The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of WRAL.com.
RESEARCH TRIANGLE PARK, N.C. – IBM executives won’t receive pay raises this year, a person familiar with the company says in a decision that affects thousands of employees ranging from high-level researchers, distinguished engineers and directors and vice presidents.
However, the decision does not affect IBM’s rank and file although one work group, Global Technical Services, has told its workers that raises will be awarded only on an individual basis rather than collectively.
“That would be wild, wild speculation” to say pay freezes are company wide, the manager said.
The decision to freeze executive salaries this year is something that affected employees have known for several months, the person said on the basis of anonymity.
Disclosure of the pay freeze emerged after news reports about a memo sent to the Global Technical Services workers earlier this week that said only some workers in that group would receive raises this year.
However, the manager said the freeze was not a sign of difficult times for IBM (NYSE: IBM), which employs some 10,000 people across the Triangle and North Carolina.
Rather, the move is designed to motivate executives to improve their – and thus the company’s – performance.
“The sky is NOT falling,” said the manager, noting that IBM’s “numbers” for revenue and profits remain strong while IBM stock remains at near record levels.
“We have good numbers, but that doesn’t mean we are satisfied,” he explained.
IBM reported strong earnings in April, increased its profit forecast for the year and also upped its dividend. Yet the message to executives about the lack of raises was that they need to improve their performance.
“We’re not working up to our potential,” he said.
Whether this might impact bonuses for 2012 that would be paid in 2013 is not known at this point, he added.
The comments about no raises reflected a similar one made to Computerworld by an IBM spokesperson.
Union Reaction: “Wow”
The news came as a surprise to Alliance@IBM, the union seeking to represent IBM workers.
“Wow,” said Lee Conrad, a retired IBM employee who is the union’s national coordinator. “That is surprising considering the financials they reported last year.”
Conrad found the news alarming, not for the decision’s impact on executives but on what it means for the company.
“That [news] signifies things are not going well,” Conrad said in a phone interview. He also said that the freeze likely would not cause sadness among non-executives. “Given that the salary plan for the rank and file has been suppressed for years, there will not be shedding of many tears,” he said.
[IBM ARCHIVE: Check out a decade of IBM stories as reported in WRAL Tech Wire.]