Subject: News Release: IBM continues seeking to exclude stockholder resolution

FOR IMMEDIATE RELEASE January 7, 2000

IBM is continuing to seek SEC permission for excluding a new IBM employee-retiree stockholder resolution on executive compensation from the proxies for the 2001 annual meeting.

IBM's claim is that the references to transparent profit reporting and COLAs * for retirees make the resolution into ordinary business. IBM employees counter by claiming the resolution is focused on executive compensation, an allowable matter for shareholder attention.

IBM's second letter to the SEC, as well as the employee response, is posted on:

The stockholder resolution calls on IBM to pay executives incentive pay based only on profit from real company operations. IBM has been including "vapor profit" in the executive compensation pay formula. Vapor profit is pension fund money the company must count as profit under an accounting rule, FAS 87, but all the money actually stays in the pension fund and none gets transferred to the company.

"Mr. Gerstner and four other IBM executives got $15 million in cash and another $8 million worth of stock grants last year in part based on vapor profit," said proponent Donald S. Parry,. "Executives have boosted the surplus in the pension fund to increase the vapor profit under the accounting rule so they can get more incentive pay. They boost the surplus by slashing retirement pay with cash balance plan conversion and by refusing to grant adjustment for inflation." Mr. Parry is an IBM retiree who has not seen a cost of living increase in his retirement pay in over ten years.

IBM's letters to the SEC argue that the resolution can be excluded under SEC rules because it deals with ordinary company business and because it includes what IBM considers to be false and misleading statements. In the letters responding to IBM the employees answer every point made in IBM's letter. "IBM is seeking to exclude this resolution not because it is false but because it clearly and accurately reports how IBM executives are acting in a self serving manner that hurts stockholders, employees, retirees, and the company as a whole," said IBM employee James Marc Leas, who drafted the response letter for Mr. Parry. Mr. Leas successfully overcame IBM's attempts last year to exclude a resolution he proposed concerning IBM's cash balance plan conversion. That resolution went on to receive the support of 28.4% of the stockholders in April, the largest vote ever for any IBM stockholder resolution opposed by management. That resolution won the support of all the institutional investor advisory services, including ISS, Proxy Monitor, and Marko. Mr. Leas submitted that resolution again this year. So far IBM has not sought to exclude it.

For Further information, contact:
James M. Leas
Janet Krueger
Donald S. Parry

* COLA = Cost of Living Adjustment

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