Author: Site Staff

In the wake of Lehman Brothers’ collapse, campus recruiting is probably the last thing on the minds of executives at financial services companies.

But shelving such recruiting activities might put these firms at a severe disadvantage when markets pick up again, consultants warn.

The announcement on Monday, September 15, that Lehman, which has 25,000 employees, was filing for bankruptcy is the latest in what seems to be an ongoing unraveling of several financial services firms, which now include Bear Stearns, Fannie Mae and Freddie Mac. At press time, insurance giant American International Group was also discussing  a restructuring.

This string of events has executives at financial services companies hunkered down figuring out how they can survive. Recruiting is probably the last thing on their minds, said Rick Smith, senior vice president of Sibson Consulting.

“This is the Katrina of Wall Street,” he said. “There isn’t going to be a lot of hiring for a while.”

But just because companies might be freezing their hiring efforts doesn’t mean they shouldn’t continue attending campus recruiting events, Smith said.

“Financial services companies should still get out there and say, ‘We may not be hiring right now, but maybe in a few months,’ ” Smith said. “They want prospects to remember that when things were tough, they were still nice to them. ”

If these firms completely scale back their campus recruiting, they risk losing the top MBA prospects to other industries, experts say. “The consulting industry might do well tapping this talent,” he said.

Given the uncertainty and the lack of job openings, many MBA graduates may turn to the Big Four consulting firms, including PricewaterhouseCoopers and Deloitte, for jobs, said Alan Johnson, a compensation consultant in New York.

Companies that do consulting for financial services may also look to recruit these MBA graduates, Smith said.

“We may even want to look at some of these kids,” he said.

Companies such as Goldman Sachs and Morgan Stanley, which have so far remained unscathed by the crisis on Wall Street, are likely using this time to recruit more experienced employees from the likes of Lehman and Merrill Lynch, consultants say.

“They are definitely picking the cherries out of the pie,” said William J. Morin, chairman and CEO of WJM Associates, a New York organizational consulting firm.

“If these firms are smart, they will spend a similar amount of time reaching out to the top MBA students with their recruiting activities,” he said.

Financial services firms need to remember that for many young MBA students and recent graduates, this is the first major crisis on Wall Street that they have seen, Smith said. It’s up to recruiters to reassure them, he said.

“I have been in this business for 25 years and have lived through two recessions and a number of market crashes,” Smith said.

Although there might not be work in the industry the next six months, Smith and others believe that it will pick up again next year.

“This will pass,” Smith said. “It always does, and Wall Street will come back as strong as ever.”

—Jessica Marquez

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Nissan North America reports that its offer to buy out 1,200 of its Tennessee factory workers with lump-sum payments up to $125,000 has proved popular.

As the buyout deadline passed on Friday, September 12, the company declined to say how many of the 6,600 workers at two Tennessee plants have taken the buyout, saying that the paperwork was still being tabulated. Workers have three weeks to change their minds.

The company said in July that it had about 1,200 more technicians than it needed at its 25-year-old Smyrna, Tennessee, vehicle-assembly plant and its engine plant in Decherd, Tennessee. Not all of the 6,600 employees are eligible for the buyout.

Nissan offered a lump-sum payment of $100,000 or $125,000, depending on tenure, plus a year of health coverage and a car-purchase discount. Another buyout program is planned for 2009, and still another for 2010, although the benefits will be reduced in those years, the company said in July.

Filed by Lindsay Chappell of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Deere & Co. retirees have filed a lawsuit against the farm-equipment maker to force it to restore their previous health insurance coverage.

The lawsuit—filed in U.S. District Court in Davenport, Iowa—accuses Deere of reneging on a promise that some 5,000 salaried workers who retired after 1993 would be eligible for the same coverage in retirement that they had while they worked for the Moline, Illinois-based company.

The retirees say Deere changed the coverage early this year to plans that cost more, particularly for prescription drugs, and provide fewer benefits.

“It’s going to be a long haul. We realize that,” says retiree William Gabbard, president of the Flex Retiree Organization, the group that filed the lawsuit. “We’re still willing to sit down and talk, but nothing has come of it.”

A Deere spokesman said the company plans to “vigorously defend” its actions in court and called the changes in coverage “appropriate and beneficial.”

The defendants said they’ll seek class-action status for the lawsuit.

Deere said escalating costs and inefficiencies in the old plans forced the company to adopt alternatives. By giving employees more choices for coverage, Deere predicts it will be able to manage its insurance costs more effectively.

The company disputes retirees’ contention that it’s being insensitive to former employees.

“This program represents a significant benefit that many retirees of other companies do not enjoy,” the spokesman said.

Filed by Bob Tita of Crain’s Chicago Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The Government Accountability Office on Wednesday, September 10, called on the Department of Labor to provide guidance for defined-benefit plan investments in hedge funds and private equity so fund executives understand the challenges and risks of those asset classes.

The GAO report recommended that the guidance include a description of the steps that funds should take to address the challenges and risks of the alternative investments while meeting their fiduciary obligations under ERISA.

The guidance should also specifically address the challenges that alternative investments present for smaller pension plans, the report said.

In a July 16 letter of response attached to the GAO report, Bradford P. Campbell, assistant secretary of the DOL’s Employee Benefits Security Administration, said ERISA already charges plan fiduciaries with investing prudently.

Campbell said in the letter that providing additional guidance would be difficult because “there is no statutory definition of hedge fund or private equity fund, and investment objectives and strategies may vary greatly among these funds.”

The GAO responded to Campbell in the report, saying: “The lack of uniformity among hedge funds and private equity funds is itself an important issue to convey to fiduciaries, and highlights the need for an extensive due diligence process preceding any investment.”

“It is crucial that we take great care as pensions invest more in hedge funds and private equity,” Sen. Max Baucus, D-Montana, said in a news release. “If the pension investments sour, the retirement savings of millions of Americans could suffer.”

Baucus requested the GAO report.

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The U.S. Government Accountability Office on Thursday, September 11, recommended that the Pension Benefit Guaranty Corp. provide reports on its management and financial challenges to newly appointed board members, board representatives and its director in advance of the possible leadership change following the November presidential election.

PBGC executive director Charles E.F. Millard agreed to the recommendation and said the agency would continue to “work in concert with its board to provide the oversight information necessary to address the important issues that we confront in providing pension security to millions of Americans,” according to a comment letter included with the report.

The GAO report recommended that the PBGC give the reports to the Office of Inspector General and the GAO. No time frame was given.

This is a follow-up to a 2007 GAO report that recommended expanding the size of the PBGC board of directors; clearly defining the roles and responsibilities of board members, senior management and the director; and developing policies consistent with other government corporations.

The report noted that the PBGC’s board of directors remained composed of three members—the secretaries of Treasury, Labor and Commerce. Because of the small size, the board “has not been able to develop procedures and mechanisms to monitor the agency’s operations, such as standing committees, which are used by other government corporations,” the report said.

It also pointed out that the PBGC does not have the same reporting requirements that other government organizations have in regard to providing additional information to Congress. The GAO points to the Millennium Challenge Corp. and the Commodity Credit Corp., both of which are required to notify Congress before conducting certain financial transactions. Millennium Challenge works with countries around the world to reduce global poverty through the promotion of sustainable economic growth, and Commodity Credit was created to stabilize, support and protect farm income and prices.

Filed by Jennifer Byrd of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

New Yorkers are trying to take their economic fate into their own hands by seeking overtime and getting second jobs, according to a poll conducted by the Siena Research Institute.

In the past six months, 34 percent of New York state’s residents have started a second job or added overtime to their schedules to make ends meet. Of the respondents, 13 percent of retirees said they’ve taken on extra work, as did 43 percent of lower-income residents.

Researchers said residents are partly trying to save up for their winter energy bills.

“Gas and food prices have most people’s attention, and many are driving less, juggling spending or rewriting the family shopping list to include more store brands and fewer cookies, but everyone is bracing for the heating bills this winter,” said Don Levy, founder of the Siena Research Institute, in a statement. “Upstate, downstate; all incomes, nearly 80 percent of New Yorkers are concerned about the bite energy will take when the weather turns.”

The poll, which queried 513 households and comes with a margin of error of plus or minus 4.3 percentage points, showed that many residents are simply accepting today’s economic turmoil as a new way of life.

About 52 percent of respondents said they believe the country’s best economic days are behind us and that the next generation will have to accept a lower standard of living. Nearly 75 percent of voters said food prices are seriously affecting their financial condition, and 67 percent continue to feel the pinch of gasoline prices.

In May, fiscal analysts for New York Gov. David Paterson said a recession was beginning in New York and should continue into early 2009.

Still, some optimism remains, Siena researchers said.

“Even though more New Yorkers expect the economy to decline than to improve over the next 12 months, by a margin of 49 percent to 32 percent, residents think their personal situation will improve,” Levy said.

Residents who take a second job or work more overtime are trying to make that happen for themselves.

“It’s a natural reaction to economic insecurity,” said Jim Brown, an economist at the state Department of Labor.

Filed by Elisabeth Butler Cordova of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Institutional investors may not be as monolithic as believed when it comes to their views on executive compensation.

At least that would seem to be the take-away conclusion of a study of 20 of the 25 largest U.S. institutional investors. That survey found that more than half of the respondents oppose “say on pay” proposals.

Only a quarter of the institutions were in favor of such proposals, in which shareholders make nonbinding votes on whether they support or oppose an executive’s compensation.

The results come as something of a surprise, considering that influential shareholder advisory firms RiskMetrics and Glass Lewis back say on pay. Likewise, the Council of Institutional Investors, which represents 130 public, labor and corporate pension funds, approved a policy in March 2007 recommending that all companies voluntarily adopt say on pay.

But one of the executives at the polled institutions, all of whom chose to be anonymous in the study, said: “I think [say on pay] is ridiculous. I don’t get it. If you don’t like [the executive’s pay package], then don’t invest in the company. Go somewhere else.”

While some of the largest top institutional investors—including Vanguard, Fidelity Investments and T. Rowe Price—took part in the phone survey, other large institutions, such as the California Public Employees’ Retirement System, did not.

“There are nuances that often get lost in the day-to-day reporting” of these issues, said Tim Bartl, general counsel at the Center on Executive Compensation, which commissioned the study and helped draft some of the questions. “These findings are more contrary to [union and pension] statements.”

Maybe. But supporters of say on pay contend that the study is biased because of the involvement of Bartl’s group, a newly formed association that represents executives in the compensation debate and is funded by the Human Resource Policy Association.

Rich Ferlauto, director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees, said the center is a “front group” for defending excessive pay.

“Big Business must see the writing on the wall from Congress that there will be legislation to curb abusive pay practices next year, so they are out to undermine the growing view that action must be taken,” he said.

The study’s author, Kevin Hallock, a human resources professor at Cornell University, said the responses seem to indicate institutional investors are more willing to engage in direct dialogue with companies over disparate pay than to support say-on-pay proposals.

“Most of these guys are not worried about [executive compensation],” he said. “Although some vocal groups have a more formalized view of it.”

Other survey findings sure to tick off shareholder rights groups: About three-quarters of the investors had no real concerns about current levels of executive pay, and less than half said they think compensation consultants should be independent.

Filed by Nicholas Rummell of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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A bill that would expand workplace protections for disabled Americans gained unanimous Senate approval on Thursday, September 11.

The legislation, which was co-sponsored by 77 senators, sailed through on a voice vote. Both presidential nominees, Sens. John McCain, R-Arizona, and Barack Obama, D-Illinois, came out in support of the bill weeks ago.

The measure clarifies that Congress meant for the Americans with Disabilities Act to be broadly interpreted. The original measure, which became law in the early 1990s, required employers to make accommodations for disabled employees.

The new bill, the ADA Amendments Act, addresses Supreme Court decisions that critics say restricted the law. The court ruled in several cases that mitigating measures—such as medication or prosthesis—make a person ineligible for coverage.

In an unusual show of cooperation, disability advocates and the business lobby compromised on the final bill, ensuring broad support on Capitol Hill. In late June, the House approved a similar bill, 402-17.

“This was a slam-dunk,” said Keith Smith, director of employment and labor policy at the National Association of Manufacturers. “The biggest hurdle was the Senate calendar.”

Congress returned from its August recess on Monday and will be in session until late September, when it will take another break to allow members to go home and campaign.

It’s not clear whether all legislative business will be concluded by October, but the window is closing quickly.

Both the House and Senate versions of the ADA bill reiterate that the definition of a disability is a physical or mental impairment that “substantially limits” one or more major life activities. They also increase the number of activities covered, add a category of bodily functions and allow workers to sue if they are “regarded as” disabled.

The House bill defines “substantially limits” as “materially restricts.” In an effort to garner more support, the Senate avoids such sharpening of the language.

“Instead, the bill takes several specific and general steps that, individually and in combination, direct courts toward a more generous meaning and application of the definition,” Sen. Tom Harkin, D-Iowa, said in a Congressional Record statement in July.

Differences between the House and Senate bills won’t slow down the measure, Smith said. He anticipates that the House will take up and pass the Senate measure, bypassing the need for a conference committee.

“This is a high priority for [House Majority Leader Steny] Hoyer,” Smith said. Hoyer, D-Maryland, is the author of the House bill.

The White House has not indicated its position on the bill, but a veto is unlikely.

In addition to NAM, the Society for Human Resource Management and the U.S. Chamber of Commerce were among the business groups that participated in a coalition with disability advocates to push the bill through Congress.

As is the case with any compromise, no one was completely satisfied. The business community accepted a bill that could increase litigation. But the final language was less expansive than that contained in the original bill.

The lack of a specific definition of “substantially limits,” however, could require courts to step in again.

“At the center of the continuum, the question [of who is disabled] is probably straightforward,” said Neil Abramson, a partner at the law firm Proskauer Rose in New York.

“At the margins, it’s more difficult. That will probably generate, at least in the beginning, litigation,” he said.

HR departments will have to be fastidious about ensuring that language in employee files pertains only to performance so that it doesn’t become fodder for disability lawsuits.

“It’s going to require a fairly diligent HR function,” Abramson said. “The nuances are fairly complicated and will be fairly significant as this plays out.”

—Mark Schoeff Jr.

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The number of large employers that have frozen at least one of their defined-benefit pension plans continues to increase, according to a new survey.

Of the 624 employers on the 2008 Fortune 1000 list that sponsor defined-benefit plans, 27 percent have frozen at least one of those plans, according to benefit consultant Watson Wyatt Worldwide of Arlington, Virginia, which analyzed Securities & Exchange Commission filings. That’s up from 2007, when 21.6 percent of 638 Fortune 1000 companies had frozen at least one of their defined benefit plans.

In 2004, as the corporate drive to freeze defined-benefit plans was gathering steam, only 7.1 percent of 633 Fortune 1000 companies with defined-benefit plans had one or more frozen pension plans, according to the survey.

In a freeze, a company continues its pension plan, but future benefit accruals stop for some or all participants. Typically, employers who freeze their defined-benefit plans enhance their defined-contribution plans for affected participants.

Employers freezing their pension plans have done so for various reasons, including reducing retirement-plan costs and the volatility of required contributions, which for defined-benefit plans can fluctuate significantly due to changes in interest rates and investment results.

Fortune 1000 employers that have frozen defined-benefit plans in recent years include Hewlett-Packard Co., IBM Corp. and Sears Holdings Corp.

The survey is available at www.watsonwyatt.com.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Workers at Mitsubishi’s U.S. assembly plant continue to build vehicles despite a breakdown in contract talks with negotiators from the United Auto Workers.

The sides have reached an impasse on whether 1,250 UAW workers at the Normal, Illinois, plant will be asked for wage and benefit concessions, as they were two years ago during a period of financial trouble at Mitsubishi.

Mitsubishi Motors North America spokesman Dan Irvin said there is no schedule for returning to the negotiating table, but that production continues at a normal pace.

The two sides have declined to publicly discuss the issues of their negotiations. But a statement posted Sunday, September 7, on Mitsubishi’s UAW Local 2488 Web site told U.S. workers that “it’s extremely disappointing that this latest proposal asks these loyal workers for the kind of drastic cuts that would have a devastating impact on their lives and on the communities in which they live.”

The statement is attributed to UAW vice president Jimmy Settles, who directs the UAW’s affairs with the non-Detroit Three automakers.

In the Web site statement, which instructs the workforce to continue reporting to work, Settles said: “In 2006 UAW members made concessions worth millions of dollars to improve Mitsubishi’s bottom line.”

A $4-an-hour wage reduction lasted until this year, when workers returned to their previous wage levels.

The current Mitsubishi contract expired August 28, but both sides agreed to extend talks through September 5. The contract would have expired in 2005, but the UAW agreed to two separate extensions as Mitsubishi worked to regain financial stability.

Filed by Lindsay Chappell of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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