IBM Layoffs and Compensation Raise Disturbing Questions About Corporate Ethics PDF Print E-mail
Analysis - Commentary
Written by Chris Smith   
Saturday, 04 April 2009 19:00

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The corporation continues to keep layoff numbers secret but is obliged to report that executives received millions in bonuses and extravagant perks.


While wandering the aisles of Wal-Mart the other day, I noticed that the store's stock of resumé paper was completely sold out. I don't know why I should be surprised by this, but it made me wonder if a few thousand laid-off IBM employees might have been responsible. Perhaps they first met at McDonald's for coffee and then marched over to Wal-Mart together and swarmed into the store like a hoard of locusts, wiping the shelves clean of the precious commodity that everyone wants: resumé paper!


The bizarre image is made that much more palpable because no one really knows how many laid-off IBM employees there actually are. The company won't tell anyone. There could be thousands and probably are. There could be tens of thousands, and, theoretically, there could be hundreds of thousands. No one knows. It's a secret. This is very odd and reminds me somewhat of a scene out of Aleksandr Solzhenitsyn's book The Gulag Archipelago. People disappear at the hand of the secret police, you never hear from them again, and you have no idea what happened to them. No one knows exactly how many have disappeared because the number of those abducted...err, never released. As far as the government is concerned, no one has been eliminated. It's business as usual at the marketplace with crowds milling around normally.


The secrecy surrounding the layoffs at IBM, which most observers close to the situation have estimated will total about 10,000 in North America this year, is just one of the seeds of discontent the company is sowing in this period of economic downturn. Mind you, people are losing their jobs all over the place, and private companies aren't exactly broadcasting how badly they are being hurt by the recession. One of my friends is watching her human resources and insurance business evaporate because her small-business clients are simply shutting their doors and going belly up.


The policy of most large companies, however, is to announce layoffs of significant size. It's considered a matter of business and social responsibility and has the effect of easing the psychological blow on the laid-off worker by telling the community that it's not the fault of the workers that they are losing their jobs; it's just that the company is cutting back. By not announcing the layoffs, IBM is making it harder on the people who are losing their jobs. The message is: suck it up, the company is doing fine, you're being laid off because you weren't as good as the workers we chose to keep.


This message of inadequacy is multiplied onto a national scale. While IBM is laying off workers in North America, it is hiring workers in emerging markets. As of last year, the company had nearly as many workers in Brazil, China, India, and Russia--113,000--as it did in the U.S.


The most recent IBM layoff of some 5,000 workers has raised the ire of the union-backed Alliance@IBM, which says that IBM is "abandoning the U.S. workforce." Lee Conrad, national coordinator for the group, made that statement upon learning about a patent application IBM had submitted that essentially is for a method to outsource work offshore. "A method for identifying human-resource work content to outsource offshore of an organization," was originally submitted for a patent in January 2006, according to Christine Young, a reporter for the Middletown, New York, Times Herald-Record. The application was withdrawn in October 2007 by IBM, which said that it lacked technical content.


At the end of last month, however, the existence of a second, similar patent came to light. According to Young, the application, which had been sitting in the Patent Office for some time unbeknownst to the press, was for a "computerized system to help businesses outsource offshore jobs while maximizing government tax breaks." The application apparently referenced weighing such goals as "50 percent of resources in China by 2010," the Times Herald-Record reported.


As soon as the newspaper broke the story, IBM put the brakes on and said it would withdraw the application. IBM spokesman Steve Malkiewicz claimed the patent application "was filed in error and will be withdrawn," the newspaper reported. The reason for the reversal Malkiewicz cited was that the patent was "contrary to our patent policy on business methods."


Meanwhile, U.S. Rep. John Hall, D-N.Y., whose fourth-largest campaign contributor was IBM, turned on the company and reportedly lambasted it for being "downright unpatriotic and un-American." The context of the statement wasn't entirely clear, but presumably it was when he was informed by the press of the existence of the patent application. Hall said he intended to launch a probe into IBM's offshore jobs policies, according to the Times Herald-Record.


Meanwhile, grumbling continues among laid-off IBM employees who just learned recently that the man responsible for steering IBM safely through the troubled waters of 2008 received nearly $21 million in compensation for his stewardship. IBM Chairman and CEO Sam Palmisano was rewarded for his efforts with salary--$1.8 million; performance-based bonus--$5.5 million; stock options and awards--$12.2 million; and perks--$1.44 million (including $493,881 for personal use of a company aircraft). The figures were reported as part of the company's filing with the U.S. Securities and Exchange Commission.


IBM's income in 2008 was $12.3 billion compared to only $10.4 billion in 2007. Revenues were also up over 2007 by about 5 percent to $103.6 billion in 2008, compared to $98.8 billion the prior year.


Alliance@IBM's Conrad sees the issue less as a testimonial to the benefits of capitalism and more as fair game for the political arena. He is calling for the government to "do something about the loss of IT jobs." He says the federal government should penalize companies that offshore work and then fire U.S. workers, and he wants companies who engage in the practice to get "no tax breaks" and certainly no stimulus money.


There is something ironic and tragic about workers who help build up a company to the pinnacle of success, only to have the current regime of well-heeled executives secretly fire them and stealthily replace them with lower-paid foreign workers. Meanwhile, stockholders and company executives continue to reap far-above-average rewards from the corporation's continued high profits--which all employees took part in producing through hard work and extraordinary dedication.

Chris Smith
About the Author:

Chris Smith was the Senior News Editor at MC Press Online from 2007 to 2012 and was responsible for the news content on the company's Web site. Chris has been writing about the IBM midrange industry since 1992 when he signed on with Duke Communications as West Coast Editor of News 3X/400. With a bachelor's from the University of California at Berkeley, where he majored in English and minored in Journalism, and a master's in Journalism from the University of Colorado, Boulder, Chris later studied computer programming and AS/400 operations at Long Beach City College. An award-winning writer with two Maggie Awards, four business books, and a collection of poetry to his credit, Chris began his newspaper career as a reporter in northern California, later worked as night city editor for the Rocky Mountain News in Denver, and went on to edit a national cable television trade magazine. He was Communications Manager for McDonnell Douglas Corp. in Long Beach, Calif., before it merged with Boeing, and oversaw implementation of the company's first IBM desktop publishing system there. An editor for MC Press Online since 2007, Chris has authored some 300 articles on a broad range of topics surrounding the IBM midrange platform that have appeared in the company's eight industry-leading newsletters. He can be reached at

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