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The Pension Benefit Guaranty Corp. has assumed responsibility for the pension plan of Hurd Windows & Doors Inc. of Medford, Wisconsin, the agency announced Wednesday, August 5.

Hurd filed for Chapter 11 bankruptcy protection on September 15, 2008, and the U.S. Bankruptcy Court in Eau Claire, Wisconsin, approved the sale of the company’s assets to HWD Acquisition Inc. The transaction did not include the company’s two pension plans.

The pension plans—the Hurd Millwork Company Pension Plan for Local 2979 and the Hurd Millwork Company Pension Plan for Shop Employees—are a combined 77 percent funded, with $9.6 million in assets and $12.6 million in liabilities.

The PBGC expects to cover the entire $3 million shortfall.

Both plans have been frozen since December 3, 2004.

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

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With bills circulating in Congress that would enable flexible work schedules, the next focus for Capitol Hill lobbyists may be flextime for nonexempt workers.

Flexible work arrangements traditionally have been the domain of exempt, salaried employees, but now more companies are using them for nonexempt, hourly workers, experts say.

According to a recent study by WorldatWork and Work Design Collaborative, 45 percent of survey respondents report they include nonexempt employees in their flexible work arrangements. The researchers expected to find that only about 15 percent did so, according to the study, which surveyed 135 employers.

But offering nonexempt workers flexible work arrangements may require some changes to the Fair Labor Standards Act, which, among other things, regulates how employers keep track of overtime for nonexempt workers. Tracking overtime can be complicated if an employee is working a flexible work schedule or teleworking.

“We have had the FLSA since the 1930s and there have only been a few amendments to it,” said Ryan Johnson, vice president and a telework expert with WorldatWork. “The question is, are the national laws and rules designed for the modern workforce and workplace, or are they designed for the workplace of 50 to 60 years ago?”

FLSA requires that nonexempt employees who work more than 40 hours a week get paid overtime. This is problematic for nonexempt employees who occasionally want to work compressed workweeks and more than 40 hours a week on other weeks, experts say.

A bill in Congress would allow companies to provide compensatory time for employees in the private sector instead of overtime. This would mean that companies can provide time off with pay instead of overtime pay.

“We oppose the idea of compensatory time instead of overtime,” said Bill Lurye, associate general counsel for the AFL-CIO. “The FLSA only requires a 40-hour workweek and it’s easy to comply with and offer flexible work arrangements. We believe there are companies that have flexible work arrangements that are in line with FLSA.”

A number of organizations, including WorldatWork, are watching the issue closely and expect it to become a larger discussion in coming months.

“Paid family leave and paid sick leave are at the top of our agenda right now, but this is something we are starting to talk about,” said Cara Woodson Welch, director of public policy for WorldatWork.

One organization, Workplace Flexibility 2010, discussed the issue in its May public policy platform on flexible work arrangements.

The group, which is based at Georgetown University Law Center in Washington, calls for the Department of Labor to provide “written guidance, technical assistance and training on how the majority of flexible scheduling arrangements comply with the requirements of the FLSA. Such guidance should provide examples of FWAs that comply with the FLSA, examples of FWAs that do not, and an explanation of the underlying analysis.”

While workplace flexibility advocates argue that more employers will embrace these arrangements for nonexempt workers because they will cut costs and improve engagement and productivity, many are doubtful that this issue is high on companies’ agendas.

“Until you see this issue triggered by collective actions under FLSA or we see a number of overtime claims under FLSA, it’s unlikely that employers will want to have this addressed,” said Drew Matzkin, a partner at law firm Mintz Levin.

—Jessica Marquez

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Dear Excellence Director:

 

Think of probation as a chance to “test drive” people before making an offer of full-time employment. It is a chance for both company and would-be employee to gauge whether there is a good “fit.” Here are some keys to ensuring your test drive doesn’t end up in a ditch:

• Use a map to get from A to Z. It is important to set expectations for new employees during this trial period. Expectations can be set by creating goals and objectives that establish direction for the new employee. Plan small wins along the way to help them succeed.

• Stop at red lights. Immediately address any wrong behaviors and help educate the new employee on expected company behaviors. Organizational culture is sometimes tricky to learn.

• Go on green lights. Everyone has strengths. Once a new employee’s strengths are discovered, it is important to plug those strengths into organization opportunities. By having a conversation about the person’s strengths and observing them in action, you will have a much clearer understanding of how the new assets can be best leveraged.

• Sightseeing is a part of the drive. As you get to know the new employee and they get to know you and the organization, the goal is that both sides will get more comfortable with each other. Take the time to invite the new employee to organizational social events to get to know them outside of work.

• Navigate the construction. There will be times during this “test drive” that you will uncover development needs. Make a list and have a conversation with the new employee to discover learning and development opportunities.

• Use the brakes. New employees may find it hard to learn the organizational nuances and culture, thus leading them down the wrong road. Take time out to check in with the new employee on a consistent basis to see how they feel about how things are going. Communicate, communicate—and then communicate some more.

• Pay attention to the road ahead. By looking ahead to future organizational needs, you will be able to determine which role is best for new employees, based on an understanding of their strengths and weaknesses.

SOURCE: Dana Jarvis, Duquesne University, Pittsburgh

LEARN MORE: If people are leaving before their probationary period expires, open-ended exit interviews are a good way to determine the reasons.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

Small may be beautiful, but small businesses have a unique set of challenges that aren’t always pretty. Competing with larger employees when it comes to employee benefits is one of them.

According to recent research from MetLife, only about one-third of workers at businesses with fewer than 500 employees report that their company’s benefits communications effectively educate them on their benefits options so they can select those that best meet their needs. In tough financial times, employees are increasingly looking to employers for guidance on securing their personal financial safety net, according to MetLife. Forty-three percent of employees at small businesses have taken a greater interest in understanding the employee benefits they receive through their employer because of recent economic events.

For more information on how small businesses can more effectively leverage benefits programs, take a look at “Small Business Benefits: Cost-Effective Strategies for Maximizing ROI.” This 16-page supplement to MetLife’s seventh annual Study of Employee Benefits Trends is the result of surveying nearly 1,000 benefits decision makers at companies with fewer than 500 employees as well as hundreds of the employees who work for these smaller businesses, according to MetLife.

Workforce Management Online, August 2009 — Register Now!

With flu season around the corner and the H1N1 flu—also known as swine flu—still a top concern of medical professionals, Welcoa reminds employers that August is National Immunization Awareness Month. This would be a good month, the organization says, to ensure that workers have the immunizations they need. (There currently is no vaccine for the H1N1 flu, although one is in development, and the Centers for Disease Control and Prevention expect it to be available in the fall). August is also Cataract Awareness Month, and August 1 is National Minority Donor Awareness Day. Find out more information about these and other health observances at http://www.welcoa.org/observances/august.php.

The Pension Benefit Guaranty Corp. plans to create a new investment policy to replace the one adopted during the Bush administration, PBGC spokesman Jeffrey Speicher said.

Speicher declined to speculate on what the new policy would be or when it would be announced.

“We await the board’s decision on how our assets will be allocated in the future,” Speicher said in an interview.

Under the PBGC’s existing investment policy, adopted by the PBGC board in February 2008, 45 percent of the $48 billion in assets available for investment were supposed to be in equities, 45 percent in fixed income and 10 percent in alternatives. This policy has been suspended by the PBGC board, Speicher said.

Previously, 75 to 85 percent of the PBGC’s assets were in a liability-driven investment strategy, with the balance invested in stocks.

In a May 20 news release, the PBGC said that as of April 30, about 30 percent of its assets were invested in equities and 68 percent were in bonds, with less than 2 percent in alternatives. According to that release, all of the PBGC’s alternative investments were inherited from pension plans the agency took over.

As part of its pending change in plans, the PBGC on July 20 terminated BlackRock, JPMorgan Asset Management and Goldman Sachs Asset Management, which had been hired in December to run a combined $2.5 billion in real estate and private equity for the PBGC.

The contracts, which had not been funded, were canceled following allegations that Charles E.F. Millard, former PBGC director, had inappropriate contact with the managers before they were hired.

In a statement, Stanley M. Brand, Millard’s attorney, said that Millard had sought to implement a policy change to secure the agency’s future.

“He sought advice from top professionals in a responsible and legal manner,” Brand said. “The choices that he, his colleagues and PBGC’s board of directors made were strictly on the merits.”

Brian Beades, a BlackRock spokesman, said, “We are confident that neither the company nor any of its employees did anything improper or illegal.”

Mary Sedarat, a spokeswoman for JPMorgan, declined comment.

Andrea Rafael, a spokeswoman for Goldman Sachs, did not immediately return telephone calls seeking comment

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 director of the Pension Benefit Guaranty Corp. would be barred from any involvement in hiring money managers or from “participating in any matter that may have or appear to have a conflict of interest” under legislation introduced in the Senate on Thursday, July 30.

The bill, introduced by a coalition of Senate Democrats, also would expand the PBGC’s board to seven members from the current three, require it to meet at least four times a year and give the PBGC’s advisory committee and inspector general direct access to the board.

The PBGC board—composed of the secretaries of Treasury, Labor and Commerce—has met only 20 times since 1980, according to a news release from Sen. Herb Kohl, D-Wisconsin. Kohl is chairman of the Senate Special Committee on Aging.

“The GAO has indicated for years that the PBGC board members do not have enough time or resources to provide the necessary policy direction and oversight,” Sen. Kohl said in the news release. “The role of PBGC is too crucial to allow its governance to slip through the cracks.”

The legislation was spurred in part by allegations that Charles E.F. Millard, the PBGC’s former director, may have been inappropriately involved in the hiring of money managers at the agency. These are charges that Millard, through his attorney, has denied.

Co-sponsors of the bill, according to the news release, are Sens. Michael Bennet, D-Colorado, Claire McCaskill, D-Missouri, and Russ Feingold, D-Wisconsin.

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

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Before heading into a monthlong recess, the House of Representatives passed legislation on Friday, July 31, that would give shareholders an annual, nonbinding vote on executive compensation and allow federal regulators to curb incentive pay.

The bill, approved largely along party lines, 237-185, is similar to a measure that made it through the House in 2007 but was not acted upon by the Senate before the end of the congressional term.

It’s unclear what the Senate will do this time. Observers say that it might include a so-called say-on-pay provision in a broader financial regulation measure later this year.

In addition to mandating the shareholder vote on compensation, the House bill would prohibit any incentive pay structure that “encourages inappropriate risks” that “could threaten the safety and soundness of … financial institutions or could have serious adverse effects on economic conditions or financial stability.”

The provision would apply to financial companies with assets of $1 billion or more regardless of whether they have accepted federal bailout funds. Another part of the bill would require corporate compensation committees to be composed of independent directors.

Proponents of the bill argued that it gives shareholders an opportunity to rein in excessive executive pay, an issue that has stoked anger among voters following the $700 billion government rescue of failed financial institutions last fall.

A July 30 report by New York Attorney General Andrew Cuomo shows that the nine original recipients of bailout funds spent nearly $33 billion on bonuses in 2008.

“There is no clear rhyme or reason to the way banks compensate and reward their employees,” the report states. “But even a cursory examination of the data suggests that in these challenging economic times, compensation for bank employees has become unmoored from the banks’ financial performance.”

Republicans asserted that the House bill goes too far in correcting the problem and would usher in excessive government control of pay packages.

“It is the government that is empowered,” said Rep. Spencer Bachus, R-Alabama and the ranking Republican on the House Financial Services Committee. “Government bureaucrats do not know what is best for America. Are we going to have every bonus submitted to some government agency?”

But Democrats accused Republicans of ignoring the problems caused by excessive risk in the financial system.

Rep. Barney Frank, D-Massachusetts and chairman of the House Financial Services Committee, said the bill would not allow the Federal Reserve, the Securities and Exchange Commission or any other regulator to set pay. Rather, it would allow them to ensure that risk incentives don’t undermine the markets.

“There has to be balance to the risk-taking,” Frank said. “We want an alignment of risk. The Republican position … is to do nothing.”

A Republican alternative that would have authorized a nonbinding shareholder vote every three years, allowed shareholders to opt out of such votes and deleted the risk-based pay provisions was voted down, 244-179.

Having the government determine whether compensation is inappropriately risky sets a dangerous precedent, according to Timothy Bartl, senior vice president and general counsel of the Center on Executive Compensation.

“You have the federal government superseding the judgment of the compensation committee,” said Bartl, whose organization is sponsored by the HR Policy Association and has issued its own recommendations for addressing risk.

The say-on-pay provision also would be detrimental, Bartl said, because it could create a situation where boards make pay decisions based on what package is likely to draw the most votes.

“That may not be in the best long-term interests of the company or its shareholders,” Bartl said. “This boils down to the question of how do you encourage and succeed in obtaining a sound link between pay and performance.”

—Mark Schoeff Jr.

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Citigroup and Merrill Lynch together posted $54 billion in losses last year.

To avoid total collapse, they received $55 billion in federal bailout money. Nonetheless, the two ailing firms awarded nearly $9 billion in bonuses.

Those are just some of the findings in a blistering report by New York state Attorney General Andrew Cuomo titled “No Rhyme or Reason: The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture.”

“When the banks did well, their employees were paid well,” Cuomo wrote in the report, which he sent to Congress on Thursday, July 30. “When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers, and their employees were still paid well.”

Although banks claim to link pay to performance, he accused the firms of failing “to follow any objective or consistent principles” in setting pay, which he called “simply a one-way ratchet up. … Large payouts became a cultural expectation at banks and a source of competition among the firms.”

Cuomo’s report comes two days after the House Financial Services Committee passed an executive compensation reform bill that would, among other things, give shareholders the right to vote on companies’ pay practices.

Among Cuomo’s findings: Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. paid out a combined $18 billion in bonuses last year, nearly double their net income of $9.6 billion. At Bank of America, compensation payments held steady last year at $18 billion, even as net income fell to $4 billion from $14 billion. Similarly, compensation levels at Citigroup were little changed last year at more than $30 billion, even as the bank plunged deeply into the red.

Cuomo’s report includes an excerpt from testimony taken by his office from the former head of Merrill Lynch’s compensation committee, John Finnegan, which the attorney general said illustrates how banks rationalized supersized pay in light of dismal results. Merrill was acquired late last year by Bank of America.

“I think we thought it would jeopardize the long-term health of the firm … if we didn’t pay people who performed and contributed for their performance in the face of large losses on legacy assets in some units,” the Merrill director said, according to the report.

Officials at Bank of America, Citigroup and Morgan Stanley didn’t respond immediately to requests for comment. JPMorgan and Goldman Sachs declined to comment.

“The rationalization of the compensation and bonus system must be accomplished now,” Cuomo concluded. He said the private sector is the “appropriate” place for such reform, but added that the government should get involved if banks do not adopt enough changes on their own.

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

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General Motors head of human resources and longtime executive Katy Barclay is stepping down, the automaker said Thursday, July 30. She will be replaced by Mary Barra, a top executive with an engineering background who worked closely with former GM chief executive Rick Wagoner.

The leadership change comes just weeks after the new GM emerged from a structured Chapter 11 bankruptcy with the goal of overhauling the company’s bureaucratic and bloated corporate culture, especially within its executive ranks. The shift completes GM’s executive restructuring, though the company has yet to bring in executives from outside the corporation.

The HR change will officially take place October 1, which is GM’s deadline to reduce its salaried workforce by 4,000 people. Saturday, August 1, is the deadline for reducing the company’s union workforce. The company said it wants to trim the number of union workers to 40,500 from 61,000 a year ago.

The retirement of Barclay, 53, who has been vice president of global human resources since 1998, was seen as long overdue. According to a 2005 article published in Automotive News (a sister publication of Workforce Management), Barclay said her first automotive job was as a human resources professional at GM in 1978.

“She is one of the same senior leaders who is responsible for the destruction of the company,” said Rob Kleinbaum, managing director of auto industry consulting firm Rak & Co. “She is responsible for it and should be accountable for it.”

Barra, 47, is vice president for global manufacturing engineering and has been with GM since 1980. She has served in a number of engineering, manufacturing, management and communications positions and was plant manager for the Detroit Hamtramck assembly center. Barra was appointed executive director of vehicle manufacturing engineering in 2004 and was named to her current position in 2008, the company said in a release.

Appointing an engineer with no HR experience as the department’s head suggests the company is looking to infuse it with a greater sense of the manufacturing principles of continual improvement and operational efficiency.

“It’s a positive sign they want to make deep changes in HR and don’t want to draw from the HR community,” Kleinbaum said.

Before her current position, Barclay was general director of human resource management for GM North American operations. Other positions include director of human resources for GM vehicle sales, service and marketing, and director of compensation for GM.

CEO Fritz Henderson, who has made changing the company’s culture a top priority for the new GM, announced the changes to employees Thursday, July 30, as part of an overall reduction in the company’s executive ranks.

“Our goal was to streamline our leadership team and put some of our best executives in positions where they can use their diverse perspectives and extensive global experience to create the new GM,” Henderson said in a statement.

The company appointed Mark Reuss as head of global engineering, replacing two executives, Jim Queen and Ed Koerner, who have been with GM a combined 72 years.

In a post on the company’s blog in June just after the company declared bankruptcy, Henderson wrote, “It’s important to remember that the reinvention of GM must start within GM, and we all need to be part of the process.”

Henderson then formed a team to look at the company’s cultural issues, “like how the new priorities of customer/product focus, speed, risk-taking and accountability become a natural part of our behavior,” according to a memo to employees.

Henderson has since appointed Chris Oster, head of organizational change management, to lead the company’s overhaul of its corporate culture.

The changes come a week after GM announced that the human resources seat at the proverbial leadership table would be eliminated. The company replaced its Automotive Product Board and Automotive Strategy Board, on which Barclay sat, with a new nine-person executive leadership committee.

The smaller committee is instead composed of executives from marketing, manufacturing, finance, labor relations, corporate planning, sales, and supply chain units. The new Executive Committee was created in hopes of speeding up day-to-day decision making.

Barra will report directly to CEO Fritz Henderson, a spokesman said.

—Jeremy Smerd

Read General Motor president and CEO Frederick A. Henderson’s response to this story.

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