Article 43

 

Monday, July 18, 2005

Glimmer Of Hope

Tech job cuts show Q2 dip, study says. But compared to last year, job cuts are still up by 16%.

JULY 15, 2005 (COMPUTERWORLD) - With cautious optimism, outplacement services vendor Challenger, Gray & Christmas Inc. announced yesterday that second-quarter tech job cuts in the U.S. were down 33% from the previous quarter. But it said the cuts were still running 16% higher than in the same quarter one year ago.

In its latest quarterly job-cut survey of the telecommunications, computer, electronics and e-commerce sectors, the New York-based company reported 39,720 lost jobs for the quarter that ended June 30. That’s down 33% from the 59,537 jobs lost in the first quarter, which ended March 31.

The job cuts for the second quarter, however, were still 16% more than the 34,213 cuts announced in the same quarter a year ago, the company said. For the first six months of the year, Challenger, Gray & Christmas reported 99,257 tech job cuts; That’s up 56% over the 63,726 cuts recorded in the first half of 2004.

Cuts in the technology field accounted for 18.4% of all of those announced in the first six months of 2005, the company said. One year ago, tech job cuts represented 13% of the six-month total.

The most recent job losses took place largely at computer firms, which have seen weak demand for semiconductors as well as an apparent reluctance to invest in new technology on the part of corporate customers, according to the survey. Job cuts in the computer sector totaled 20,470, or 51.5% of all technology-related job cuts in the second quarter.

The biggest improvement appeared to be in the telecommunications sector, which saw the number of job cuts fall 76% from 35,079 in the first quarter to just 8,342 in the latest quarter..

“The economy is growing and many sectors are adding workers at a steady pace, but the technology sector has been conspicuously absent from this job creation,” Rick Cobb, executive vice president of Challenger, Gray & Christmas, said in a statement. “Some blame high oil prices—as one industry insider recently told USA Today, ‘Every dollar that goes into the fuel tank is a dollar that is not going to Best Buy.’”

“The other problem affecting the computer and electronics industries is that corporate customers have accumulated a large reserve of cash, but instead of investing it in new technology, they seem content to just hold on to it,” Cobb said. “The good news is that we had a significant drop in tech-sector job cuts last quarter, which could signal a return of better times.”

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The Costco Challenge

An Alternative to Wal-Martization?

by Moira Herbst
Labor Research Association
July 5, 2005

Critics believe that Wal-Mart should play the role General Motors played after World War II [and] establish the post-world-war middle class that the country is so proud of. The facts are that retailing doesn’t perform that role in the economy. Retailing doesn’t perform that role in any country.
-- Wal-Mart CEO Lee Scott, April 2005

To workers and union leaders, it is a familiar refrain. These days, the story goes, consumers demand low prices, meaning goods must be produced and sold cheaply and retail wages must be kept as low as possible. Companies like Wal-Mart insist they’ feeling the squeeze and must pay workers poverty wages even while netting $10.5 billion in annual profits and awarding millions to top executives.

But there’s another company that is breaking the Wal-Mart mold: Costco Wholesale Corp., now the fifth-largest retailer in the U.S. While Wal-Mart pays an average of $9.68 an hour, the average hourly wage of employees of the Issaquah, Wash.-based warehouse club operator is $16. After three years a typical full-time Costco worker makes about $42,000, and the company foots 92% of its workers health insurance tab.

How does Costco pull it off? How can a discount retail chain pay middle-class wages and still bring in over $880 million in net revenues? And, a cynic may ask, with Wal-Mart wages becoming the norm, why does it bother?

A number of factors explain Costcos success at building a retail chain both profitable and fair to its workers. But the basic formula is one the labor movement has been advocating for decades: a loyal, well-compensated workforce means a more efficient and productive one.

The Union Difference

Though only about 18% of Costcos total workforce is unionized, union representation creates a ripple effect and helps determine labor standards in all stores. The Teamsters represent about 15,000 workers at 56 Costco stores in California, New York, New Jersey, Maryland and Virginia. Workers are covered by West coast and East coast contracts, negotiated in February and April of last year.

The agreements lock in wage and benefits packages that are the highest in the grocery and [discount] retail industries,” said Rome Aloise, chief IBT negotiator for Costco and Secretary-Treasurer of Local 853 in San Leandro, Calif.

Costco passes on similar compensation packages to its non-union workers; the contracts act as templates for other stores’ employee handbooks.

“The union contracts raise the bar and set the standard for all employees,” explained Aloise. “Still, while the company extends wage and pay raises to non-union employees, only union members enjoy benefits like seniority-based promotions, a grievance procedure and minimum hours for part-time workers,Ӕ he added.

The Payoff of Better Pay

Strong union representation isnt the only reason Costco jobs are so well compensated; the company itself has an unusually forward-looking corporate philosophy.

Costco CEO Jim Senegal has said: “We pay much better than Wal-Mart. Thats not altruism. Its good business.”

Chief Financial Officer Richard Galanti explained: “From day one, weve run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we’ll be able to hire better people, theyll stay longer and be more efficient.”

A 2004 Business Week study ran the numbers to test Costcos business model against that of Wal-Mart. The study confirmed that Costcos well-compensated employees are more productive.

The study shows that Costcos employees sell more: $795 of sales per square foot, versus only $516 at SamӔs Club, a division of Wal-Mart (which, like Costco, operates as a members-only warehouse club). Consequently Costco pulls in more revenue per employee; U.S. operating profit per hourly employee was $13,647 at Costco versus $11,039 at Sams Club.

The study also revealed that Costcos labor costs are actually lower than Wal-Marts as a percentage of sales. It’s labor and overhead costs (classed as SG&A, or selling, general and administrative expenses) are 9.8% of revenues, compared to Wal-Marts 17%.

By compensating its workers well, Costco also enjoys rates of turnover far below industry norms. Costcos rate of turnover is one-third the industry average of 65% as estimated by the National Retail Foundation. Wal-Mart reports a turnover rate of about 50%.

With such rates of employee retention, Costcos savings are significant. “It costs $2,500 to $3,000 per worker to recruit, interview, test and train a new hire, even in retail,” said Eileen Appelbaum, Professor at Rutgers Universitys School of Management and Labor Relations. With Wal-Marts turnover rate that comes to an extra $1.5 to $2 million in costs each year.

Other analysts of the retail industry agree that happier, well-compensated workers help generate bigger profits. George Whalin, president of Retail Management Consultants in San Marcos, Calif., disagrees with many of Wal-Marts critics, but said: “Theres no doubt Wal-Mart and many other retailers could do a better job taking care of their employees. The best retailers do take care of their employees. Nordstroms, Costco, The Container store with fair pay, good benefits and managers who care about people. You have fewer employee issues, less turnover and more productivity. It lessens costs to the company.”

Still, Wall Street analysts intent on cutting up-front labor costs tend to frown upon Costco’s model. Costco’s corporate philosophy is to put its customers first, then its employees, then its vendors and finally its shareholders. Shareholders get the short end of stick, said Deutsche Bank analyst Bill Dreher.

But Costco’s stock has quadrupled in the past ten years, and has in the past year inched closer to Wal-Marts per-share-price. In fiscal year 2004, Costco recorded record sales and earnings. While Wal-Mart continues to profit and expand, its stock has lost value in recent months it is 16% off its 52-week high as sales have been more sluggish as gas prices cause customers to cut back on driving to and from the store. The negative publicity around the company has also caused some damage.

Of course, other factors besides low turnover and employee productivity are responsible for Costcos efficiency. The company has a wealthier customer base than Wal-Marts; these customers buy higher-margin goods, purchase in bulk and have steadier spending habits. Costco also saves millions because it does not advertise.

More Than Hot Air

Besides the efficiency of its workforce, another reason Costco can afford to pay more is that it cuts the fat from executive paychecks. The overall corporate philosophy is that workers deserve a fair share of the profits they help generate not just a pat on the back or a new job title like associate.

For example, while CEOs at other major corporations average 531 times the pay of their lowest-paid employees, Sinegal takes only 10 times the pay of his typical employee. His annual salary is $350,000, compared to about $5.3 million awarded to Wal-Marts Lee Scott.

After California Costco workers ratified their Teamster contract last March, CEO Jim Sinegal said Costco workers are entitled to buy homes and live in reasonably nice neighborhoods and send their children to school.

That the company’s stated ideals match up with workers paychecks helps explain employee loyalty at Costco.

Originally from El Salvador, 28-year-old Cesar Martinez has worked at a Redwood City, Calif. Costco for 10 years, serving as a Teamster shop steward for seven years. His pay is now up to $19.42 an hour, which he estimates brings him $43,000 per year.

“Theres a feeling here that the company takes care of its employees and wants to share the profits. We feel compensated fairly,” Martinez said.

“I’ve stuck with it so long because I like the job. And the salary is solid and we have a pension that gives me security into the future. Thats important to me,” he added.

By contrast, some Wal-Mart employees experience the supposed care for associates’ as empty rhetoric. Forty-two-year-old Rosetta Brown, a Sams Club employee in Chicago, Ill., for example, stands back each morning when managers and associates gather for the Sams Club cheer.

“I refuse to do it, I don’t believe the company lives up to what they’re cheering for,” she said.

Rosetta, mother to five children ranging in age from three to 25, does not feel well compensated at $11.34 per hour after five years. She is also suing Wal-Mart, parent company to Sams Club, for costs associated with a herniated disc she suffered when she said she was locked in while working the night shift.

Twenty-seven-year-old Jason Mrkwa, who works as a frozen foods stocker in Independence, Kansas, also stands back when its cheer time at his store. But he insists he doesnt hate Wal-Mart: “I’m not another disgruntled employee. I like my job. I just feel cheated with the pay I get.” He started at $7 per hour five years ago, and now makes just $8.53 per hour.

Julie Molina, 38, has worked at Costco’s South San Francisco store for 19 years. “People stick around most people in my store have been there ten years more. No one in retail makes as much as we do. Plus it’s a good working environment.”

Molina attributes the positive working environment in large part to the Teamsters presence. It works really well now. When problems arise management comes to the union for advice. But without the union I’m not sure what would take place. Would they treat us like Wal-Mart treats its workers? You hear horror stories, she said.

Of course Costco is not paradise On a local level, some managers don’t play fair, they might harass workers, fire them unreasonably or pattern bonuses unfairly. That’s where union representation is the real advantage, explained Rome Aloise.

Into the future, the question will be which model of employee compensation predominates in retail - the high road of Costco or the low road of Wal-Mart.

When companies like Wal-Mart are setting the standard, we have to ask: “Do we want to live in a country where the largest employer pays below poverty-level wages, whose workers cannot afford health care?” says Paul Blank, chief spokesperson of Wake Up Wal-Mart, the United Food and Commercial Workers new campaign to change the companys practices. “Or do we want Americans to enjoy a decent income and a sense of security in return for their work?”

Costco v. Wal-Mart: How They Stack Up

Global Workforce
Wal-Mart: 1.6 million associates
Costco: 113,000 employees

U.S. Workforce
Wal-Mart: 1.2 million
Costco: 83,600

U.S. Union Members
Wal-Mart: 0
Costco: 15,000

U.S. Stores
Wal-Mart: 3,600
Costco: 336

Net Profits (2004)
Wal-Mart: $10.5 billion
Costco: $882 million

CEO Salary + Bonus (2004)
Wal-Mart: $5.3 million
Costco: $350,000

Average Pay
Wal-Mart: $9.68/hour
Costco: $16/hour

Health Plan Costs
Wal-Mart: Associates pay 34% of premiums + deductible ($350-$1,000)
Costco: Comprehensive; employees pay 5-8% of premiums

Employees Covered By Company Health Insurance
Wal-Mart: 48%
Costco: 82%

Employee Turnover (estimate)
Wal-Mart: 50%
Costco: 24%

SOURCE

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Commentary: The Costco Way

Business Week
April 11, 2004

Costco Wholesale Corp. handily beat Wall Street expectations on Mar. 3, posting a 25% profit gain in its most recent quarter on top of a 14% sales hike. The warehouse club even nudged up its profit forecast for the rest of 2004. So how did the market respond? By driving the Issaquah (Wash.) company’s stock down by 4%. One problem for Wall Street is that Costco pays its workers much better than archrival Wal-Mart Stores Inc.  does and analysts worry that Costco’s operating expenses could get out of hand. “At Costco, it’s better to be an employee or a customer than a shareholder,” says Deutsche Bank analyst Bill Dreher.

The market’s view of Costco speaks volumes about the so-called Wal-Martization of the U.S. economy. True, the Bentonville (Ark.) retailer has taken a public-relations pounding recently for paying poverty-level wages and shouldering health insurance for fewer than half of its 1.2 million U.S. workers. Still, it remains the darling of the Street, which, like Wal-Mart and many other companies, believes that shareholders are best served if employers do all they can to hold down costs, including the cost of labor.

Surprisingly, however, Costco’s high-wage approach actually beats Wal-Mart at its own game on many measures. BusinessWeek ran through the numbers from each company to compare Costco and Sam’s Club, the Wal-Mart warehouse unit that competes directly with Costco. We found that by compensating employees generously to motivate and retain good workers, one-fifth of whom are unionized, Costco gets lower turnover and higher productivity. Combined with a smart business strategy that sells a mix of higher-margin products to more affluent customers, Costco actually keeps its labor costs lower than Wal-Mart’s as a percentage of sales, and its 68,000 hourly workers in the U.S. sell more per square foot. Put another way, the 102,000 Sam’s employees in the U.S. generated some $35 billion in sales last year, while Costco did $34 billion with one-third fewer employees.

Bottom line: Costco pulled in $13,647 in U.S. operating profit per hourly employee last year, vs. $11,039 at Sam’s. Over the past five years, Costco’s operating income grew at an average of 10.1% annually, slightly besting Sam’s 9.8%. Most of Wall Street doesn’t see the broader picture, though, and only focuses on the up-front savings Costco would gain if it paid workers less. But a few analysts concede that Costco suffers from the Street’s bias toward the low-wage model. “Costco deserves a little more credit than it has been getting lately, [since] it’s one of the most productive companies in the industry,” says Citigroup/Smith Barney retail analyst Deborah Weinswig. Wal-Mart spokeswoman Mona Williams says that Sam’s pays competitively with Costco when all factors are considered, such as promotion opportunities.PASSING THE BUCK. The larger question here is which model of competition will predominate in the U.S. Costco isn’t alone; some companies, even ones like New Balance Athletic Shoe Inc. that face cheap imports from China, have been able to compete by finding ways to lift productivity instead of cutting pay. But most executives find it easier to go the Wal-Mart route, even if shareholders fare just as well either way over the long run.

Yet the cheap-labor model turns out to be costly in many ways. It can fuel poverty and related social ills and dump costs on other companies and taxpayers, who indirectly pick up the health-care tab for all the workers not insured by their parsimonious employers. What’s more, the low-wage approach cuts into consumer spending and, potentially, economic growth. “You can’t have every company adopt a Wal-Mart strategy. It isn’t sustainable,” says Rutgers University management professor Eileen Appelbaum, who in 2003 edited a vast study by 38 academics that found employers taking the high road in dozens of industries.

Given Costco’s performance, the question for Wall Street shouldn’t be why Costco isn’t more like Wal-Mart. Rather, why can’t Wal-Mart deliver high shareholder returns and high living standards for its workforce? Says Costco CEO James D. Sinegal: “Paying your employees well is not only the right thing to do but it makes for good business.”

Look at how Costco pulls it off. Although Sam’s $11.52 hourly average wage for full-timers tops the $9.64 earned by a typical Wal-Mart worker, it’s still nearly 40% less than Costco’s $15.97. Costco also shells out thousands more a year for workers’ health and retirement and includes more of them in its health care, 401(k), and profit-sharing plans. “They take a very pro-employee attitude,” says Rome Aloise, chief Costco negotiator for the Teamsters, which represents 14,000 Costco workers.

In return for all this generosity, Costco gets one of the most productive and loyal workforces in all of retailing. Only 6% of employees leave after the first year, compared with 21% at Sam’s. That saves tons, since Wal-Mart says it costs $2,500 per worker just to test, interview, and train a new hire. Costco’s motivated employees also sell more: $795 of sales per square foot, vs. only $516 at Sam’s and $411 at BJ’s Wholesale Club Inc., its other primary club rival. “Employees are willing to do whatever it takes to get the job done,” says Julie Molina, a 17-year Costco worker in South San Francisco, Calif., who makes $17.82 an hour, plus bonuses.MANAGEMENT SAVVY. Costco’s productive workforce more than offsets the higher expense. Its labor and overhead tab, also called its selling, general, and administrative costs, total just 9.8% of revenue. While Wal-Mart declines to break out Sam’s SG&A, it’s likely higher than Costco’s but lower than Wal-Mart’s 17%. At Target, it’s 24%. “Paying higher wages translates into more efficiency,” says Costco Chief Financial Officer Richard Galanti.

Of course, it’s by no means as simple as that sounds, and management has to hustle to make the high-wage strategy work. It’s constantly looking for ways to repackage goods into bulk items, which reduces labor, speeds up Costco’s just-in-time inventory and distribution system, and boosts sales per square foot. Costco is also savvier than Sam’s and BJ’s about catering to small shop owners and more affluent customers, who are more likely to buy in bulk and purchase higher-margin goods. Neither rival has been able to match Costco’s innovative packaging or merchandising mix, either. Costco was the first wholesale club to offer fresh meat, pharmacies, and photo labs.

Wal-Mart defenders often focus on the undeniable benefits its low prices bring consumers, while ignoring the damage it does to U.S. wages. Costco shows that with enough smarts, companies can help consumers and workers alike. By Stanley Holmes and Wendy Zellner.

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AT&T Inhuman Business Practice

The new bottom line ethics of AT&T managers has created a workforce of stress, tension, and apathy.
http://cwa3250.org/ July 15, 2005

Our members show up each day to professionally perform and maintain AT&Ts network. They contribute their experience and expertise to a company on the brink of human collapse. The workplace of AT&T managers is now ruled on the premise of the bottom line. All human contact between managers and our members is now based on how and what you can do to improve a managers numbers or perceived performance relating to the bottom line.

Gone is the interaction between managers and employees that spawned working relationships that fostered loyalty, sacrifice, and commitment to team efforts that once created a workforce of unequal dedication. The new bottom line ethics of AT&T managers has created a workforce of stress, tension, and apathy.

Combine this with AT&Ts policy of no training, understaffing, rebalancing, and constant quarterly lay-offs and anyone can see that the company is becoming a hollow shell. How does the company respond to our demoralized and understaffed workforce? They first try surveys to give the impression that they care about our input and will seriously consider our suggestions. When was the last time you can remember the company responding seriously or implementing any of your suggestions? Now, if they cant motivate the rank and file with smoke and mirror surveys, they can always drive us, its much easier than leading.

This is done by piling on work with unreasonable expectations and then denying you vacation, manipulating overtime, canceling tours, and violating seniority, while you answer to eight different bosses who all ask you the same question, is it done yet. If this doesnt improve your morale and stress level, then they can just declare another lay-off, so in the morning they can pretend that they are concerned when they ask you “How are you doing?”

Then the circle starts up again as your managers look at their numbers and see how we can improve their bottom line. When they call you a body or a resource, they only reinforce that they no longer regard us as human, we’re just another piece of equipment as part of the network. When it breaks, throw it out, and replace it with another, perhaps a contractor will do. Look around you, there they are, searching for the next body or resource that can improve their bottom line or manipulate their numbers. Can they remember our name or that we are people with families, dreams, and feelings? Probably not.

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Sunday, July 03, 2005

US House Wants To Legalize Cash Balance Pensions

Click HERE to read the press release “The House Committee on Education & the Workforce Approves Pension Protection Act.”

Cash balance pensions are STILL NOT PERMANENTLY APPROVED by Congress! Corporate lobbyists have been trying for years to cram this down our throats, but they haven’t been successful despite their deep pockets.  WE HAVE STOPPED THEM BY MAKING NOISE! 

The class action case is still pending.  We have successfully stopped The Treasury Department from enacting unfair new rules.  Now we have to make sure Congress hears us again before they vote on a piece of legislative crap called HR 2830. 

PLEASE take a few minutes to read this newspeak from Boehner, and follow the suggestions below.  This is YOUR retirement at stake.  Join the most important grass roots rebellion in 35 years.  And forward this message to everybody.

During consideration of the bill, the committee approved a substitute amendment offered by Boehner to help resolve the legal uncertainty surrounding cash balance plans, a type of hybrid defined benefit plan that many American workers rely upon for their retirement security.

“Cash balance pension plans a type of defined benefit plan that is employer-funded, insured by the PBGC, and portable from job to job ֖ represent an important component of worker retirement security, and they account for more than 20 percent of the premium revenue paid by employers to the PBGC,” said Boehner. “Cash balance pension plans are the future of the defined benefit system, and it’s critically important that Congress act to resolve the legal uncertainty that is jeopardizing generous pension benefits for workers across the country.”

The cash balance solution is the result of an agreement reached between Boehner and Ways & Means Committee Chairman Bill Thomas (R-CA). It establishes a simple age discrimination standard for all defined benefit plans that clarifies current law with respect to age discrimination requirements under ERISA on a prospective basis. The bill does not establish different rules for hybrid plans or conversions, but merely sets up a simple age discriminatory standard that all defined benefit plans must meet prospectively. The measure also prohibits employers from reducing or cutting any vested benefits workers have earned during a conversion to a cash balance plan.

“It is important to begin to address the legal status of these retirement plans,” said Johnson. “I have many constituents that are covered by this type of plan and are very happy with the retirement benefits they are earning. Legal harassment of these retirement plans needs to stop.”

Note from Janet Krueger on the four things you should do:

1) Writea letter to the editor of your local paper --- I’ve attached below the one I sent off yesterday.

2) Call your two senators and your representative in Washington and tell them you are outraged—Generally they respond more appropriately to phone calls than to snail mail, and most ignore email. Have the bill number in hand (H.R. 2830) because often the receptionists only classify things by bill number. Make sure you leave your name and your address; many of the people in Washington only listen to people from their district.

A) To find your senators, go HERE and choose your state, then pick up the phone and tell them they better not follow along behind the House. Follow up your call with a short letter. Both their phone number and their address is on that site.

B) To find your representative, go HERE and enter your zip code. Do one more piece of research—look at the education and workforce committee HERE if your representative is on the list of 27 republican represenatives, s/he needs an extra blast of outrage. If your representative is on the list of 22 democratic representatives, s/he needs an extra thank you. If s/he is not on
either list, tell them to please vote no to the bill when it comes to the floor.

3) Contact the committee with a phone call and a letter at:

Committee on Education and the Workforce
U. S. House of Representatives
2181 Rayburn House Office Building
Washington, D.C. 20515
(202) 225-4527

4) Forward this note to your network of friends, neighbors and colleagues so they can also act.

If we can generate over 1000 phone calls, Congress will be forced, once again, to back off. Thanks for asking!

Janet Krueger

----

My letter to the editor:

Subject: Letter to the editor --- Cash balance plans do NOT need to be legalized!

In 1999, IBM converted their US pension plan into a cash balance plan. In the process, they cut the benefits of many older workers by as much as 40%.

A lawsuit was filed against IBM in 1999 by Kathi Cooper charging that the new plan is age discriminatory, as it allows younger workers to accumulate retirement benefits much more rapidly than older workers.

Late last year, IBM agreed to settle the lawsuit. The settlement agreement calls for IBM to pay workers $1.7 billion if IBM loses their appeal on the legality of cash balance plans, but only $314 million if IBM wins the appeal.

Today, Republicans in Congress decided to intervene on IBM’s behalf. The House Committee on Education and the Workforce just approved a bill to legalize cash balance plans. According to their press release, “Cash balance pension plans are the future of the defined benefit system, and it’s critically important that Congress act to resolve the legal uncertainty that is jeopardizing generous pension benefits for workers across the country. . . Legal harassment of these retirement plans needs to stop.”

This is outrageous! The plans are NOT ‘generous’; workers should not be accused of harassment when they seek redress against employers who slash federally protected benefits.

Congress is doing this retroactively. The bill defines “effective date” as “The amendments made by this section shall apply to plan years beginning before, on, or after the date of the enactment of this Act.”

IBM knowingly broke the law when they cut our pensions. IBM employees deserve their full day in court. Congress should back off and stay out of the fight.

Janet Krueger

Credit: pension_watchdog

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Saturday, July 02, 2005

Phone Giant’s Final Knell

By Jeff Smith
Rocky Mountain News
July 1, 2005

AT&T investors OK SBC sale, but many aren’t happy about it

AT&T executives on Thursday came to talk to shareholders about the tumultuous past decade that led to the need to merge with Baby Bell SBC Communications.

But many shareholders at the historic event in Denver - AT&T’s 120th and almost certainly final annual meeting - wanted to talk instead about management mistakes over the years, hefty executive compensation, job and benefit cuts, stock price declines . . . and how Ma Bell has ended up a shell of her former self.

“They Built It, They Broke It . . . RIP AT&T,” read black T-shirts with gravestones worn by union officials.

About 250 shareholders attended the meeting at the Colorado Convention Center, in which AT&T shareholders soundly approved the $16 billion sale of the company to San Antonio-based SBC. New Jersey-based AT&T likes to rotate its annual meeting around the country, and CEO David Dorman said there are 20,570 registered AT&T shareholders in Colorado.

Lani Flesch, an AT&T manager for more than 20 years, took three days of vacation to travel from her Chicago wholesale markets job and gave an impassioned criticism of a company that has shrunk in stature from nearly 1 million employees before divestiture in 1984 to fewer than 50,000 today.

She complained about the new breed of CEOs who have widened the pay gap between multimillion-dollar-a-year executives and the average worker. She bemoaned the decision by AT&T to spin off its cable and wireless operations. And she contended that since the 1990s, it has been the employees, retirees and shareholders who have suffered the brunt of the pain.

Flesch broke down when she recounted that AT&T’s “ruthless” behavior in 1998 personally cost her 65 percent of her pension and 13 years of labor. She said she won’t earn back those benefits until 2011, when she is 60.

She compared that with the millions Dorman will earn in pension benefits for less than five years of service.

“How can shareholders, employees and retirees be expected to share the pain when their own executives take the gain?” Flesch asked.

But Flesch also said after the meeting that she voted for the merger with SBC because AT&T “can’t go it alone” any longer.

A majority of AT&T shareholders apparently saw it that way. More than 70 percent of the shares were cast in favor of the merger.

But another nearly 30 percent were withheld intentionally or not voted.

Dorman remained largely unflappable during the 90-minute meeting, taking in but not responding to the criticism by Flesch and other stockholders.

This exasperated stockholder activist Gerald Armstrong, of Denver.

At one point, Armstrong said he was hoping Dorman would respond to a union official who called it “tragic” that AT&T had come to this and who had urged stockholders to withhold their support for the company’s directors.

“I have no response,” Dorman said.

“I feel shortchanged,” Armstrong countered.

Dorman’s presentation also was lacking in any kind of tribute to the early days of AT&T, instead focusing almost entirely on what has transpired since the 1996 Telecommunications Act, which paved the way for the Baby Bells and AT&T to compete in each other’s businesses.

Dorman revisited the turbulence of the past decade, talking about how the “irrational exuberance,” hyper investment, overcapacity, accounting fraud, competitive technologies and pricing pressures all led to an “inevitable bursting of the bubble.”

He told shareholders the deal with SBC is the “greatest opportunity” for increasing shareholder value and ensuring that the company has the financial strength to prosper in an intensely competitive environment.

He said SBC offers as a complement a strong local phone and DSL high-speed Internet business, as well as a nationwide wireless operation through its 60 percent ownership of Cingular, and soon will offer video services.

A video that accompanied Dorman’s remarks also revisited the past decade and showed several images of former WorldCom CEO Bernard Ebbers, now convicted of fraud. The message seemed to be that WorldCom, now known again as MCI, contributed to the downfall of AT&T.

On at least this point, Flesch, the Chicago wholesale markets manager, agreed.

She said after the meeting that she believed AT&T was compelled to match MCI’s performance and that MCI’s “lies” about its revenues caused AT&T to spin off its broadband and wireless operations.

“We could have had it all, and instead we’re being bought,” Flesch said, tears still in her eyes.

SOURCE

Credit: pension_watchdog

Posted by Elvis on 07/02/05 •
Section Pension Ripoff • Section News
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In memory of the layed off workers of AT&T

Today's Diversion

We are reluctant to admit that we owe our liberties to men of a type that today we hate and fear -- unruly men, disturbers of the peace, men who resent and denounce what Whitman called 'the insolence of elected persons' -- in a word, free men. - Gerald W. Johnson

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