'Perfect storm' batters at corporate pensions

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'Perfect storm' batters at corporate pensions

By Tom Walker, The Atlanta Journal

September 2, 2003

America's corporate pension system is said to be facing a perfect storm: Stocks have taken a big hit and returns on bonds have plummeted, leaving pension funds with reduced earnings to pay benefits. In addition, says Business Week (Sept. 8), corporate downsizing and lengthening life spans have left many companies, particularly in manufacturing, with a rising ratio of retirees to active workers.

"For more than a decade, corporate sponsors of pension plans have been systematically looting them. The great pension raid is of a piece with the other accounting deceptions of the 1990s, and it had the same motivation -- to boost reported earnings and stock prices," the magazine says.

Since the 1980s, many corporations have shifted from traditional defined-benefit plans to defined-contribution plans such as 401(k)s, which cap the company's liability and shift the risk to workers and retirees. But that shift is only the most visible part of the story. As of year-end 2002, some 42 million workers and retirees and $1.6 trillion dollars were still in traditional pension plans -- and these have been raided, Business Week reports.

Communicating the Army way

Regime change is not the only lesson that business executives can take from the war against Iraq, says strategy+business (fall), a business quarterly published by management consultant Booz Allen Hamilton. The U.S. military's communications policy was a model for how to manage real-time information in business. "With live broadcasts of daily briefings, the U.S. military matched instant firepower with instant communications." That's the kind of open communication that makes financial information understandable to investors, analysts and the public, the magazine says.

'A horse went into this bar ...'

The boss who wants to get results should take lessons from stand-up comedians. The witty executive gets bigger bonuses and better performance ratings, says the Harvard Business Review (September). "Humor, used skillfully, greases the management wheels, reduces hostility, deflects criticism, relieves tension, improves morale and helps communicate difficult messages," management consultant Fabio Sala writes.

But executives need to be careful. The boss who tries to be funny but is inept may be undermining his own leadership. "If his humor is seen as sarcastic or mean-spirited, it will certainly alienate the staff," says Sala. His research also shows that female executives use humor more than their male counterparts, but men are more likely to use humor as a put-down against someone.

Selling, 21st century-style

Backstabbing, cheating, stealing. Today's sales reps will do anything to close a deal these days, says Sales & Marketing Management (September). "The difficult economy has turned some salespeople into hungry piranhas," says the magazine. The problem is that these super-aggressive reps can hurt the company they work for. "Some managers might be tempted to ignore infighting and other shady practices if it means they'll close more sales in the short term. But make no mistake," says the magazine, "customers will suffer" -- as will sales.

First music, now the movies

Hollywood is probably the next target of digital piracy, which has already plundered the music industry, The Economist (Sept. 5) reports. To be sure, movies are not as vulnerable as music; it can take days to download a movie from the Internet, unlike a song, which takes minutes. But rampant DVD piracy may be coming soon, both in the form of traditional counterfeiting and downloading from the Internet. "Already as many as 600,000 movie files are shared each day on peer-to-peer file-sharing networks," says The Economist, citing the Motion Picture Association of America. "That number is likely to soar as more households get broadband Internet and compression technology cuts download time."