Tuesday, March 31, 2009


More layoffs, amid rising CEO salaries

IBM’s working on another round of job cuts, this time on the services side of the business, completing what looks to be a trimming of on the order of 10% of its U.S. workforce.

Reports of deep job cuts at International Business Machines (IBM) come at a potentially delicate time for the company—just as it is hoping to secure money from the federal stimulus package. The company will lay off as many as 5,000 U.S. workers in its Global Business Services unit, transferring some of the work they performed to India, according to media reports.

The company’s been making big moves to several countries for a while now — some of the primary ones are India, China, Brazil, and Russia — and away from the U.S. As Business Week goes on to report:

Big Blue’s efforts to trim costs by sending work overseas are not new. For several years the company has been working to improve its efficiency through a combination of computer automation, business-process optimization, and job transfers from expensive locations to offshore. Chief Executive Sam Palmisano has said those plans are part of an effort to make IBM a “globally integrated enterprise.” Since 2003, the Armonk (N.Y.) company has hired approximately 90,000 people in India and more than 5,000 in Brazil to do IT and business-process outsourcing (BPO) services work.

In the meantime, the company has trimmed its U.S. workforce. According to its annual report, IBM had 398,000 workers worldwide at the end of 2008, up from 386,558 at the end of 2007. At the same time, U.S. employment has declined, to 115,000 at the end of 2008, compared with 121,000 a year earlier.

I agree with those who think that companies moving jobs out of the U.S. should not be eligible for any of the “stimulus” money. There has to be, along with the granting of the money, a commitment from the companies to the U.S. economy. I’ve long been a general fan of globalization, but it carries significant problems with it in the best of times — including the “race to the bottom” effect, where countries try to pull in business by offering cheaper and cheaper labour. In these times, which are closer to worst than to best, we can’t allow U.S. jobs to move overseas and then reward the companies doing that with government handouts.

And, of course, right in the middle of these two rounds of job elimination, we get the report of CEO Sam Palmisano’s compensation for 2008: just shy of $21 million, up slightly from just shy of $21 million in 2007. The cash part of that was $7.3 million — $5.5 million of which was a “performance-based bonus.”

By all reports, IBM did well last year, and expects to do well this year. Nevertheless, it’s appalling to see a company fire 10% of its workers because of an economic downturn, while giving its CEO five and a half million dollars as a performance-based bonus.

I’m not really picking on IBM, here; it’s just that it’s the company closest to my heart. But we have a systemic problem of insanely large CEO salaries, salaries far out of line with what the positions are worth, and not sufficiently tied to real measures of company success and overall economic well-being. We have to find a way out of this bizarre cycle of ever increasing compensation packages for top executives.

Certainly, at the least, we should demand that companies taking help from the government not be allowed to pay their CEOs so lavishly and send jobs to other countries. It’s a violation of basic ethics.


Ray said...

Can you spell G-R-E-E-D? And just to add insult to injury, read this.

Words still fail me.

[Original comment replaced since I learned how to insert a working link rather than simply the text of the URL.]

Janet said...

Thanks for posting this, Barry. And the layoffs probably aren't done even though over 8,000 of us are now out of a job. All of those people now trying to figure out how to pay their monthly bills... and the execs don't appear to be feeling ANY pain about it. So much for "respect for their employees". They probably wonder why employees have little respect for THEM.

21-year IBMer... now ex-IBMer (laid off 2/2009)

Barry Leiba said...

Well, as I said earlier, I'm not bitter or angry at having been cut. I don't think cutting jobs is the right thing for the economy, or, ultimately, for the company... but I accept it as their business decision.

This is aimed more generally at the issue of companies contributing to the problem while they ask for government money... and at the problem of executive salaries that are out of line with reality.

Marcy Webb said...

The top brass at these companies that have received corporate welfare should not be getting a salary at all. Why should a CEO @ a failing company be rewarded?