My letter to the White House on corporate cuts to employee benefits (Hewlett-Packard)

Dear President Obama,

Every quarter, one of our nation's largest hi-tech corporations, Hewlett-Packard, has systematically cut benefits - dropping pensions, stalling cost of living raises, cutting 401K matching benefits and renegotiating the co-pays of their health care plan so that they're paying more for less care - in order to reduce their operating expenses so that they can continue to improve quarterly results. These cuts have occurred annually, and sometimes quarterly.

I have many friends and acquaintances who work for Hewlett-Packard. The cloud of layoff threats has hovered over their heads since the 2000 stock market crash. Many skilled engineers I know have survived round after round of layoffs only to find that after several years, their real take-home pay after inflation has dropped by nearly 1/3. After HP froze bonuses and raises for 3-4 years, this last quarter, HP decided to cut pay 10% across the board. With the cuts in 401K matching benefits, the increases in health care insurance costs, and a cut to any bonuses, the acquaintances' pay - once a good, white -collar salary - has been dried of any spending power or financial longevity. At one meeting, top-level HP managers told employees that this was the "market standard." I know from other people in the tech sector that it is in no way a reflection of how other hi-tech corporations are treating their employees when they are all suffering from the economic downturn. just recently, they announced a large round of layoffs with drastically reduced severance packages.

A private company has every right to control its costs during an economic downturn, but are there not any limitations to how much a company or corporation can gut the paychecks and benefits of their employees in order to improve their quarterly revenue? When a large corporation like Hewlett-Packard drastically reduces pay and benefits, that affects the larger economy. However, CEO wages remain high. A 10% paycut for CEO Mark Herd - at the top of the ladder - would have saved many jobs for those at the bottom of the ladder. Why don't corporations pursue cutting operating expenses at the top first before resorting to gutting the paychecks of their employees?

Can we place any controls on how corporations cut employee benefits? Can we find more creative ways to make sure that cuts to employees' salaries and benefits are the very last resort for a company in financial trouble? I consider HP's financial decisions over the last decade to have abused their rights as employers governing their expenses. Many of my friends at HP are too frightened to look for work elsewhere because of the overall state of the economy. How can this type of business behavior be acceptable in the United States. Where are the rights for employees?

Sincerely,

~Writer~

of mine was just asking me about this. He initially worked for DEC and when they were bought out by HP his benefits changed over of course. He has never had a problem with United Health Care (the provider). He recently had an MRI and some other procedures. He couldn't understand why he was getting notices "denied" "denied" "denied." Needless to say he's upset and is going to call HP Monday morning. I had told him I would try and get some info for him and here you are, providing the very best I could ever provide for him. Many thanks Writer. I doubt he's going to be happy and I don't know how he's going to pay these bills but at least he'll know what's going on.

if not at the top, of best companies to work for. How times have changed.

Writer,

I can relate to your open letter as a current employee of HP. It paints a pretty good picture of what‘s been going on since the dot com bust. I do have one correction to post regarding the recent salary cuts. They varied depending on one’s title and were executed as follows:

 Mark Hurd’s CEO salary was reduced by 20%
 Executive Council (EC) members reduced their salaries by 15%
 Vice Presidents and Directors’ salaries were reduced by 10%
 All other exempt employees’ salaries were reduced by 5%
 All non-exempt employees’ base pay was reduced by 2.5%

I fell into the 5% category.

One point I would like to make here is that Mark Hurd’s overall reduction in compensation is more like 0.07% since his base salary is only a very small part his compensation package. The majority of his compensation is bonus money and stock options. This 0.07% figure is based on total compensation somewhere around $42 Million for 2008. http://www.siliconbeat.com/2009/01/20/2522/

Salary cuts reduce more than just one’s salary. They also reduce pay-related contributions and benefits under the 401(k) plans and disability programs. Next year they will impact life insurance benefits for 2010.

HP also cut a lot of the bonus programs for the rank and file employees. However they never announced any bonus program cuts or suspensions for Executives. It sure would be nice if everyone was treated equitably but that is not the case these days. I am sure Bill Hewlett and Dave Packard would have taken a bigger hit than Mark Hurd did before passing this pain to the common folks.

And with much better detail.

My questions to the President still stand, though. ;-)