Note that what is quoted as good about our pensions comes from the past and what is acknowledged as less favourable to us is current.
That completes the material on the trustee views. I forgot to discuss some things, and failed to discuss others because the discussion ran out of time. I would have liked to discuss how disclosures of interest lead to board members not voting. I would have liked to learn whether anything (other than their choice) could have led to the elected members who resigned not telling us why. I would have liked to learn more about the support given to elected members in assembling data to support their point of view.
If you think I discussed the wrong things then, as a retiree or employee, you can ask for a Preliminary Stage discussion yourself. (Obviously, you should be prepared to wait - the professionals at North Harbour have a lot more to do than discussions.)
Returning to the a,b,c,d at the top of this note:
a) Once upon a time IBM UK was required to hold a vote about whether employees wanted union recognition. If you voted then the odds are very high that, like me, you voted against, since the overall vote against was somewhere up above ninety percent. No doubt we felt we already had a good implicit agreement with IBM upper management - they behaved as a corporation in a way we could be proud of, they rewarded us well, we made huge efforts and remained loyal. We didn't want that replaced by outcomes decided at picket lines and court rooms. This classic IBM culture came under threat during the bad patch IBM had around the late 80s.
IBM took a beating over the OS/2 operating system when it hoped to co-operate with Microsoft on the basis of gentlemenly agreements. That and other circumstances led those in power to believe that it was a competitive necessity to adopt a Microsoft approach - operating brutally near the limits of what was legal. (And beyond the limits in Microsoft's case).
The serious periodical 'Wired' says they even wanted Bill Gates to run IBM. In practice we got Mr Gerstner, who had no experience of the IBM culture or of IBM's area of expertise.
Whether the change of direction was a good judgement or not is another topic - it was certainly likely to be a commercial advantage during the period when the employees and the rest of the world continued to believe that the classic IBM culture was still in place. Also it was certainly a bonus to those making the change. The standards about executives selling their shares were relaxed. According to the Vickers Insider Trading Reports, 17 IBM executives made a total $76 million pretax gain on selling IBM shares between Oct 1997 and Oct 1998. ("Insiders" are people with a knowledge of major company plans, plans such as companies buying their own shares to bolster the share price.) One of these 17 was J D Serkes who was one of directors IBM appointed to our Trust.
Anyway, the change happened. The classic IBM culture has been replaced. The new IBM made IBM's first hostile takeover. The new IBM believes pensions are an "old-fashioned" idea. The new IBM has settled in a case where it was alleged to have knowingly sold defective chips. The new IBM will pay to settle charges of bribery in Argentina. I don't know it for a fact but I'd be prepared to wager that UK union membership is rising and I would be surprised if the staff voluntary resignation rate is not at an all time high.
You can find out more about all this by following links from the messages and news items of this site. The weaselly efforts by IBM lawyers to keep something out of a shareholder meeting are almost funny. (See "Response to IBM letter to the SEC..."). Of course, the users of this site are not necessarily representative. (More aware than most, right? :-)
Not all employees will have embraced the new culture - some feel they have not changed their attitudes at all. However, very senior executives in the US company, such as those that have been on our trust board, can be expected to be enthusiasts about the way the company is now run.
So the cause of the damage is a change in the IBM culture. The immediate extent of the damage (unless corrected) is £24M out of the reserves that would otherwise have helped protect payments to us from future uncertainties.
b) Unless the situation is corrected, the first way the damage could increase is with further loss of the reserves, up to all of them. (Several hundred million). The second way is if IBM exercised its power to disapprove pension increases. The motivation for the new IBM to do that is clear - it would produce more reserves that could be whisked away for the benefit of IBM's balance sheet. Instead of the value of your pension decreasing by roughly 30% of the RPI change each year, as it does now, it could decrease by 100% of the RPI.
The theoretical possibility of increases not being approved was also there under the classic IBM culture. At that time most people probably thought the reason for keeping the 70% rule informal was so that increases could be more when times were good and less when they were bad. We now know that was not the case since times have been good but increases have not responded. So the obvious question is why IBM wants to retain this power now. The obvious answer (can you think of another?) is that they are contemplating using it to lower increases.
(If you think this is bad spare a thought for our American colleagues who are still employees - those with 10-20 years in the company face an immediate drop of 30%-50% in the value of the pension benefit they have earned.)
(If you can't feel sympathy for those employees, who are amongst the best paid in the world, consider the Filipino women paid six dollars a day to assemble the CD-ROM drives that IBM sells. This does not conflict with the new-IBM culture, [doing what the lawyers can defend], because these are not IBM employees.)
c) If you were really smart enough to have seen this coming you would have taken some remedial action when you retired - by taking a lower pension and a higher lump sum you would have enjoyed all the appreciation of the lump sum with no risk of it being whisked away. I suspect that many people chose not to do this - the classical IBM culture provided more of an argument for letting the trust look after the money.
Remedial action now via the Ombudsman is a possibility, either on a technical basis (that the documents involved don't allow the trust to do what it did) or based on the trust behaviour. Although any complaint does not have to be in legal terminology it has to be good in law because the law can be used to overturn an Ombudsman ruling.
The legal route is weak, for us, because the trust has much more protection than the retiree in law. When you were in work and needed a decision from your boss, you expected the decision to be that of a reasonable person. It is not that simple with the law.
The test of whether the trust has done wrong is not "what a reasonable person would think", it is a higher hurdle than that. The test is not "what a jury would think beyond reasonable doubt", it is higher than that. One judge put the test as "The Judge may disagree with the manner in which the Trustees have exercised their discretion but, unless they can be seen to have taken into account irrelevant, improper or irrational factors, or unless their decision can be said to be one that no reasonable body of Trustees, properly directing themselves could have reached, the Judge cannot interfere."
My paraphrase of that is "The trust has not done wrong if there is a conceivable way they could have thought they were doing right".
This is an unusually high hurdle. For example, in "insider trading" cases the tests used take into account all the circumstances - regulations do not say "No insider trade is using insider information if the trader could conceivably have had a different reason for making it".
Those of you who play tournament bridge will know that the regulations of that game operate the inverse of the trustee rule - if you hesitate in the bidding your opponents are awarded a verdict as if you passed information by the hesitation; whether your side's actions were actually or conceivably innocent is no help to you.
Despite the high hurdle, it is right to exercise the Ombudsman route since there is a moderate chance the hurdle can be overcome, and because active concern can have good side-effects arising from the "squeaky wheel" factor.
d) The following structural change bit has the tone of a potted (potty?) lecture so if that sounds bad, quit reading now.
The circle whereby corporations own media and fund campaigns that empower the politicians that produce the rules to channel the money flow whereby corporations own media and fund campaigns that ..... has produced the situation where a company selects the majority of those who vote on a trustee board and any victims of that have to show, with poor access to records of what really happened, that the board could not conceivably have thought it was doing right. This is corporate power in action.
One upon a time the monarchy had more power than was good for the rest of the population. People changed that.
Some of us lived when government power was excessive and millions could be sent to their death in faraway places with the government controlling what the populace was told about it. With the advent of better communications people knew more about what happened to both sides in a war and that particular government power was reined in.
Most of us in the UK lived through a period when union power was excessive. That was reined in when union activity became so prevalent that even those in sympathy with union power recognised they that were in the same community as those suffering from it.
Nowadays corporate power is excessive. Individuals, communities, and weaker countries struggle to achieve a minimimum of self-determination in their affairs under the yoke of work, debt, and corporate decisions that they cannot get near to. The trends in corporate consumption that threaten to make more of the world uninhabitable are accelerating. Governments must kotow to the media corporations or risk being isolated from their electorate. Ombudsmen and regulators often roll over or are rolled over.
The tide of affairs will turn when those who are part of the apparatus of corporate power recognise that overall they are as much the victims as anyone else. It will happen - extreme weather touches everybody, skewness between haves and havenots cannot be ratcheted up forever, the spread of facts across the web cannot be legislated away. The concern should be about how much worse things may get before they turn for the better.
You might wonder, if excessive corporate power is the cause of our little problems, and the cycle described above is the cause of excessive corporate power, what is the cause of the cycle above? There is a much praised book, ("The Rise and Decline of Nations", Mancur Olson, 1982) which is relevant. It isn't light reading because it is written as economic theory but it argues that history shows that things we regard as fostering orderliness (like the caste system, the class system, perhaps the legal and political systems) are the framework whereby the powerful reinforce their power, and the resulting skewness is eventually so inefficient that a nation can fail even when its external enemies are weak. Not an encouraging thought if you substitute "the world" for "a nation".
Meanwhile, most of the retirees this site aims to represent will not know what is done to their pension fund. Those that do will sensibly plan to be a little less well off, and maybe (selfishly?) seek to optimise their own finances by voting the way they think will minimize inflation and the means-testing of state pensions. Perhaps just a few will react more to what is happening.
They might borrow a book from the library, like one of George Monbiot's carefully researched tracts or the Naomi Klein empathetic effort ("No Logo"). They might change their newspaper as an experiment. Perhaps just one or two will see this affair as a cue for more activity, remembering chaos theory and probability theory - the butterfly can precipitate a storm, people do win lotteries.
Not a structural change in itself but a molecular level component of that change - just as this slim website represents a molecular level of the undisputed power of the web.