IBM Shareholder Meeting
April 24, 2007
Knoxville, TN

“Offshoring Proposal Speech by Mike Saville – Proponent”

Good Morning Sam, IBM Board of Directors, Shareholders, Fellow IBMers and Ladies and Gentlemen.

My name is Mike Saville and I am from Riverton , Utah . In Gerstner's book “Elephants” he wrote that people who show up at the annual IBM shareholder meeting are “Social Engineers, Gad Flys, or Disgruntled Employees”. Well, I might fit all those categories but I prefer to be known as a retired IBMer after 32 years who helped IBM achieve the “Most Admired and Profitable Company status during the Eighties” and a “LONG TERM loyal Shareholder, having held my IBM stock since 1968.”

“Offshoring” or “Globalization” is “short term” cheap labor profit chasing.

It is like trying to “Time the Stock Market”. Another negative factor is the effect on a Corporations “Brand Name”. The long term affects on Morale of employees, working in an environment of “Threat and Intimidation”, Being Incentivized, treating employees as Commodities and not as Assets that does not promote Self-Actualization or Innovation.

In the last five years, the USA employee headcount has remained flat at 127,000 while IBM India has grown to 55,000 with 100 Thousand employees projected in India by 2010 Sam, last year you announced $6 Billion would be spent to expand in India , the same as the total IBM research and Development in the US annually.

Where did all this IT talent come from in India ? I remember reading a decade ago how India had more than a million Computer Science graduates. I could not understand why there were so many when most Indians Citizens, could not afford Personal Computers. Curiosity led me to discover that the Indian Government identified IT as a national Strategy to generate employment internationally. A program similar to the “GI bill” after WWII. India was cranking out millions of Government sponsored IT graduates that paid off thanks to the explosion of the Internet that enabled “remote computer programming and support by wire”.

Meanwhile, in the USA, contributions from Corporations dropped by 60 Per cent to IT programs in US Universities, with the exception of an IT school of 250 students in my home town, Northface, now known as Neumont, where an IT curriculum costs $80,000 for a two year program. Many of the 125 graduates go to work for IBM and others. We, especially Orin Hatch and his friends in the court, thank you for your contribution to our kids but it is only 125 students a year?

I guess it is easier to capitalize on a Country who pays for their children’s education unlike the parents in the USA who go into hock, funding their kid’s college.

I want to remind you that most of the US Strategic Defense technology comes from the Science and Technology graduates in our US Universities.

Where is IBM going and what are the Long term effects on the USA of Offshoring?

In 1981, a McKinsey sponsored book (Gerstner was a McKinsey employee) written by Tom Peters entitled Excellence that complimented IBM as being the most profitable and most admired Company. Shortly thereafter, IBM fell on hard times and Gerstner came to IBM to save it.

Recently, Fortune magazine ranked Companies as America’s most admired in eight categories that included Innovation, People Management, Social Responsibility, Use of Corporate Assets, Quality of Management, Financial Soundness, Long Term Investment, and Quality of products and service. They listed the Ten Best and Ten worst in each category.

IBM was not mentioned in any of the Best Top Ten Categories and fortunately was not in the Worst either. I guess that means IBM is considered mediocre at best in the eyes of the Fortune magazine.

If IBM’s success is hinging on Innovation for the last four years, where is the measured success? Why is it IBM did not make the Top Ten Most Admired in any Fortune magazine’s categories?

Some of the questions I have is “With the explosion of hiring in India , China , Brazil , Russia and others internationally” when is the payoff coming to the Shareholders?

I reviewed IBM’s stock performance at CBS Market Watch dot com and on page 119 of the Annual Report, and compared to the last four years of 65% growth of the S&P 500 and 55% growth of the Dow, IBM stock performance during the same period was only 12% growth.

The profits of “Offshoring” have not translated into shareholder value.

Gerstner in his “Elephant book” stated that 60% of IBM is owned by Institutions like State Street and Mutual fund managers who don’t show up at these meetings. I want to point out that those institutional funds are really managed assets of Grandma and Grandpa, Mom and Dad, our Children and Grandchildren who have Coverdell’s, IRA’s 401K’s, 403B’s and 457’s. In other words, IBM’s shareholders are the American People.

I think, there is concern about Offshoring, about IBM’s commitment to the American People who are the “real” IBM shareholders.

An article in Information week entitled “Why IBM stands for India Beijing Machines. The writer asked “Is IBM an American Company”?

There is nothing new to the exploitation of Human Capital. Today it is known as Offshoring or Globalization. I wonder if India understands how long IBM will be there before moving on to cheaper labor in Vietnam or China .

I received this information from Don Parry Sunday and he says to say “Hi Sam”. Robert Gomory – Retired IBM Senior VP and President of the Alfred P Sloan Foundation, said in an article in The Nation that “The US approach to Globalization must be transformed to defend the national interest. If nothing changes in how Globalization works – Americans will be increasingly exposed to downward pressures on incomes and living standards. Gomory wants to re-create an understanding of the corporation’s obligations to society, the social perspective that flourished for a time in the last century but is now nearly extinct. The old idea was that the corporation was a trust, not only for shareholders but for the benefit of the country, the employees and the people who use the product. “The attitude was the attitude I grew up on in IBM,” Gomory explains. “That the way we thought—good for the country, good for the people, good for the shareholders—and I hope we will get back to it…. We should measure corporations by their impact on all their constituencies.””

I will conclude with comments by a fellow named Bob McDonald entitled “Crime of the Century”. He points out that treating employees poorly and taking pension dollars from them is a violation of long term commitments. Congratulations on the recent win in the Cooper case where the employees saw their pensions shrink by 50% and $10 Billion removed from the Pension fund.

I wish I had written this but I share it with you.

“There is a firm belief that employees are the critical factor in a company’s success or failure. When employees have the ability to add value to an organization they will be encouraged to do so when they are allowed to share in the value created.

The promise of a secure retirement is one way for a company to share the value of success created by an employee’s loyalty and hard work. Promises made to employees but reneged on for short-term benefit shows disrespect for those who are critical to a company’s success. When you reduce or eliminate the employee’s incentive to see the company succeed, the seeds for long-term failure have been planted. “

I think IBM has made mistakes with its employees since 1991 that does not have to continue. It was comforting to read Randy McDonalds statement on treating employees as Assets.

You can say it, measure it, but
What about …. THE TOTAL Ethical treatment of Employees as Assets?

I respectfully submit this proposal on Offshoring and solicit your support.

Thank you.