dow Jones News Service: Pension Returns Loom Large In Many Companys' Earnings: Study Excerpt: As Wall Street's scrutiny of pension plan income intensifies, a new study shows that nearly a third of big U.S. companies are getting part of their earnings from the plans - sometimes a significant part. The report, issued last week by Credit Suisse First Boston Corp. accounting analyst Jane Adams, also hints that companies can use pension accounting to manage their earnings by changing assumptions to boost the amount of pension income that can be factored into operating income. Thirty-four companies, the analyst said, including giants such as International Business Machines Corp. (IBM) and Verizon Communications (VZ), raised their expected return rates and thus benefitted their earnings without apparent justification based on past performance.
  • "wantedtoretire" comments
    

May 2001:

• Forbes: Recurring Gains? Excerpts: "It's curious how, in the face of slumping computer sales, International Business Machines isn't feeling the heat." "For the first quarter of 2001 IBM netted $1.75 billion, or 98 cents a share, up 15% from the first quarter of 2000, on revenues that were up only 9% to $21 billion. But investors should be wary of this happy earnings picture, says Bradley Rexroad, an analyst at the Center for Financial Research & Analysis, a Rockville, Md. research boutique. A fair amount of the earnings gains in 2000 had nothing to do with the strength in IBM's business operations." "The biggest item on Rexroad's list of artificial gains is the accounting for retirement benefits. IBM has been getting a nice kick to reported earnings from the robust state of its pension plans. Pension-related effects boosted the aftertax bottom line by $820 million last year, a 63% improvement in this source of profits from the year before, Rexroad says." "This shot in the arm comes in several forms. IBM has been shifting from traditional defined benefits for retirees to "cash balance" plans, which should cost less; the strength of the stock market (until 13 months ago) and the bond market has lowered the amount of additional cash IBM had to pour into the pension fund; and the company last year changed its assumption on the fund's future average returns from a somewhat optimistic 9.5% to a more Pollyannaish 10%." If link is broken, view Adobe Acrobat version [PDF--64 KB].
  • Janet Krueger sends a letter to the editor of Forbes to point out a small error in their analysis of IBM's numbers.
    
    
• Business Week: The Numbers Game. Companies use every trick to pump earnings and fool investors. The latest abuse: "Pro forma" reporting. Excerpts: Sure, companies have always tried to present themselves in the best possible light. But some of today's practices, though perfectly legal, sail close to the wind: They seem designed to mislead unwary investors about the real financial state of companies that use them. Fading dot-coms, new tech giants, and venerable blue chips all hype their earnings. Cisco Systems Inc. subtracts payroll taxes on employee stock options in its earnings-per-share numbers. IBM lifts its earnings by assuming it would pay less into its pension fund, and Motorola Inc. boosts sales by lending huge sums to customers." ... "Company pension plans can become a fruitful source of extra earnings. Companies can't generally take money out of their pension funds, but by juggling several factors, including the actuarial present value of benefits, interest rates, and expected returns on assets, they can reduce or even eliminate what they have to pay into their plans in any given year, according to Gabrielle Napolitano, accounting maven at Goldman, Sachs & Co. For example, IBM picked up $195 million--1.7% of pretax income--in 2000, when it raised the expected rate of investment return from 9.5% to 10%..." If link is broken, view Adobe Acrobat version [PDF--64 KB].
  
  
• Motley Fool: Fool on the Hill: Where Has Corporate Integrity Gone? Excerpts: "A smoothly functioning investment system depends on integrity: of financial statements, of corporate leaders, of lawyers, bankers, and the media. Recently, I've become increasingly distressed by the appalling breakdown of integrity in this system." ... "At the Wesco annual meeting, Charlie Munger railed against the way corporations use inflated return assumptions for their pension funds to boost current reported earnings. He specifically named IBM, which he said recently increased its pension fund's assumed rate of return from an already high 9% to 10% annually. If IBM and other companies were forced to lower this number to 6%, they would have to take huge charges to earnings. IBM has used many tricks like this to keep earnings per share steadily rising over the past few years despite anemic revenue growth, one of the reasons I named the company in my column, 'Stocks to Avoid.' (I discussed it further in a subsequent column.) No wonder a friend of mine who manages a hedge fund -- and who has shorted the stock in the past -- called IBM 'the world's biggest accounting cheater.' That's a bit of hyperbole, perhaps, but not much in my opinion." If link is broken, view Adobe Acrobat version [PDF--57 KB].

April 2001:

• Barron's: Deconstructing the Books at Big Blue [PDF--50 KB]. Excerpt: "Relatively speaking, IBM is starting to look like a pillar of strength. Big Blue has yet to lower its earnings expectations and has been racking up consistent earnings. But don't let the happy news and quarterly performance streak fool you, warns James Grant, founder of Grant's Interest Rate Observer. In tumultuous times like these, people want to believe that the mother of all tech companies is a safe haven. But the reality is that the health of IBM's core hardware and software businesses is difficult to detect because the company continues to play the Street like a fiddle by fiddling with its income statements. 'IBM is rightly known for the brilliance of its electronic engineering, and no less impressive is its brilliance in financial engineering,' Grant told Barron's."
  
  
• Boston Globe: The Pension Game. Excerpt: One of the biggest changes wrought by the great bull market of the 1980s was that corporations learned to think of pension funds as assets to be managed at least partly for the benefit of shareholders rather than as trusts operated strictly for the benefit of employees. ...With the boom of the 1990s, companies once again have been learning to use the huge surpluses that have built up in their pension funds, this time mainly for their own accounts. The new cash-balance plans have proved to be a cornucopia of benefits - for corporations. If link is broken, view Acrobat version [PDF--49 KB].
  
  
• Savannah Morning News: Chief addresses IBM's future. Company puts on a new face while sing the blues. Excerpts: "But the happiness of his message to shareholders did not carry through to the shareholder question time. Gerstner was dodging and parrying more than blocking and tackling. Talk of a failed employee bid to reinstall IBM's old pension plan dominated this part of the meeting. Gerstner made an impassioned reply to the suggestion that part of IBM's success, and Gerstner's executive compensation, were brought on by vapor profits - ones that exist on paper only due to accounting rules, not business success. 'There is something either very naive or very malicious in this comment,' Gerstner said. 'If we wanted to manipulate compensation at the price of employees, we could reduce salaries. We could cut variable pay. When pension-related comments were made during the meeting, Gerstner's image, projected on two huge screens, was replaced with a generic blue field with white lettering saying, 'IBM stockholders meeting.'" If link is broken, view Acrobat version [PDF--161 KB].

March 2001:

• The Progressive Magazine: Cut Loose. Companies Trick Retirees out of Health Benefits. Extract: "'Lou Gerstner has only been at IBM for seven years,' says Conrad. 'He's affecting the lives of retirees who put thirty, forty years in. They're the ones who built the company and created the wealth that Lou Gerstner is now pillaging. When you have people who are ill, on fixed income, the increased costs are going to create serious problems. That's unconscionable. How can you do this to people? IBM has their own personal piggy bank right now. And it's not their money. It's the employees' and the retirees' money.'" If link is broken, view Acrobat version [PDF--64 KB].

February 2001:

• Wall Street Journal: Securities Regulators Back IBM In Shareholder Pension Dispute. Excerpt: "This year a group of retirees and employees sponsored a resolution that would have required that 'Future executive incentive compensation be determined by profit from real company operations not including accounting rule profit from pension fund surplus.' As at many other companies, IBM's pension-fund surplus, fueled by the rising stock market, has boosted reported profits."
  • Janet Krueger comments. Excerpt: "Why did they fight so hard to get the resolution omitted from a vote? Their action to keep pension fund profit as a factor in executive incentive compensation--and the $23 million the top five executives took out for themselves in 1999, based in part on that accounting rule profit--belies their disclaimer."
  
  
• Binghamton (NY) Press and Sun-Bulletin: U.S. Representative Hinchey still fighting for pension-reform legislation. Extract: "In vigorously fighting a change in their pension distribution formula, IBM Corp. workers may have unknowingly helped save the pension benefits of thousands of other workers across the country." If link is broken, view PDF version [PDF-132 KB].
  
  
• Poughkeepsie Journal: Feds deny pension profit plan vote. Execs allegedly gain from benefit cuts. Excerpts: "A group of IBM Corp. employee shareholders says executives collect millions in extra pay because of a pension fund surplus management fattened by cutting benefits." ... "The attempt sheds light on the issue of how executives may realize personal financial benefits from trimming pension benefits for employees. Hundreds of companies have shifted to cash-balance pensions as IBM did in mid-1999, and some employees say the changes shrank the value of their retirement assets." If link is broken, view Acrobat version [PDF-94 KB]. 

January 2001:

• NBC Nightly News: Corporations change rules on retirees. Excerpt: "Many retirees have worked all their lives, thinking their companies were going to pay for their health care when they left. But many companies are now changing the rules." Both the original video and an abbreviated transcript are available at the MSNBC site. If link is broken, view PDF version [122 KB]. Note: Ed and Dorothy Hughes, featured in the report, still have much better coverage at their age than future IBM retirees will have with the new Personal Health Account. An IBM retiree comments.

December 2000:

• Wall Street Journal: Companies quietly use mergers, spinoffs to cut worker benefits. Companies still scrounge for ways to reduce pension benefits. By Ellen E. Schultz. Extract: "The reason for this is that under the tutelage of outside lawyers and consultants, companies have come to view pension surpluses as assets that, in effect, can be bought and sold at the time of a merger, sale or acquisition. Companies’ ability to cash in their surpluses — a maneuver that Congress sought to deter in the past — provides a powerful incentive to pump up surplus levels by slashing benefits." (If link doesn't work, view PDF version [256KB]).
  
  
• New York Times: Cuts in Health Benefits Squeeze Retirees' Nest Eggs. (PDF, 24 KB) Extract: "Because of the economy and the labor market, you can't squeeze worker health benefits," said Deborah Steelman, a Washington lawyer who represents insurance companies and drug makers, and a member of a bipartisan commission on Medicare reform. "It's logical for employers to say, 'These people don't work for me any more.' It's a place to cut."

  November 2000:

• Yahoo! News: IBM Execs Face Tough Crowd at Fall Analyst Meeting. "IBM has its work cut out to convince investors and analysts weary of several quarters of explanations for sales shortfalls, which Bear Stearns analyst Andy Neff called, 'the dog ate my homework' problem. 'Investors are frustrated by IBM's ability to come up with new excuses every quarter on why it missed the numbers,' he wrote in a note to clients. `We don't want excuses. We want results.'"
  
  

• ABCnews.com: Argentine Judge Investigates Alleged Kickback Scheme. 4 Arrest Warrants in IBM Case. An Argentine federal judge signed arrest warrants today for four current and former IBM officials sought for questioning in an alleged kickback scheme, the judge's aide said.

• Forbes: Baby Blues. "Besides, dividing IBM, would prevent Gerstner from being able to continue to employ the financial alchemy that he has used to create the appearance of growth at IBM. In the past five years he has boosted earnings per share by 24%, in part by spending $37 billion to buy back IBM stock. The results have also benefited from lower tax rates and windfalls from IBM's pension fund." (Emphasis added by editor of this site).
  
  
• South Africa Business Report: Strip away pensions' veneer to find ugly face of capitalism. "Martins who worked for IBM, the IT company, for 26 years until he retired in 1986, died in July in miserable circumstances. His electricity and phone had been cut off because he was unable to pay the bills. At the time of his death Martins and other IBM pensioners were battling to get nothing more than they were entitled to from the IBM South Africa pension fund. After years of pension increases lagging inflation, in 1995 they had been promised that they would be given increases sufficient to catch up with inflation."

  October 2000:

•  Wall Street Journal: Retiree-Medical Plans Are Transformed Into Source of Profits by Sears, Others. "Sears Roebuck & Co. has figured out how to turn its medical-benefits program for retirees into a source of corporate income." "The seeds of the retiree-health windfall for many companies were planted in the late 1980s, when the Financial Accounting Standards Board, the accounting industry's rule-making body, began to develop standards for reporting retiree-health obligations. Major companies, such as General Electric Co. and International Business Machines Corp., played an active role in the process, suggesting ideas to the accounting board. Companies showed the board computer simulations of how various proposals would affect corporate bottom lines."

• The London (England) Times: IBM to face inquiry over pension fund. "IBM could face a multimillion-pound bill to top up one of its pension funds if the Pensions Ombudsman upholds complaints that the multinational has acted wrongly in cross-subsidising contributions to its schemes."
  
  
• Washington Post: Pension Trend Painful to Some. "Fueled by recent General Accounting Office reports and the ongoing complaints of a number of IBM workers, the debate over cash-balance pension plans shows no sign of abating."
  
  
• CFO Magazine: FEATHERING THE NEST EGG. Pension surpluses are a boon to corporate bottom lines. But are efforts to expand them going too far? Excerpts: "Last year, for example, when IBM converted to such a plan, one of the company's engineers calculated that he would lose $212,000 when he retired in 10 years after 30 years of service. "The purpose of IBM's cash-balance plan conversion was to slash obligations to employees, increase the pension plan surplus, increase the company's operating income, and drive up its stock prices," says James Marc Leas, an advisory engineer and patent lawyer at IBM's Burlington, Vermont, semiconductor fabrication plant." "...largely in response to the protests of employees at IBM and other companies, a Senate panel, the Internal Revenue Service, the Equal Employment Opportunity Commission, the Department of Labor, and the Pension Benefit Guaranty Corp. are all in the process of reviewing cash-balance plan conversions to determine if, among other things, they violate U.S. age-discrimination laws."

  September 2000:

• Wall Street Journal: Retirement-Savings Bill Draws Fire for Proposals. (Requires Adobe Acrobat Reader). (Editor: excellent article, don't miss!) "Some unions, including the Communication Workers of America and the AFL-CIO, are objecting to certain cash-balance pension measures that appeared in the Senate version several weeks ago. Those provisions would help employers fight legal challenges to their cash-balance plans and continue the practice of "wearing away" the early-retirement subsidies of older workers, a practice to which the Treasury objects."
  
  
• Washington Times: Pension Protection Astray? "Although the Senate version of the proposed legislation includes some potentially helpful provisions, the vast majority of the benefits go almost entirely to upper-income taxpayers, a relatively small group that is already well prepared for retirement."
  
  
• San Francisco Bay-Guardian Editorial by Ralph Nader: Pension Takeaway: Stop Corporate Schemes To Undermine Pension Benefits. "At a time when CEOs are paying themselves exorbitant salaries, stock options, and benefit packages, corporations are slashing the pension benefits of workers who have helped build their companies. The most heinous of the pension takeaway schemes include switching to cash balance plans (which deprive workers of expected benefit increases from their final years of company employment), changing pension formulas with obscure "modifications" that are really cuts, and "wearaway," which can force employees to work many additional years to increase pension benefits beyond previously established levels..."
  
  
• Wall Street Journal: Fidelity Urges Its Investors To Lobby Retirement Plan. "Fidelity Investments is waging an unusual Internet campaign to turn its 16 million customers into amateur Washington lobbyists for a retirement-savings package pending in Congress. But there's something Fidelity isn't telling its customers: Some of them could actually be hurt by obscure provisions recently added to the Senate version of the package." "If adopted by Congress, the retirement-savings package could be a windfall for the mutual-fund industry, which earns lucrative fees for managing 401(k) plans and IRAs. Of $1.7 trillion in U.S. 401(k) assets, 45% were invested in mutual funds at the end of 1999, according to the Investment Company Institute, the mutual-fund trade organization. Almost half of the $2.5 trillion in IRA assets is socked away in mutual funds. And Boston-based Fidelity, with about $1 trillion in assets under management, is the number one player in the mutual-fund and 401(k) markets."
  
  
• CNN Financial Network: CEO salary gap widens. Executive pay surged 535% in 1990s, while average worker pay rose 32%.

  July 2000:

• New York Post: The Reality of Big Blue's Numbers. "Sometimes a company's profits aren't all they are cracked up to be..."

  June 2000:

• Fortune Magazine: Hocus-Pocus: How IBM Grew 27% a Year. Do you want to believe in the IBM miracle? Then don't look too closely at the numbers
  
  
• Wall Street Journal article comparing how two companies converted to cash-balance pensions. One company did it right, the other company (guess who!) is repeatedly used as an example of a company that did it wrong.
  Excerpt: "Legislation introduced by Rep. Bernie Sanders, a Vermont independent, would require employers who are converting to a cash-balance or pension-equity plan to offer employees a choice of staying in the old plan." "Employers generally complain that such choice is too costly. Mr. Sanders finds this amusing in some cases. 'If converting to a new pension program doesn't save a company any money, as some companies say, it should not be too expensive for companies to offer all of their employees the choice to remain in their original pension plan,' he says."
  
  
• New York Times: What's Hiding in Big Blue's Small Print Excerpts: "...the combination of a roaring stock market and lower costs associated with IBM's controversial switch to a new sort of pension plan generated $799 million in 1999. Accounting rules let such gains go into a company's income statement, although the company cannot spend the money for anything but pensions...

  "Because these gains are typically buried in financial statements, shareholders may not understand how a company's earnings are augmented by pension gains...To be sure, IBM is just one of many companies that continues to bury details about its pension plans' gains. But Big Blue could be clearer. ...'IBM's annual report is one of the most complicated,' said Brad Perry, former chairman and now consultant at David L. Babson & Company, an investment advisory firm in Cambridge, Mass. 'Obfuscation is the name of the game, not just for IBM but for a lot of companies.'

  "Another area of IBM's financial report that is difficult to fathom concerns stock buybacks, which have totaled $14.2 billion in the past two years. By reducing the number of shares outstanding, the buybacks have helped IBM's per-share earnings grow at a respectable 10.5 percent -- masking the company's slow growth in revenue and income...

  "But the purchases come at a cost, Brad Perry added: IBM's ratio of debt to total capital is 54 percent, up from 31 percent four years ago. 'It's one thing to buy back shares if you have excess cash flow,' Mr. Perry said, 'but when you're loading up the balance sheet with debt to jazz up your earnings, that's more suspect. And it certainly is a game that has an end.'"

  May 2000:

• Wall Street Journal: IBM Holders Defeat Pension Resolution; Employee-Led Issue Gets 28.4% of Vote