OT: update on IBM pension screw-job

No I don't know. If the opportunity presents itself I'll find out.

But that's the thing, Don. They never made any 'promises.' That is, when employed, I never saw a piece of legally binding paper that said "we're going to do this for you." All they have to do is abide by the ERISA laws and that's pretty easy to do.

The executive managment *does* typically have employment contracts, where retirement benefits are spelled out in black and white. In a legally binding document. But how would it be if retirement pension benefits had to be defined by contract, for *all* employees of

*all* companies? That would be tantamount to unionizing the rank and file.

What nobody's saying here is the reason why all the pension bru-haa- haa is happening right now. Basically it's because the stock market is flat or declining. At one time IBM invested its pension funds heavilly in the market, and the returns were huge. So there wasn't a need to do any of this. In fact, about ten years ago, the federal government was concerned about underfunded pension plans. So they gave penalties to those who underfunded. But the penalties worked both ways, if you *overfunded* your plan, you got a tax CREDIT. Which is what IBM did. In fact, there was a cap on the amount per worker they could invest, and there was a minor flap about so-called "highly compensated" employees, who were told by the company to protest that they could not have their full amount, based on salary level, contributed to the plan.

About 5 years ago, the single most paper-profitable division of IBM was the pension investment group. True.

This of course has changed. When they realized that the money would not garner the large returns, they pulled the funds out of the market. Then they realized that, in principle, they had been playing with somebody else's cash.

Well, not really of course. The money was never really "promised" to anyone. There's nothing on paper. It's ours. You can't have it.

And oh, your retirement medical benefits just went away too. Most companies don't give those don't cha know.

This is the real screw-job. You have a large number of retirees who rely on the medical coverage. The corporation can basically just stop their coverage by simply mailing them a letter. Too bad. Sucks to be you, eh? Good thing Sam and Lou and John have their stuff locked in legally.

That's exactly right. And they could have done that, if making a pension plan that was better for the company as a whole was their goal. The real goal was providing more cash right away, to boost the stock prices, so Lou could get his options out, and provide more cash right away, so the executive pensions could be beefed up.

And switching all new employees, as of the plan change date, to the cash ballance plan, does not fill that bill.

They needed to take green dollars from one pot, and put them into another pot. To put them into the second pot, some group had to give. The goal was short-term cash generation at the expense of long-term degradation of the corporation. Short term = just until Lou retires, in this case.

Carry the plan out to the logical conclusion: in about five years, they will simply stop contributing to any pension plan whatsoever. Like the retirement medical benefits, all that stuff, including whatever overhead it takes to run the plans, will be jetisonned.

Yep. Work here, we pay you. But when you get old or sick, we're gonna fire you, and you will be on your own. This is the brave new world. If you think the S&L debacle of the 80s was a big deal, this one's gonna be a 10 times more devastating. Imagine that all retirment benefits for all workers, private, public, state, federal, military, just stopped one day. Sorry, we can't afford to pay them anymore. No recourse, no lawsuits. If there does happen to be a pension contract, the courts will rule they can be legally broken.

Harold's "but I worked for that social security money" plea just won't work anymore. The checks will stop. That's what's in the works right now. Don't bother trying to save BTW. Inflation's gonna be cranking up...

Jim

I never saw such a piece of paper either, Jim, but my employer had a very strong track record of keeping implied promises. They'd show "the plan" as it was at the time of hiring. It wasn't guaranteed, but the plan had been so for a long time, pick yer pony and place yer bet. It continued to be so for quite a while longer, turned out to be a good bet. Then the new age arrived where screwing anyone corporations and executives could get away with screwing was viewed as clever by investors. There's nothing new about greed, it's just more overt and out of the closet than it has been in the past.

The market was flat or declining for several years during the '70's and early '80s, don't recall the exact timeframe but it's quite evident on a long-term chart of the DJA. A few pension funds went bust during that time, but most companies rode that period out in good shape. Pension/retirement fund management must be done with a long-term perspective rather than trying to make a killing in a bull market. Nobody can time the market consistently.

Used to be that many large companies did a pretty good job of managing pension funds for their employees. If they didn't do it they retained a financial firm that could and did.

so hoarding cash now may not be prudent, but ya gotta keep providing for your retirement and that's definitely possible during an inflationary period. Don't ask me how, I'm no financial weenie. Ya don't have to be one, ya just have to know one who can make it worth both your while and his to assist. I don't do my own dentistry either.....

There was a time when executives really identified with their companies and the people who made the company work. I knew a few like that. Many were vets. There were plenty of bodies buried along every path to mahogany row, nature of the game. But they made a point of and took pride in taking care of customers, good vendors and the employees that made the company work -- while being utterly ruthless with flake vendors and employees trying for a free ride.

The new model seems to be pillage and plunder as long as the quarterly numbers (valid or not) assuage the greed of the investors.

Perhaps it's too bad that only the greed part of jungle modus operandi is operative in corporations. An officer/leader who is without honor and would deal with his team's resources to his benefit at their cost should and very probably would get fragged.

================================ There is not a black/white situation.

Some companies did indeed give a "pension" out of the "goodness of their heart" for a lifetime of faithful service.

In other companies, the pensions were explicitly deferred compensation. This was especially true of the airlines. Thus when you worked for the company, you were compensated with X dollars now, and Y dollars to be delivered in 40 years when you retired, paid over your remaining life. In many cases the parties to the labor contract negations would explicitly shift X (now) dollars to Y (later) dollars.

This can be a good deal for each party. The wage earner gets a tax break by shifting income to the later [lower tax rate] retirement years, the "return" is not taxed as it is being earned increasing compounding gain, and the wage payer gets capital at low effective interest rates.

The problems began almost immediately [but would not surface for

30 or 40 years] because almost none of the employers treated their accruing pension liabilities as "debts" requiring servicing.

In a business, borrowed funds must be allocated to not only earn at least their interest cost but enough to amortize the debt [sinking fund] when the debt must be repaid. This was *NOT* the case -- it was treated as "found money."

This problem was compounded by fantasy accounting standards that allowed the projection of returns on the assets in the pension fund [there were no assets, it was all liabilities] at anything management wished in order to show a profit. Generally this rate of [assumed] return was several times any commercial rate such as "money market funds."

In the occasional "boom" period when the actual rates of return exceeded the required rates of return, these were not used to offset the "down" years, but rather used to justify "recapture" of the "excess" pension funds. [I note in passing this is a characteristic attitude of the problem or addicted gambler. Never cover your losses/debts with your winning or save anything for future losses -- spend it while you have it.]

The 30 years have passed and the balloon note is due. Where's the money? The corporations got their labor and now its time to "ante up" all that deferred compensation.

As noted above "Now many companies don't seem to think they owe even what was promised, do whatever they can get away with to screw employees, customers and vendors."

In one sense we are all enablers of this behavior. If no one will do business with them, this sort of thing will stop one way or another. Either a change in management [attitude] or they go out of business.

Two modest suggestions based on observation of the biological world.

(1) There appears to be a optimum size for each entity, and as the size changes, so does its capabilities. For example, you can have a 100 pound bird, but it can't (and won't ever be able to) fly. We need to impose absolute size limits [adjusted for inflation] limiting the amount of capital any one business can control, and the amount of market share they can have. When/if they get bigger, they have to split and the owners wind up with stock in two corporations.

(2) Nothing physical is immortal. Corporations should have legally limited life spans. When their charter expires, the corporation must be liquidated for cash, all debts paid, and the remainder distributed to the stockholders. No new corporation could buy more than 20% of the terminated corporations assets/"lines of business." A 50 year lifespan would have eliminated many of the current problems caused by the senility and decline of Ford, GMC, AT&T, IBM, etc. Call it a corporate "death with dignity" act.

Unka George (George McDuffee)

...and at the end of the fight is a tombstone white with the name of the late deceased, and the epitaph drear: ?A Fool lies here, who tried to hustle the East.?

Rudyard Kipling The Naulahka, ch. 5, heading (1892).

Agreed. The name of the game is sometimes losing as little as possible, instead of making a little bit. But as you say, there are good ways and then bad ways. I have the distinct impression from what I've heard from several friends that up until recently, for the past several years, simply putting money under your mattress worked nearly as well as investing it, when all the fees were said and done.

One friend in particular got involved with vanguard and had a very very unpleasant situation. He would have been *much* better off with the mattress approach.

And that model has been, and continues to be, fine-tuned for more of the same, by the execs who are milking the situation.

Jim

Good lakefront property in MN has appreciated nicely for years and continues to do so even after taxes and expenses. Values have nearly doubled since the market drop following 9/11. Folks from as far away as Pennsylvania are buying property on Leech and Vermillion.

The conveyer is being installed by Seimens. So the answer is yes.....installer same as supplier.

Oh no, George. Those bad things are "legacy costs" which is another way of saying, we don't care if our workers get old or sick. As long as the stock options of the Gerstners or Akers or whoever get enough boost so the CEOs can cash out, that's all we care about.

Yes, except that corporations are not physical entities anyway. They're a purely legal construct. They've been basically been given the right to vote (Plessy v Fergueson) and that was a terrible decision. If the USSC would reverse that, things would start back to center. Don't expect the bushies cronies to even consider thinking about that though.

Jim

IIRC They one of the same German firms that have been buying up US firms & shutting them down. Must be profitable.

Do the folks installing speak German? Where was it all made?

If not a "brain fart," you might want to check your sources.

Plessy v Fergueson (1896) (see:

) established the legal fiction of "separate but *EQUAL*" upon which the segregation of public facilities/services including education was based. In public education this was revisited in Brown v Board of Education of Topeka (Kansas) (1954) (see: where it was established after c. 58 years that there was such substantial and pervasive inequality that "separate but equal" was no longer operational. This should have been expected, as the southern states were unable or unwilling for most of this time to adequately fund a single system of public education, let alone two of them.

The fiction of the corporation as a "person at law" was established by "Santa Clara County v. Southern Pacific Railroad" (1886) see:

I am not a legal scholar or lawyer, but a review of the pleadings in this case seem to indicate the outcome was based on something other than case law, facts and prior decisions [such as a bribe], as the railroad's case, at least to me, was largely composed of a series of non sequitur arguments/citations [no logical flow or connection] and "table pounding" [old joke: when weak in the law, argue the facts -- when weak in the facts, argue the law -- when weak in the law and the facts, pound on the table."

In point of fact, a "person at law" [corporation] does not have a vote, although their political influence is probably greater than all but a tiny handful of individuals because of the enormous resources they control. This need not be in the form of direct campaign contributions [which are illegal] but patronage, plant location, PAC contributions, etc.

I don't know what if anything can be done at this point, but clearly an entire corps of immortal "Frankenstein's monsters" were born in 1886 with "Santa Clara."

If you have additional interest see

Unka George (George McDuffee)

...and at the end of the fight is a tombstone white with the name of the late deceased, and the epitaph drear: ?A Fool lies here, who tried to hustle the East.?

Rudyard Kipling The Naulahka, ch. 5, heading (1892).

Yep, a brain fart. It was late, I had had a beer.

The case in question was Buckley v. Valeo, which basically established first amendment rights for corporations.

Jim

Fascinating. Now Ill view your future posts with the knowlege they were written by a man with a drinking problem. Which of course explains much.

Gunner

"I think this is because of your belief in biological Marxism. As a genetic communist you feel that noticing behavioural patterns relating to race would cause a conflict with your belief in biological Marxism." Big Pete, famous Usenet Racist

Cliff, half the installers speak Mexican. They're young (and small).....Siemens works them long hours and then probably disgards them.

They aren't here for the long haul that's for sure. They don't vote, retire here, serve in the military.....just take jobs, send home enough money to buy a house in Mexico, then head back down south. In comes the next young batch.

But the point I made in an earlier post is that these aren't jobs "Americans won't do". Putting together conveyors.....placement,bolting together sections, wiring....these are good jobs that Americans WOULD DO.

They sort of used to be the gold standard for employee treatment, that's right. And as you say, that's the 'old' company, this here is the 'new' one. The old one was long gone, about ten years ago.

It's a shame, but understandable given the business climate. Still I suspect somewhere along the way you are going to see some hand-wringing about "why are todays workers so disloyal?"

Brave new world and all that.

Jim

And winners do not stay winners for long.

i

Everything is getting too fast. 30 years ago businesses could only screw you every once in a while. Today, its an ongoing thing.

Uncontrolled capitalism is like a monoply game. Winner take all, every else goes bankrupt. John

Krupp,Bayer, Dupont, Exxon, they all have been around for quite a while.

John

Bell Telephone, Enron, GM? They were around for a long time too.

Jim

How do you put Enron in that group? I'd say they were a big-league short-term scam.

From a quick search, "Enron was formed in 1985".

Hardly in the realm of Bell/AT&T or GM.