|
|||
Posted by Peter J Smith on 01 November 2000 at 13:09:35: The following appeared in South Africas morning Financial Paper - Business Report.
Strip away pensions' veneer to find ugly face of capitalism
An intelligent management team will devise imaginative ways of growing earnings even in a sluggish environment. This will inevitably involve growing the sales line as well as intelligent paring of the company's cost structure. This type of team, of which there are many, is worth its weight in pentium chips and over the long term certainly deserves whatever generous stock options it is allocated. By contrast a team of dullards, or maintenance managers whose numbers are unfortunately in rapid increase, will rely on the economy to grow or shrink its business. The emphasis will be on protecting the bottom line. And if you're not growing the top line, then the only way to lift the bottom line is to cut costs. Maintenance managers do not do this with any precision and so what invariably happens is that they do not take costs out of the system, they take costs out of the product or service. Which means that they cheapen it. The managers involved expect to have moved on before the longer-term destructive effect of this short-term attitude becomes apparent. The problem is that this cost-cutting obsession considerably undermines the company's ability to grow. Which means that protecting the bottom line requires increasingly desperate cost cutting measures. Introduce into this scenario a smart actuary who explains how to convert one of the company's major liabilities into an asset. With considerable sleight of hand, defined benefit pension funds are converted into defined contribution funds. The process is managed in such a way that it not only curtails the company's commitment to the provision of pensions but it generates huge reserves which are quickly renamed surpluses in order to strengthen management's claim to them. The only people who might create a fuss are the pensioners who are an easy target because they have absolutely no voice in our society. On a country-wide basis the asset in question is worth in the region of R80 billion. While the hugely lopsided battle for this asset is being fought between individual pensioners on the one hand and employers supported by the Financial Services Board on the other, the employers are quickly eating away at the reserve. They accomplish this by taking pension fund contribution holidays. Corporate South Africa is not sitting on R80 billion of funds that are surplus to the entitlements of pension fund members. The bulk of the R80 billion represents the extent to which the transfer values, attributed to members' claims at the time of conversion, were understated. There was certainly nothing that could be described as surplus in the life of Bennett Martins to whom my colleague David Gleason referred last week. Martins who worked for IBM, the IT company, for 26 years until he retired in 1986, died in July in miserable circumstances. His electricity and phone had been cut off because he was unable to pay the bills. At the time of his death Martins and other IBM pensioners were battling to get nothing more than they were entitled to from the IBM South Africa pension fund. After years of pension increases lagging inflation, in 1995 they had been promised that they would be given increases sufficient to catch up with inflation. Apparently as a result of bureaucratic bungling nothing was done. The poor under-resourced pensioners were forced to do battle against this powerful multi-national company that set up all manner of costly legal and actuarial obstacles to stall them. As if that was not tragic enough the pension fund adjudicator ruled last November against the members trying to get their inflation increases. The adjudicator ruled that the employer had the right to withhold inflation increases as a legitimate tool to negotiate a deal for the employer to share the surplus. Capitalism doesn't get much uglier than the face it displays to its
pensioners. Posted by e.m.ployee on 07 November 2000 at 10:55:44: In Reply to: IBM South Africa Pension fund in the news posted by Peter J Smith on 01 November 2000 at 13:09:35: Illustrates beautifully the point made elsewhere - the ONLY way to
influence IBM is by making it very clear that what is being done with
pension funds is a systematic and worldwide manipulation which has 3
objectives... Exposing this sort of behaviour will exert pressure on the company not only to treat pensioners properly but also to run the company more effectively rather than masking its underachievement by financial manipulation. Posted by Alan Murphy on 07 November 2000 at 12:42:58: In Reply to: Re: IBM South Africa Pension fund in the news posted by e.m.ployee on 07 November 2000 at 10:55:44: See also the news clipping which is linked to on the page below. This is from South Africa's 'Business Report' dated 26th October and
is titled "Mistakes, recalcitrance, bureaucracy E and pensioners." Posted by Mike M. on 09 November 2000 at 15:56:47: In Reply to: Re: IBM South Africa Pension fund in the news posted by e.m.ployee on 07 November 2000 at 10:55:44: It takes courage to tell it how it is. It's good to know that The Company has clearly changed since my day, and it is very sad Do you think the conspiracy you seem to be alleging will |
|||
| Back to: Documents Contents |