Information from the IBM Retiree group that may be of interest to all individuals concerned about retirement, pensions, etc.
Following are news and links of interest to IBM employees, retirees, ex-employees, and persons interested in pension, retirement, off-shoring, and corporate governance issues.
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New York Times: New Tug of War Over Excess Pension Cash. By Mary Williams Walsh. Excerpts: These are lean times for pension funds, and few companies report having more pension money than they need. But some business advocates have nevertheless begun urging Congress to let companies tap any surplus that appears in their pension funds, if and when the good times return. "We think there needs to be access to the surplus," said Steven Kerstein, managing director of the global retirement practice for Towers Perrin, a large consulting firm. [...] The question of who actually owns the excess money in a pension fund has fueled big battles over the years. Workers usually assume that any pension surplus must be theirs, because the money that employers put into the pension funds is their deferred compensation. But companies tend to think that any surplus is theirs - that they are entitled to the investment returns because they, not the workers, bear the investment risk in a defined-benefit pension plan.
Janet Krueger: Below is a letter from the Pension Rights Center in Washington, DC, in response to today's "New Tug of War Over Excess Pension Cash" article in the New York Times. Excerpt: We knew pension issues were heating up -- but the New York Times article really took us by surprise. As you may know, the Administration's pension funding proposals would allow companies to put more money into their defined benefit plans in good times. Now it turns out, companies are gearing up to ask Congress to let them take any so-called "surplus" assets out of their plans without paying the penalty taxes that were imposed in 1990.
Many of you on this listserv were part of the 1980s fight to curb "pension raiding". Put simply, companies were siphoning billions of dollars out of their pension funds for corporate purposes. This practice fueled takeovers and leveraged buyouts, effectively ended all hope of cost of living adjustments for retirees, and, as the article points out, resulted in some plans becoming underfunded. Although no legislative proposals have put forward so far, they are likely to surface very soon.
CFO.com: IBM Eyes $8 Billion Repatriation. If it goes through with the plan, Big Blue could be the latest U.S.-based global company to benefit from a potentially whopping tax break provided under the American Jobs Creation Act. By Lisa Yoon. Excerpts: If it goes through with the plan, IBM would be the latest multinational to reap benefits of President Bush’s American Jobs Creation Act of 2004, which offers tax breaks to U.S.-based companies. For one year, multinationals can repatriate overseas earnings at 5.25 percent – a significant cut from the normal rate of up to 35 percent. [...] AP cited "private estimates" as suggesting that total repatriations will top $300 billion. Few companies have said how they would use the money once it starts to stream back into domestic operations. Though the purpose of the tax holiday is to enable multinationals to use the tax savings to create jobs back home, some experts are skeptical about how many jobs will actually be created., without specific language in the legislation earmarking the tax savings for jobs creation, the repatriated amounts may be used by firms (to pay down debt or buy back stock , according to a recent story in CFO. In other words, jobs might be created only as a side effect of strengthening companies’ financial health.
Jim Hightower: What's Behind the "Jobs Creation" Act? Excerpts: Just when you think you've bottomed out on the level of cynicism it's possible to have toward Washington's constant kowtowing to the monied interests – along comes the "American Jobs Creation Act." These days, whenever the White House and congress put a positive-sounding title on a piece of legislation, you can bet that the law itself does the exact opposite of what the title so gloriously proclaims. The American Jobs Creation Act, pushed by George W and enacted last fall, does not create a single job. Instead, it's a massive multibillion-dollar tax giveaway to global corporations. Through this law's "homeland investment" loophole, corporations operating abroad are allowed to have some $400 billion in foreign profits taxed at the bargain-basement rate of only 5.25 percent, rather than the normal rate of 35 percent.
To pass this gargantuan boondoggle for some of the richest corporations in the world, Bush and his congressional cohorts had to cloak it as an economic development program, promising that it would prompt a surge of new investments all across our land and create hundreds-of-thousands of new jobs for U.S. workers. They lied. Instead of building new factories or producing new products, thus creating new jobs, such corporations as Hewlett Packard, Proctor & Gamble, Pfizer, GE, and ExxonMobil are using the billions they get from this tax windfall to buy out their competitors, shore up their bottom lines, or simply finance their existing operations.
Poughkeepsie Journal: IBM paid $130 million after tax audit. Report: Pension fund loses value. By Craig Wolf. Excerpts: IBM Corp. paid an extra $130 million to the Internal Revenue Service after an audit on tax issues, the company disclosed in a recent filing. That is one nugget a dedicated investor can find by reading the fine print in the non-glossy version of the annual report. It's called a 10-K by the Securities and Exchange Commission. IBM filed its annual tome last week with the agency. The glossy, printed version comes out in mid-March, a staffer at the corporate office in Armonk said. The more formal and boring-looking report contains some nuggets...
CNET News: Big Blue to sales staff: Go far and small. By Martin LaMonica. Excerpt: IBM will dedicate 1,000 salespeople to its partners in an effort to boost international sales and sales to medium-size businesses. The company said the sales personnel will work directly with partners to generate leads and close deals through regional systems integrators and independent software vendors, which build applications targeted at small and midsize companies. IBM announced the staff changes at its PartnerWorld Conference here Monday.
This Is Money (United Kingdom): Labour hit by 'honours for software' row. By Jonathan Oliver. Excerpts: THE American boss of IBM was granted a knighthood by Tony Blair shortly after his computer company gave Labour high-tech software for 'next to nothing'. Louis Gerstner Jr received what is a rare award for a foreigner - and given access to Downing Street - following the deal for a system to keep party members 'on message'. The row is the latest controversy over honours for businessmen who have helped the Prime Minister, and Tory MPs last night demanded an explanation for the new revelations. IBM provided a network via its Lotus subsidiary to let Labour bosses give orders to grass-roots activists in time for the 2001 Election campaign. At the same time, the Government named Mr Gerstner as an honorary Knight of the British Empire 'for services to education and e-commerce'. [...]
Written by Labour's IT adviser Lord Mitchell, it said: 'I persuaded [Lotus] to do a lot of work for next to nothing - work which will come into its own in the Election.' Mr Blair met Mr Gerstner in private on December 2, 1999, while the system was being installed - a meeting only admitted by Downing Street last week in a Commons written answer. But officials are still refusing to disclose what what was discussed. The KBE is one of the highest honours given to foreigners. Its very few recipients include Bob Geldof. Conservative MP James Gray said: 'I am puzzled by the odd coincidence of an IBM subsidiary offering a low-cost system, and a private meeting between the boss of the company and the Prime Minister. Then the American businessman receives an honorary knighthood. It is certainly strange.' [...] Mr Gerstner, 62, has since left IBM and is now chairman of the Carlyle Group, a Washington-based venture capitalist which employs several former political leaders, including John Major. Mr Blair has been tipped to join when he quits as Prime Minister. Yesterday Mr Gerstner declined to comment, but IBM insisted it had never offered Labour any favours. 'This was a commercial transaction,' said a spokesman. 'IBM has a policy not to make political contributions.'
New York Times: How to Save Medicare? Die Sooner. By Daniel Altman. Excerpts: THOUGH Social Security's fiscal direction has taken center stage in Washington of late, Medicare's future financing problems are likely to be much worse. President Bush has asserted that the Medicare Modernization Act, which he signed in 2003, would solve some of those problems - "the logic is irrefutable," he said two months ago. Yet the Congressional Budget Office expects the law to create just $28 billion in savings during the decade after its passage, while its prescription drug benefit will add more than $400 billion in costs. So, how can Medicare's ballooning costs be contained? One idea is to let people die earlier.
ComputerWorld: IT skills bonus pay finally heading upward, study finds. Bonus pay for skilled IT workers dropped in the past three years. Excerpt: After three years of declines in the bonuses paid to specially trained IT workers, skilled employees are likely to see bonus pay rebound this year, according to a new study by Foote Partners LLC, a New Canaan, Conn.-based IT research consultancy. The Hot Technical Skills and Certifications Pay Index, compiled quarterly by Foote Partners, was released Sunday. According to the survey of 46,000 U.S. and Canadian IT workers, the bonus pay for certain IT skills spiked late in 2004.
Wall Street Journal: Retirees Face More Benefit Cuts As Health-Care Costs Rise, Some Big Employers Move To Cut Dependents' Coverage. By Jennifer Saranow. Excerpts: More companies are joining the wave of employers who are cutting health-care costs by reducing the benefits they offer to their workers' dependents. A growing number of big employers are excluding new dependents -- such as spouses and children -- from their retirees' health-care plans, while others are cutting coverage amounts for retirees' current dependents. These moves come after many employers already have raised premiums for the dependents of active employees and imposed surcharges to encourage spouses to seek coverage from their own employer. Others are dropping current employees' future retirement benefits. Employees of International Business Machines Corp. who retire on or after Jan. 1 won't be able to enroll new dependents in the company's health plan beyond the dependents covered on their retirement date. Similarly, Boeing Co. has told its nonunion employees who retire on or after Jan. 1 that they won't be able to seek medical coverage for new dependents after their retirement date.
John DeCastro estimates he paid about $60 a month for medical coverage for himself, his wife and now 20-year-old daughter when he retired from his job as a director of manufacturing and planning at Lucent four years ago. Now, the 56-year-old San Francisco resident pays about $600 a month. "It's a major hit on the retiree, and that's part of the reason I decided to go back to work," says Mr. DeCastro, now a salesman for a software company. [...] Lucent estimates its most recent change will affect 5,400 management retirees with about 7,400 dependents. The company currently provides retiree health-care benefits for about 48,000 management retirees and 71,000 formerly union retirees. Boeing estimates its changes will impact about half of its work force. A spokeswoman for IBM declined to comment on the impact of IBM's changes.
Macleans (Canada): The toxic workplace. A poisoned work environment can wreak havoc on a company's culture and its employees. By Katherine Macklem. Excerpts: When Steve Jones was just two years from retirement, he quit his job as vice-president of human resources at one of Canada's largest banks, walking away not only from a high salary but also from a fat pension. He'd spent his entire career in banking, and had no idea what to do next. A change of management two years earlier had replaced a people-friendly way of doing business with one more cutthroat and focused on the bottom line -- an approach diametrically opposed to what Jones believed in. The new leaders systematically dismantled programs he'd put in place. The level of pressure he experienced at work went through the roof. [...]
"There's a lust for unreasonable profits," Kelly says. That lust creates a culture inside an organization where the pursuit of short-term profits towers above all else, including the company's own long-term health. Often, the CEO's remuneration -- and ego -- is closely linked to those quarterly profits, and boosting all three replaces what's best to sustain the company's growth and survival. McInerney points out that with the average tenure of today's CEOs shrinking, they have only a small window in which to make a mark. Often, the result is an absence of humanity in the workplace, Kelly says. [...]
Relentless demands, extreme pressure and brutal ruthlessness are all trademarks of a toxic company, as is a twisted disconnect between what a firm says it does for employees and what it actually is doing. People are looked at as costs, rather than assets. On its books, a company might have progressive policies regarding work-life issues, but in fact employs no part-time workers, a key option for those who are struggling to balance career and family. Fear and paranoia, and anxiety to the point of panic, are other characteristics of a toxic workplace.
Macleans: The symptoms of a polluted company. Deadly combinations. It's not a single thing that creates a toxic company, but a combination of elements. Full excerpt:
Mediocrity over merit: promotions based on favouritism; mediocrity is rewarded
Management by fear: disagreement is a career-ending move; new ideas dry up.
Leaders lose it: executives always operate at high stress levels.
Age and gender ghettoes: leaders hire in their own image, resist new perspectives.
Personal agendas prevail: egos outweigh company business agenda and values.
Revolving leadership door: new leaders come and go; long-tenured run the show.
Poor public persona: negative comments rampant in surveys, blogs and chat rooms.
What human assets? Financial assets are "valued" more, people are "costs."
Déjà vu all over again: no clear vision of the future, and as a result the company can't move forward.
Hartford Courant: Report Slams Benefit Policies. Health Insurance At Big Companies Often Left To State. By By Christopher Kearing, Ritu Kalra And Kenneth R. Gosselin. Excerpts: The state is paying an estimated $43 million annually for health care insurance to cover workers at the top 25 major employers, led by Wal-Mart, officials said Thursday. Nearly half of the estimated total covers the top five employers, including highly profitable, well-known companies that operate franchises in Connecticut, including Stop & Shop, Dunkin' Donuts and McDonald's. The Laidlaw transportation company, which operates buses and ambulances, ranked fifth among the top employers with workers on the popular HUSKY health insurance program, according to a report by the legislature's nonpartisan research office. Some legislators were outraged that the state is helping to provide health insurance for profitable companies, particularly Wal-Mart. "Here is the richest retail company in the world, and we, the taxpayers, are subsidizing their coverage," said House Majority Leader Christopher Donovan, a Meriden Democrat. "I think people aren't aware of the extent that we're subsidizing the biggest, richest, most powerful companies. Wal-Mart shoppers need to know there's an extra cost of doing business."
Technology Review: Carly's Way. Excerpts: An electronic engineer who worked as a Research Scientist at the Hewlett-Packard Imaging Systems Laboratory starting in 1975 until he resigned in 2003, G.S. thought HP represented the very best of American character -- "a spirit of adventure and a belief in unlimited possibilities." He charges, though, that starting in 2000 the can-do attitude was killed by management choices intended to placate nervous investors and board members rather than benefit the company and its workers over the long-term. He warns that sustained cut-backs to R&D budgets over the past half-decade may have irreversibly damaged H-P and the entire U.S. technology industry.
Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some of this week's posts follow.
Coverage on H1-B and L1 Visa and Off-Shoring Issues
Coverage on Social Security Privatization
New on the Alliance@IBM Site: