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IBM Corporation
New Orchard Road
Armonk, New York 10504
Office of the Vice President, Assistant General Counsel and Secretary
April 11, 2000
[Addressee]
Re: STOCKHOLDER PROPOSAL REGARDING PENSION AND RETIREE MEDICAL PLANS
Dear IBM Stockholder:
Enclosed is a copy of IBM's 2000 Proxy Statement and 1999 Annual Report, in
addition to the ones we mailed to you last month. As you will note, IBM
management and the IBM Board of Directors are recommending a vote against the
stockholder proposal on pension and retirement medical plans. WE ARE WRITING TO
ASK FOR YOUR SUPPORT BY VOTING AGAINST THIS PROPOSAL (PROPOSAL NUMBER 5 ON YOUR
IBM PROXY CARD) AND BELIEVE THAT A VOTE AGAINST THIS PROPOSAL IS IN THE BEST
INTERESTS OF IBM STOCKHOLDERS.
We oppose this proposal because we believe that the new design of our pension
and retiree medical plans better supports the realities and expectations of
today's competitive marketplace. The changes to our pension and retiree medical
plans were part of our overall goal to make our total compensation and benefits
package more competitive with companies against which we compete for employee
talent. We also believe that the subject matter of the proposal is ultimately a
matter of business judgment and that all companies must have the latitude to
make these kind of day-to-day management decisions that directly impact
competitive and cost issues.
I am attaching for your review a number of highlights supporting IBM's position
on this proposal.
I appreciate your time and consideration on this issue and ask for your support
of the IBM recommendation of a vote against this proposal. Please do not
hesitate to call me at 914-499-4825 or our Assistant Secretary, Andrew Bonzani,
at 914-499-6118 if you have questions or comments.
Sincerely,
/s/ Daniel E. O'Donnell
Daniel E. O'Donnell
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IBM 2000 PROXY STATEMENT
HIGHLIGHTS OF REASONS TO VOTE AGAINST PROPOSAL #5
- Before we made these changes, we studied the practices of over
75 companies, and found that our compensation and benefits structure was
out of line with competitive practices in a number of areas, including
cash compensation and equity usage, in addition to pension and retiree
medical;
- We found that 75% of our competitors do not offer a pension plan, and even
fewer offer retiree medical;
- In addition, we found that nearly 60% of our recent hires have been
mid-career hires, 40% of our employees have less than 6 years of service
and only 10% of our new hires are likely to reach 30 years of service. Our
traditional plan had been designed in the early '90s to address resource
strategies when IBM was in difficulty, and reflected a marketplace that is
radically different today.
- We also found that our pay was not competitive with the outside market. In
response, we have funded an aggressive salary increase program and in 2000
have paid out more than $1.6B in bonus pay to non-executives (up 80% from
1995 and 700% from 1993);
- In addition, our equity award programs significantly lagged the programs
of our competitors. To address this, we have increased the number of
employees receiving stock options from a few hundred in 1993 to over
30,000 employees receiving options this year;
- We also offer a 401(k) plan as another vehicle to foster retirement
savings, and in 1995 we doubled the IBM match on employee savings under
this plan to 50% of the first 6% saved; and
- Further recognizing the importance of personal investments and financial
planning, we are asking stockholders to approve a new Employees Stock
Purchase Plan, giving employees the opportunity to buy IBM stock at a 15%
discount off the lesser of two prices--the price at the beginning of each
offering period or the price on the date of purchase (the prior plan was
based on the date of purchase only). Again, we are proposing this new plan
because it is in line with the programs offered by a substantial number of
our competitors.
