Davis: IBM bullies the state of Vermont, again

Editor’s note: Richard Davis is the executive director of the Vermont Citizens Campaign for Health and has been a registered nurse in Vermont since 1978. He has been writing a weekly column on health care politics for the Brattleboro Reformer since 1994. This op-ed first appeared in the Reformer.

GUILFORD- We have developed a zero tolerance policy for schoolyard bullies but when it comes to the place where laws are made bullying is alive and well. Just ask anyone who has had to deal with IBM lately.

IBM is Vermont’s largest private sector employer. Keep in mind that the State of Vermont employs the most people and that there other sectors of our economy that employ many more people than the sacred IBM, such as the hospital industry.

History has taught us that when IBM wants something to happen or not to happen they get their way. They don’t like the current health care bill that is on a fast track to the governor’s desk so they have put together a coalition of large business owners to turn the bill into something they can live with.

Their rhetoric is right out of the right-wing playbook. They say they are in favor of health care reform and recognize that it needs to happen. Then they go on to detail all of things wrong with the bill, which is just about every major piece of it.

The IBM coalition is lobbying (or is it bullying?) the governor and the legislature to make sure the health care bill turns out the way they want it. They may say that are only looking out for what is best for Vermonters, but what they really want is to protect their bottom line at all costs. Just ask the former and current employees who made it clear that IBM management does not speak for them when it comes to health care reform.

The amendments being proposed by IBM management transform the entire health reform process into a plan based on the fatally flawed free market insurance model while allowing self-insured businesses to shirk from shared responsibility for a system of health insurance that would provide a basic safety net for all Vermonters.

The IBM coalition amendments make it clear that IBM and its allies have no concern for the majority of Vermonters who own and work for all of the small businesses in Vermont, that are the foundation of the state’s economy.

According to a January CNN story, “IBM posted a fourth-quarter profit… that beat Wall Street expectations. The tech giant also pointed to an improved outlook for 2010. The Armonk, N.Y.-based company reported a profit of $4.81 billion, or $3.59 per share, which was 9% higher than what IBM reported last year.”

So what is IBM complaining about to Vermont’s politicians? They are making veiled threats about moving out of Vermont because their profitability might be hurt under the current health care reform proposal. Let’s look at the facts.

The health care bill has no funding mechanism, but according to the report by Dr. Hsiao upon which the legislation is based, apayroll tax on employers of about 11% would pay for the plan. IBM is big enough to be self-insured. That means they hire a middle man to administer an insurance plan for which they take most of the risk.

Large businesses do well with self-insurance plans and they are able to have a great deal of control over benefits and costs. It is one of their best recruiting and retention tools. Self-insured companies are also subject to a federal law, the Employee Retirement Income Security Act of 1974, a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry.

If a company comes under the umbrella of ERISA, such as IBM, they do not have to follow state laws when it comes to health insurance. It also means that if a state creates a health care system it cannot require companies that fall under ERISA rules to join any new insurance plan they create.

So IBM wants to have the choice of either keeping the plan they have or buying into the new state plan without having to pay the payroll tax if they choose not to join the state plan. They claim they would be paying twice for health insurance if they keep the plan they have. That claim may be more spin than truth, but whatever happened to doing something because it was good for the entire state and not just for IBM?

IBM’s share of the cost for Vermont’s proposed health insurance system will not jeopardize very much of the $4.81 billion in profits that the company raked in last year. Whether or not IBM and its allies buy into a new health insurance plan, they should have a responsibility to make it viable for all of us. How many tax breaks and special concessions have they received over the years that have come at the expense of tax-paying Vermonters who don’t work for IBM?

The truth is that the plan that Vermont eventually develops will be as good as if not better than what IBM now offers. It has to be at least as good as current Medicaid plans and that is about as good as insurance gets. If IBM really believed in health care reform, as they claim, they could support a state-run insurance plan as long as they had input into the benefits package.

IBM could get out of the business of being an insurance company and concentrate on their ability to generate even more than $4.81 billion a year in profit. Instead of being Vermont’s biggest bully they could lead the charge to create the largest and most diverse insurance pool the state has ever seen so that our new form of insurance will be financially viable for all Vermonters, not just IBM.

Tell your Senators you don’t want Vermont’s health care reform bill to become the IBM Bill.

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  • walter carpenter

    Thanks Richard. Nice piece. Curious if IBM reads it. Of course, another factor is how many part time employees does IBM have, those working in jobs that are not classified as full time and no benefits? Those people, if lucky, might have Catamount, so we are paying for them, whereas IBM is not.

  • Mr. Davis,

    Companies like IBM become successful through a massively complicated process of evaluating every facet of their operations in order to optimize them; they cut waste and add value anywhere possible, because the aggregate of small and medium-sized changes – if done correctly – will add up to a competitive advantage.

    What you’re suggesting is that because a company has been successful at this, it should abandon part of what has made it successful because it would be “good for the entire state and not just for IBM.”

    No company EVER becomes successful because it does what is good for the state instead of what is good for itself.

    Companies exist to provide products or services. If they’re good at this, they make a profit, invest capital, own property, pay employees, provide employee benefits, and give back to communities in ways they feel are appropriate… all of which generate prosperity, as well as tax revenue for the state. That’s how companies benefit the state – by being successful and earning PROFIT, not by behaving as though they are a giant ATM for the governor’s and the legislature’s grand plans.

    • Danny Jensen

      “No company EVER becomes successful because it does what is good for the state instead of what is good for itself.”

      Thank you for so eloquently making the argument that corporate charters should go back to being temporary. Do some good and you can be incorporated. Thumb your nose at an entire state and lose that ability.

    • James Davis

      It’s pretty clear that IBM has no intention of giving back to the community, since they’re actively working to avoid it by threatening a pull-out. Does this sound like a company that when given the choice, would voluntarily part with a small portion of it’s enormous profits in the interest of benefiting the community? That’s a rhetorical question by the way.

      Please, explain to us again what the difference is between coercion and voluntarism, and why one is better for the community than the other. Also please explain to us how one day IBM will collectively wake up and think “We’ve made too much profit this year, why don’t we give some of this money away in the interest of benefiting the community we reside in”.

      I mean really, who could possibly imagine the CEO of IBM doing something like… oh I dunno, giving himself a 30% raise:


      We should just have a little faith, and believe that all he really wants to do is give back to the community that made it possible for him. That’s sarcasm by the way.

      • Mr. Davis,

        It seems to me that you misunderstand the basic purpose of businesses. The reason they exist is not to benefit the community by directly transferring cash, but rather to provide their products and/or services well.

        And, cry out against executive compensation packages all you want, but the fact remains that making a company successful is incredibly difficult, and the people who know how to do that are sought-after commodities. Boards of directors are willing to pay huge money to find folks who can chart and achieve strategic success for a business, because there aren’t that many of them out there. And by the way, boards of directors generally give CEOs raises; any CEO who tried to give herself a 30% raise unilaterally would only end up forced out of her position.

        Your rhetoric seems to be predicated on the notion that profits and high pay are wicked things, and that any company that is highly profitable should make amends by transferring cash to the communities in which it does business. This ignores the fact that highly profitable businesses are able to pay employees better, provide better benefits, and conduct more voluntary CSR activities. These are values that are shared by liberals and conservatives alike, but you seem intent on using a company’s success as a lever to pry yet more cash from it.

        It should be no surprise that such companies look around them at the dozens of states courting businesses (to say nothing of foreign countries), and decide that they don’t need to put up with being treated like a bad neighbor simply for being successful.

  • Great piece, Richard.

    Jamal – I can’t disagree with you more. Vermont Businesses for Social Responsibility believe our local companies and businesses have a responsibility beyond their financial bottom line.

    • Mr. Barlow,

      There are many, many companies that believe in being responsible to the communities in which they do business, and they do so voluntarily to the tune of billions of dollars a year. In fact, there is an entire industry sector emerging that helps companies find the best ways to maximize their impact in this realm. However, I think there is a fundamental difference between voluntary socially responsible behavior and coerced behavior deemed “socially responsible” by others.

      Unfortunately, VBSR doesn’t simply advocate that your members behave in certain ways; you actually advocate that the legislature force other businesses, by law, to behave in ways YOU find “responsible.”

      It’s nice that you believe companies have a responsibility beyond their financial bottom line, but in my view, it’s not so nice that you believe it so strongly that you want everyone else to fund your policy preferences through tax dollars and the force of law. If a business is indeed socially “irresponsible,” then I would think the caring citizens and consumers would vote with their dollars not to support such an entity.

  • Arthur Coates

    Mr. Kheiry seems to feel that a company has no business to do what is right for the people it “lives” in the midst of. He also appears to think that a company profits independently of its employees; that it is the company that provides prosperity rather than something that comes about as a result of the work of the people that do the work as employees of the company. If the company didn’t provide benefits who would be willing to work for them? The company certainly should pay its fair share of taxes, yet some other well known corporations report up to billions in profits yet pay no taxes. The point being that the company may not feel it appropriate to “give back” to the communties as it would adversely affect the “bottom line”. I don’t believe Mr. Davis is suggesting that IBM should be a giant ATM for the governor’s and legislature’s grand plans; rather that IBM has been interfering with what the people of the state of Vermont are saying through the democratic process that they want and need. Sorry if that doesn’t generate still more profit for IBM, but isn’t it a little miserly to ignore the will of (and benefits to) the people where it does business? I think IBM would benefit from a “can do” approach to working for the mutual benefit of itself and society. I think that comes under good Public Relations, no?

    • Mr. Coates,

      Your interpretation of my comments is incorrect; I believe companies DO have an obligation to do good in the communities where they do business. However, I believe this should be voluntary, and I’m happy to reward businesses that behave this way by being their customer. Similarly, I have no trouble withholding my custom from entities that behave irresponsibly. But there is a huge difference between voluntary contributions and forced contributions.

      At the same time, you mis-characterize my views when you suggest that I think companies profit independently of their employees’ work. Obviously, a company does well only if its employees perform. However, the company pays employees money and benefits to perform, and many of them also offer profit-sharing and other performance-based incentives. If a company prospers as a result, it’s getting what it has paid for, and the employees are getting compensated for their labor; there’s recognition on both sides of the equation that everyone’s getting what they bargained for.

  • Jim Schnecktgookie

    I would be willing to sit down with Jamal and Walter and Arthur and work out our differences over a couple of beers and some Rick Astley.

  • Wayne Stidolph

    It is disingenuous to compare IBM’s worldwide corporate profit to the cost of a Vermont-only change; fairer, IMO, to consider the profit generated in VT itself. Hard to know how much profit really comes from VT, but to get a sense of proportion, perhaps use employee count: IBM has 426, 751 employees (2010 SEC 10-K), and (according to various press releases and blogs) employs about 5000 people in VT – that’s about 1.2%. So maybe compare teh cost of teh health-care change to $50M in VT-base profits, rather than to $4.8B in worldwide profits … it’s more fair to the other people who want a piece of IBM’s profit stream for their local betterment.

  • Matt Walsh

    There’s really nothing to get worked up about here. The State of Vermont is a service provider – it allows business to be conducted on the land it administers for certain fees. If IBM finds a more efficient service provider in this or another country it weigh transitioning costs and potentially switch to that one. It’s really a maximization exercise for Vermont, balancing political viability with (per-business income x quantity of operating businesses).

  • Joseph A. Mungai

    Maybe we need to see if IBM is evading taxes. IBM sells a program for this. I hope our government isn’t using it.

    Closing the Tax Gap: IBM’s New Business Analytics Offering for Smarter Tax Collections (http://www.youtube.com/watch?v=VGKp13APsBg)

  • John Decker

    If the legislation passes then IBM should just bail out of Vermont and put the jobs elsewhere. Leave the liberals and entitlement minded to figure out how to pay the tab by themselves. That’s the beauty of globalization, those who create the wealth no longer have to deal with those who leech off of it.

    Just like when people buy that made in china cheapo product at big box mart instead of paying a bit more for made in the usa. Anyone who does is doing the same thing as IBM and other global companies, you are saying “I’m putting my money where the costs are lowest and I don’t care what happens to the usa company”.

  • walter carpenter

    \If the legislation passes then IBM should just bail out of Vermont and put the jobs elsewhere.\

    How many Vermont tax payers that never see IBM pay for IBM’s tax breaks? How many vermonters that work at IBM on a part time basis, have to use Catamount, vhap, or other state programs because IBM does not provide them health insurance, yet does not pay for them, but expects us too? That’s the real IBM. They will probably go somewhere else when they finish milking the state dry; health care is not going to force them out. That’s the way big business works now.

  • Michal Carax

    @John Decker””If the legislation passes then IBM should just bail out of Vermont and put the jobs elsewhere.””

    Sure. Let IBM move to The Netherlands or Germany where the laws would require IBM employees be paid higher wages and have universal health insurance. American is the land of corporatism, where profit is the bottom line and the workers be damned – no wonder so much of American society is dysfunctional. This is what the Swedish Ikea company took advantage of in Danville, Virginia. They wouldn’t dare treat their employees like that in Europe. Put any foreign company with a good reputation for treating its employees fairly into the corrupt and greedy American business environment and they go to the dark side. Apologists like Jamal Kheiry ultimately believe more in government by corporation than by a true democracy. They say they don’t but they do.

    • Mr. Carax,

      You don’t know me from Adam, and yet you feel no compunction about ascribing base motives to me simply because I believe differently than you do. That strikes me as a fundamentally dishonest approach.

  • Jaap Troost

    Dear mr. Davis.
    With astonishment I read your article where you are blaming IBM that they do not want to put a part of their profit into your health care system in Vermont. It is completely understandable that IBM is not doing it. In your text you are raising one of the points yourself by telling that the present IBM health care is better than the present one in Vermont. When you look at the profit that the majority is coming from outside the US. Give me one reason why workers of IBM who life and work outside the US (Europe, Asia Passific, South America and Africa) pay for the people in Vermont. Did the people in Vermont ever paid for the poor in the third world? Every private company will do the same as IBM. It is a positive act of IBM.

  • Joe Pasecora

    Vermont and other states need to do a review of IBM’s employment history. I can
    not think of one state that IBM has not “been pulling out of” for the past 10
    years!! A implied threat of pulling out is worthless in that IBM has already
    been pulling out for cheaper labor markets abroad. Each of the States needs to
    make decisions that are in their citizens best interest and only value the input
    from companies that have demonstrated an ongoing and recent historical growing
    commitment to the state not one like IBM that has been pulling out over the past
    10 years through out the USA ( Except for IOWA )..

  • Gary Brown

    Did IBM town, Burlington Vermont ever let the country’s largest private employer, Wal-Mart put stores in their town? I heard they had two stores in the whole state. What’s up with that?

    Last time I was in Burlington, the McDs had no drive-up window. I viewed it as a left-wing conspiracy to prevent cars from idling.

    Oh well, only spent 3 days in the state.

  • Jason Brand

    Mr. Carax, IBM-Vermont needn’t move to Europe. It can move to any of several states in the southern US.

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