ORGANIZACJA I ZARZĄ - Politechnika Śląska · Ekonomika i Organizacja Przedsiębiorstwa 2005, nr...

ORGANIZACJA I ZARZDZANIE

KWARTALNIK NAUKOWY

Nr 4(8)

WYDAWNICTWO POLITECHNIKI LSKIEJ GLIWICE 2009

SPIS TRECI

1. Witold BIAY, Grzegorz BOBKOWSKI Wykorzystanie systemw komputerowych do wspomagania gospodarki remontowej zakadw grniczych ...... 5

2. Dominic S. DEPERSIS, Alfred LEWIS System emerytalny w Stanach Zjednoczonych ocena dysfunkcji systemowych oraz konsekwencji globalnych ...... 21

3. Agnieszka GRZESIOK Prawo zaliczenia wartoci mienia zabuaskiego ......... 35

4. Jo Ann HO, Ee Yin LIEW Percepcja motywacyjna przeoonych i podwadnych przypadek Malezji ................................................................................................. 55

5. Dan KIPLEY, Alfred LEWIS Paradygmat sukcesu strategicznego Ansoffa dowd empiryczny potwierdzajcy sukces przedsibiorstw konkurujcych w burzliwym otoczeniu. Dlaczego brak tej koncepcji w podrcznikach zarzdzania strategicznego? ................................................................................. 71

6. Mariusz KRUCZEK Podejcie procesowe w analizie struktury acucha dostaw . 89

7. Tony LINGHAM Teoria motywacji oparta na potrzebach uczenia klasyfikacja potrzeb ze wzgldu na style uczenia si i ich odniesienia do motywacji pracy ........... 103

8. Bonnie A. RICHLEY Zrwnowaony rozwj systemowa perspektywa caociowa . 117

9. Radha R. SHARMA Outsourcing jako strategia wyzwania dla zasobw ludzkich w wiecie globalnego rozproszenia pracy ...................................................... 131

10. Marco TAVANTI Zarzdzanie poprzez wartoci w kierunku rozwoju organizacji ..................................................................................................................... 153

Ladies and Gentleman,

We are pleased to give to your hands, special english-language edition of our research

quarterly entitled Organization and Management, presenting research achievements of

authors from around the world.

I would like to thank you Professor Agata Stachowicz-Stanusch without which there

would be no such publication. The research cooperation of Mrs. Professor with domestic and

foreign institutes has resulted in this unique publication, which we hope will be a good

practice and will be published periodically.

On the pages of our quarterly showing since 2008, we share with you the outcomes of

research investigations. At the same time we make every effort to meet the highest substantive

and cognitive standards of our quarterly.

The quarterly became a place where we present the intellectual achievements both the

researchers of the Silesian University of Technology and researchers representing other

domestic and foreign universities. The theme of our scientific quarterly covers wider issues of

management understood from the perspective of economics, logistics, sociology or technical

sciences. We believe that this multidimensionality makes our quarterly valuable source of

knowledge.

The Chief Editor,

Rector of The Silesian University of Technology,

Prof. PhD. Eng. Andrzej Karbownik

Witold BIAY Silesian University of Technology Faculty of Management and Organization Institute of Production Engineering Grzegorz BOBKOWSKI Silesian University of Technology Faculty of Mining and Geology Institute of Mining Mechanisation

APPLICATION OF COMPUTER SYSTEMS IN SUPPORTING MAINTENANCE POLICY IN MINING INDUSTRY

Summary. Continuous production maintenance in mining industry (coal mines) results in high production costs. Well-known computer systems supporting machine and appliances exploitation as well as traffic control in factories have been currently broadly applied in a variety of industry branches.

Therefore introduction of these systems in mining industry operations seems inevitable. CMMs class system introduction in mining industry should provide continuous operation of machines and appliances and result in decrease of variable costs of the company due to extended operating time of the devices. In terms of a coal mine, this time savings will result in loss cuts as a result of machine delays.

Applications of computer systems supporting the maintenance policy in mining industry have been presented.

Keywords: computer systems, maintenance policy, mining plant

WYKORZYSTANIE SYSTEMW KOMPUTEROWYCH DO WSPOMAGANIA GOSPODARKI REMONTOWEJ ZAKADW GRNICZYCH

Streszczenie. Zapewnienie cigoci ruchu w zakadach grniczych (kopalniach wgla kamiennego) generuje wysokie koszty produkcji. Komputerowe systemy wspomagajce zarzdzanie eksploatacj maszyn i urzdze oraz utrzymaniem ruchu w przedsibiorstwach na dzie dzisiejszy znalazy szerokie zastosowanie w wielu gaziach przemysu. Dlatego te nieuchronne wydaje si wprowadzenie tych

6 W. Biay, G. Bobkowski

systemw do obsugi zakadw grniczych. Wprowadzenie systemu klasy CMMs w zakadach grniczych powinno zapewni cigo pracy eksploatowanych maszyn/urzdze, a tym samym obniy koszty zmienne przedsibiorstwa w wyniku wyduenia czasu pracy tych maszyn/urzdze. W przypadku zakadu grniczego pozytywnym skutkiem tej oszczdnoci czasowej bdzie ograniczenie strat spowodowanych przestojem maszyn.

Przedstawione zostay moliwoci zastosowania narzdzi komputerowych do wspomagania gospodarki remontowej zakadw grniczych.

Sowa kluczowe: komputerowe systemy, gospodarka remontowa, zakad grniczy

Introduction

The technological breakthrough of recent years has caused a significant concentration of coal production. At the moment the only technology of coal mining in Poland is the longwall system. The number of longwalls has been reduced significantly (by 40%, i.e. by over 400 longwalls in 1995 alone) and the ones with the highest yield have been left in operation. Longwalls with a 3000-5000 t/day and more have appeared in Polish coal mining industry.

The following factors made it possible: the introduction of a new organizational structure of coal mines, which significantly

improved work organization, increased efficiency of technological processes due to machines and devices of new

generation used in the output production and haulage. Mining technical systems are very complex, are used over large areas and their work area

is restricted by the size of underground headings. The introduction of coal mining concentration led to an increase in the power of longwall

tumble coal miners the ranges of power used in these machines are often between 800 and 1000 kW or more.

The key purpose of operation management is to ensure uninterrupted operation of the machines and devices used. Disruptions (e.g. due to a breakdown of a machine) cause enormous financial losses. Consequently, funds should be allocated for the purpose of improving this aspect of an enterprises operation.

Application of computer systems 7

Machines/devices which are elements of technical systems used in the production process are subject to gradual wear and tear. An early assessment of the condition and the amount of wear and tear of a machine/device prevents breakdowns and necessary repairs. The use of the stock of machines/devices to its full capacity (working in several shifts) requires modern production organization, using the employees work more efficiently, motivating them appropriately etc, but also proper maintenance should be provided i.e. preventive measures and repairs to ensure the operation of the devices.

Using the machines/devices according to their intended use and within the limits of their technical parameters and an appropriate repair management mean that the wear and tear processes and the necessary repairs can occur at regular intervals. These processes when repeated constitute the maintenance cycle, which is the basis for maintenance work planning.

Maintenance management aims to restore the operability of a given machine/device through planning repairs of different types and extent. The repairs can be divided into routine and emergency ones. A repair can be done by replacing a part or a subassembly using a standard or periodic post-inspection method.

1. Maintenance management in coal mines

At the moment there is no system in place in Polish coal mines to standardize the mining machine operation management system1 either in terms of the machine/device operation processes or in terms of repairs.

Specialist services are responsible for managing the operation of mining machines. These can be both own and outsourced services. The companies working on the outsourcing basis are usually the manufacturers of the given machine/device.

All the machines/devices in coal mines, which are subject to periodic maintenance and repair works, can be found on the repair structure block diagram (fig. 1)2

1 Biay W., Bobkowski G.: Awaryjno grniczych systemw technicznych. Zeszyty Naukowe Politechniki lskiej, seria: Organizacja i Zarzdzanie, z. 22, Wydawnictwo Politechniki lskiej, Gliwice 2004; Biay W., Bobkowski G.: Moliwoci wykorzystania narzdzi komputerowych w gospodarce remontowej kopal wgla kamiennego. Mechanizacja i Automatyzacja Grnictwa 2005, nr 4 (411); Helebrant F., Jurman J., Fries J.: Maintenance of machines from the point of view of modern functional operation. Ekonomika i Organizacja Przedsibiorstwa 2005, nr 7; Konderla J., Biay W., Bobkowski G.: Computer maintenance managing systems (CMMs) in mining machinery and equipment exploitation entrance strategy. Mine Planning & Equipment Selection 2006, Turyn.

2 Biay W., Bobkowski G.: Awaryjno grniczych systemw technicznych. Zeszyty Naukowe Politechniki lskiej, seria: Organizacja i Zarzdzanie, z. 22, Wydawnictwo Politechniki lskiej, Gliwice 2004.


Fig. 1. Service structure flow chart Rys. 1. Schemat blokowy struktury napraw Source: Biay W., Bobkowski G.: Awaryjno grniczych systemw technicznych. Zeszyty

Naukowe Politechniki lskiej, seria: Organizacja i Zarzdzanie, z. 22, Wydawnictwo Politechniki lskiej. Gliwice 2004.

2. Managing planned repairs of machines/devices

The main purposes of managing the activities connected with preventive maintenance by means of specifying the methodology and responsibility are the following:

to guarantee that the planned preventive maintenance works will be completed, to record the results in the form of reports, archiving. The procedures describe the stages of preparing and carrying out the operation

management plan and end with completing the works and presenting an account for them. The works can be carried out by the departments of coal mines or outsourced companies (fig. 2).The following is a sample description of the activities used:

instructions for the planned inspections, updated with the data from the previous ones must be available for each machine/device. They are prepared on the basis of the technical documentation provided for the machine/device.

the operation management services feed inspection cards specifying the frequency and methodology of the inspections into the computer system (CMMs),

the operation management services divide the works among individual departments (e.g. electrical, mechanical, outsourcing, etc.)

the works are carried out to meet the needs of the users of the machines/devices and after consultation with the operation management services and/or outside companies,


the works are carried out by the employees of the coal mines operation management services or by outsourced companies in accordance with the recommendations specified on the inspection cards,

the inspection cards are used to prepare the reports from the works, when works which were not listed in the inspection schedule must be carried out, the

entity responsible for carrying them out requests that further works are performed, which initiates other procedures for repairs,

if an outside company becomes involved, the operation maintenance services perform a check to ensure the inspection was carried out properly,

if the data obtained after the works are completed indicate a need to change the frequency and/or the extent of a scheduled inspection, the operation maintenance services update the card,

the operation maintenance services register the completion of the works and if an outside company was involved they issue a service completion confirmation note.


Fig. 2. Machine service management diagram Rys. 2. Schemat zarzdzania przegldami maszyn/urzdze


3. Unscheduled repairs and major repairs of machines/devices

The following are the principles of managing unscheduled repairs/major repairs of machines/devices:

the completion of the repairs/major repairs is guaranteed, the results are recorded. The procedure describes the sequence of activities necessary to manage repair/major

repair works when the 'user' or one of the operation management departments has issued a request for them. The procedure finishes with the completion of the works and the recording of the data and sending them to the archive.

The works can be carried out by own operation management services (fig.3) or outside companies (fig. 4). The following is the description of the works carried out by the operation management services in a coal mine:

the users of the machines/devices report a need for an unscheduled repair/major repair if there is a failure or breakdown. Also the operation maintenance services can demand the repairs if faults were detected during routine inspections,

if the works are urgent the time when the works are to be carried out is arranged according to the 'user's' needs, if the works cannot be carried out by the services from the coal mine, outside companies must be contacted,

the works are carried out by the operation maintenance service workers, who use the relevant operation cards and instructions,

an operation management service worker hands over the machine/device to the user and sends the completed card to the archive, the completion of the work and its duration is recorded,

minor works are outsourced by the operation management services, the operation management services check whether the works provided by an outside

company are complete and effective, if a heavy repair/major repair is necessary, a standard purchase process should be

used, which is initiated by appropriate procedures, the confirmation note stating that the service has been completed is issued by the

operation management services after the works have been completed and their effectiveness has been checked.


Fig. 3. Traffic maintenance crew operation diagram in case of unexpected maintenance

and service of machinery Rys. 3. Schemat postpowania sub utrzymania ruchu w przypadku nieplanowanych

napraw/remontw maszyn/urzdze


Fig. 4. External contractor operation diagram in case of unexpected maintenance and service

of machinery Rys. 4. Schemat postpowania firm zewntrznych w przypadku nieplanowanych

napraw/remontw maszyn/urzdze


4. Using CMMs class systems in maintenance management in coal mines

Optimizing maintenance processes and modernizing complex systems, such as power engineering and mechanical systems, need an effective tool to provide a comprehensive support for large projects usually carried out under the conditions of full mining operation.

A tool to improve the functioning of the operation management services in a coal mine can be a solution consisting in the implementation of a CMMs-class system, which will cover a full scope of operation management activities. CMMs-class systems provide support for operation processes such as means and operation system maintenance through technical, organizational and economic activities. These systems signal the need to perform preventive maintenance and repair activities, ensure a timely provision of the desired quantity of operational resources (tools, spare parts, consumables, specialist equipment) for the maintenance and repair activities.

Also, it is possible to pass messages quickly and by the same token to undertake prompt action in emergency situations, which as a result contributes to the following:

optimizing and minimizing the time necessary for maintenance, managing the documentation of the tasks being carried out. When implementing a CMMs system in a coal mine, apart from making a technical

assessment of individual systems, the following measures must be taken: the information technology means available in the company such as computer

networks, software and databases, computer hardware and operation systems with the technical parameters suitable for CMM systems must be checked,

the possibility of integrating the new CMM system with the information technology systems already present in the company (e.g. accountancy, pay, personnel, warehouse management systems etc.) must be considered,

the structure of technical information flow in a coal mine at the level of the mine operation management services and their connections with the superior (and external) structures must be determined.

Implementing CMM systems in a coal mine should begin with a detailed analysis of the interconnections between the already existing technical facilities directly involved in the mining process and a possibility of a their subsequent adaptation to the entire technical structure of the mine.

At the moment the most advanced systems can be used in many branches of the same company often situated in different parts of the world (globally, locally), in several time, language and currency zones etc. Such installations optimize asset management within the whole organization. Regardless of the size of an organization (company) the availability and operation of the income generating assets can be improved. Using management support


systems can reduce the time and cost of maintenance, guarantee access to the necessary parts and at the same time reduce stocks and improve the deliveries and the organization of outside contracts.

IT systems can therefore be used in just one company or in a number of entities, which are for example part of a larger structure such as a group/holding/company. CMM systems can be implemented locally (mining and haulage facilities in a single mine) and globally (managing scattered organizations). This convenient function allows one to centralize or decentralize the place of storing and processing information (data) according to the strategy of the company within one created database.

The way how the CMMs tool can be used by means of carrying out uniform works for all the dependent organizations making up one entity (group/holding/company) is shown in fig. 5.

The system can be used to define any number of organizations and/or companies and to choose a separate management method at the level of the company, organization or branch for organization and economic issues (account systems, base currency, financial reports) and operational data (subcontractors, taxes, works commissions etc.). Such a solution makes the management of spare parts, human resources and equipment which is part of the company's movable property more efficient.

Fig. 5. Global and local strategy of CMMs systems introduction Rys. 5. Globalna i miejscowa strategia wdraania systemu CMMs


5. Directions in the development of CMMs-class computer systems

Computer systems supporting the management of machine and device operation and company operation management have changed significantly in recent years (fig. 6). This is the result of the users growing demands and the development of computer technologies both in terms of the efficiency of the hardware but also in terms of the capabilities of operation systems and new working platforms. Both these factors are inseparable and in some sense complementary. The demands of the users present IT technologies with challenges and at the same time new aims can be achieved as these technologies are being developed. The development of IT technologies creates new needs in the users and makes it possible to satisfy those needs. Functionally, the systems supporting technical facilities operation management have developed from simple Computerized Maintenance Management system programs (CMMs) used to put in order the maintenance management in a manufacturing company to complex systems supporting enterprise asset management (EAM) and systems used for strategic asset management (SAM).3

CMMs

EAM

SAM

Department Coal mine Enterprise

Fig. 6. Evolution of systems supporting machinery utilization management and traffic

maintenance Rys. 6. Rozwj systemw wspomagajcych zarzdzanie eksploatacj maszyn i urzdze

oraz utrzymaniem ruchu Source: MRO Software Inc, Strategic Asset Management Executive White Paper, 2003

They can be used not only in applications strictly connected with manufacturing. Its

functions have been extended to such areas as the following:


Facility Management, IT infrastructure management, internal and external transport management, supply of parts and materials necessary for maintenance management, outsourcing contracts, etc. At the moment the most advanced systems can be used in many branches of the same

company often situated in different parts of the world (multi-site, multi-organization), in several time, language and currency zones etc. The time and cost of maintenance can be reduced by e.g. guaranteeing access to the necessary parts, reducing stocks, improving the deliveries and the organization of outsourcing contracts.

The pool of information available in the system, including historical and current data as well as future plans, helps in the asset management during the entire life cycle. The fact that the key equipment elements and exact information regarding what parts and at what time will be necessary can be determined will make it possible to assess the actual cost of maintaining the assets and to find ways of reducing them. Asset management can even be started before the machine/device appears in the organization and before it is used. Thanks to the creation of a virtual catalog of the company's assets (e.g. MAXIMO Illustrated Parts Catalog) according to the description standards adopted in the whole organization (e.g. StruxureTM and Standard Modifier DictionaryTM) the system allows the employees to move around the structure of the assets complete with detailed drawings/diagrams of its elements and to find a particular site, determine the necessary items in need of repair and to find them in the supply chain. Throughout the entire life cycle of the assets in the organization, modern systems to support operation management facilitate the activities connected with planning and scheduling management.

The development of the systems is closely connected with the rapid developments in IT. This refers among others to communication techniques and data transmission. Having become common, more functional, reliable and safer in terms of data transmission, network systems (the internet, intranet) not only extended the application of management support systems to the entire organizations but they also allowed for connections between organizations to be created, which can be used to carry out a range of activities such as supply of parts and materials, service contracting etc. The Automatic delivery generates significant savings. Based on the analyses of the Boston Consulting Group, AMR Research estimates that among the largest global companies the reduction of delivery cost may reach as much as 60%.4

3 MRO Software Inc, Strategic Asset Management Executive White Paper, 2003. 4 Ibidem.


The development of mobile computers also has a great impact on EAM systems. Instead of a (very often large) collection of paper documents, an employee receives a device which has access to all the tasks he was given and all the necessary information he/she may need to carry them out. The activities are also reported by means of the same device as the works progress, which provides an ongoing supervision of how much of a given task has been completed (progress supervision). Appropriate devices can be chosen from among a wide variety of portable computers for the purpose of achieving the goals. Data transmission to and from a portable device can be carried out in several ways depending on its functional connection with the main system (a docking cradle, an on line connection via a cordless network, a connection via mobile telephone networks, a dial-up connection, an IRDA connection).

The development of computer systems used to support the operation management of technical facilities could not be independent of the specific requirements on the side of the users. At first, with a limited functional possibilities of the early systems (usually consisting in merely ordering the maintenance management), they could be adapted to the needs of the users by making minor modifications. As they developed, the systems had to be specialized.

Versions dedicated for the following started to appear: the manufacturing, the technical infrastructure, transport, the IT infrastructure etc. The systems can be used for a wider range of applications thanks to new modules being

added to them. The variety of industries, products and requirements made the development of the systems dedicated for the manufacturing sector develop also in various directions. That is why systems for the manufacturing, oil, power engineering (especially nuclear power), pharmaceutical companies, the food industry etc. started to appear. The reason behind all this is to meet the technical and formal requirements characteristic of the particular industry.

6. Summary

The constant development of technology makes machines/devices ever more reliable. There are still situations, however, when machines/devices must be repaired.

A failure of a machine and a long time one has to wait until it is repaired frequently causes great losses for the user. This is particularly true for enterprises which base their activity on using machines, which are very time-consuming or impossible to replace in the


event of a failure due to the absence of a 'spare' machine/device. Such a situation is often encountered with many machines/devices used in coal mines.

A quick repair requires a close co-operation between the user and manufacturer of the machines/devices. Quick access to complete and up-to-date information and the possibility of exchanging them is of essence. In the mining industry the replacement is made more difficult by the fact that there is a geographical distance between the manufacturer and the user of a machine/device.

Another factor influencing efficient repairs is an appropriate management of material and human resources on the side of the manufacturer and the possibility of fulfilling the formal requirements (transfer of the necessary information, circulation of the relevant documents).

Taking the above into consideration, the use of a system which is both a data collection and a communication platform for efficient information and document exchange and one which supports the management of the resources necessary to carry out the repairs proves all the more desirable.

As the management support computer systems develop all the time, the introduction of systems which support strategic asset management also in the case of machine/device manufacturers is inevitable.

Computer systems supporting machine/device operation and company operation management have so far been widely used in many industries. Consequently, it seems inevitable that such systems have to be implemented in coal mines.

The implementation of a CMMs-class system in coal mines should ensure uninterrupted operation of machines/devices, help reduce the costs thanks to a longer operation time and consequently - prolong their life.

The manufacturer of mining machines/devices operates on a large geographical area, in many countries and on different continents. In a situation of a difficult market (which is true for the mining machines/devices market), computer systems have become a significant factor necessary to rationalize activities connected with asset management and bring easily measurable savings.5

Bibliography

1. Biay W., Bobkowski G.: Awaryjno grniczych systemw technicznych. Zeszyty Naukowe Politechniki lskiej, seria: Organizacja i Zarzdzanie, z. 22, Wydawnictwo Politechniki lskiej. Gliwice 2004.

5 Ibidem.


2. Biay W., Bobkowski G.: Moliwoci wykorzystania narzdzi komputerowych w gospodarce remontowej kopal wgla kamiennego. Mechanizacja i Automatyzacja Grnictwa 2005, nr 4 (411).

3. Helebrant F., Jurman J., Fries J.: Maintenance of machines from the point of view of modern functional operation. Ekonomika i Organizacja Przedsibiorstwa 2005, nr 7.

4. Konderla J., Biay W., Bobkowski G.: Computer maintenance managing systems (CMMs) in mining machinery and equipment exploitation entrance strategy. Mine Planning & Equipment Selection 2006, Turyn.

5. MRO Software Inc, Strategic Asset Management Executive White Paper, 2003.

Reviewers: Prof. dr hab. in. Jzef Bendkowski Prof. dr. hab. Jerzy Mika

Dominic S. DEPERSIS Broome Community College State University of New York Alfred LEWIS Alliant International University University of California, San Diego

THE RETIREMENT SYSTEM IN THE UNITED STATES AN EXAMINATION OF THE SYSTEMIC DYSFUNCTION AND MACRO CONSEQUENCES

Summary. Retirement signifies the transition from a position of active employment to a non-employee status usually triggered by age or other significant life event. The underlying principle of retirement continues to be a necessary event to sustain the American economy. In the post-depression era, the idea of retirement and more recently the idea of encouraging individuals to retire became a popular notion. Benefits from retirement include job openings for younger workers who graduate from college or university or are ready to start a trade or other employment. Recently government and private workers have been enticed into retirement with a myriad of buy-out arrangements. Even when Americans make a good faith effort to save for retirement, it is possible to end up with inadequate resources due to corrupt business practices and investment decisions that do not generate adequate returns.

Keywords: Investments, Pension, Private Sector, Retirement

SYSTEM EMERYTALNY W STANACH ZJEDNOCZONYCH OCENA DYSFUNKCJI SYSTEMOWYCH ORAZ KONSEKWENCJI GLOBALNYCH

Streszczenie. Emerytura oznacza przejcie z pozycji aktywnego zatrudnienia do statusu osoby niepracujcej zwykle z powodu wieku lub inych istotnych wydarze yciowych. Podstawowe zasady przechodzenia na emerytur w dalszym cigu s niezbdne dla utrzymania amerykaskiej gospodarki. W okresie pokryzysowym, zachcanie osb do przejcia na emerytur stao si popularnym zjawiskiem. Korzyci

D.S. DePersis, A. Lewis 22

z przejcia w status emerytalny osb uwzgldniaj otwarcie rynku pracy dla modszych pracownikw koczcych szkoy i uczelnie lub gotowych do podjcia dziaalnoci handlowej lub innego zatrudnienia. W ostatnim czasie pracownicy sektora administracyjnego i prywatnego zachcani byli do przejcia na emerytur za pomoc licznych ofert wykupu. Nawet jeli Amerykanie w dobrej wierze oszczdzaj na emerytury, istnieje moliwo, e pozostan z niewystarczajcymi rodkami za spraw praktyk korupcyjnych w biznesie i decyzji inwestycyjnych, ktre nie przynosz odpowiednich zwrotw.

Sowa kluczowe: inwestycje, wypata emerytalna, sektor prywatny, przejcie na

emerytur

1. Incentives to retire1 young

In 2002 New York State Governor George Pataki signed into law an Early Retirement Incentive Program (ERI) at the urging of the AFL-CIO Pension Task Force. Chapter 69 of the Laws of 2002 allowed eligible members to take advantage of ERIs.

The ERI provided New York State employees who were age 55 or more with a minimum of 25 years of service the opportunity to retire with an extra three years of employment credited to the calculation of their pension.2 For example, an employee with 26 years would have their pension benefits calculated as if they had 29 years of service to the State.

The type of ERI offered to state employees was a targeted incentive for employees with seniority to retire. This ERI provided several opportunities such as allowing New York State to reduce its workforce, trim its payroll, and hire new junior level employees where appropriate. Senior employees typically make the most money because of State incremental increases in pay designed to reward longevity. The program also worked well for employees/retirees who chose to partake as well as workers looking for employment, the State Government, and ultimately the taxpayers.

These ERI programs have become commonplace in state government and even private sector employment. From a positive perspective, they provide some workers a desired opportunity to retire at a comparatively young age. These workers can embark on another career or entrepreneurial venture or to completely withdraw from the labor market. Public sector ERIs are generally viewed positively in that they cannot usually be forced as a result of due process rights to their position unlike in the private sector where employment is at will.

Thus, in some circumstances, usually private enterprise employment, early retirement can be forced, feared, and are often viewed as a threat to a workers livelihood, ability to care for family, assist children with college expenses, etc. 1 www.freedictionary.org/index.php, last verified March 23, 2006.

The retirement system 23

Recently workers at General Motors (GM) are mulling over their options due to the financially stressful times at the manufacturing giant.

One news story, states, After 34 years at General Motors Corp. and Delphi Corp., the endgame of Tim

Krzeszewski's working life and future retirement comes down to this: Where will he place his bets? Ever since a union steward stopped the sheet metal worker at his Saginaw, Mich., plant this week to deliver details of a sweeping buyout offer, Krzeszewski has been mulling the decision before him, trying to divine its many unknowns. To me, it's like a gambling issue. Are you going to keep the hands that were dealt to you ... or throw the cards in and ask for a re-deal and hope you get a better hand, says Krzeszewski, who is 52 and leaning heavily toward taking early retirement. Then you could lose it all. 3

Similar to Mr. Krzeszewski's internal debate, many employees are faced with the question of whether to retire younger than they had planned. The question is important in that many American workers are aware that they have not saved enough for retirement.

Majority started saving very late in life and need time to secure a nest egg of retirement funds for their nonworking years. This is why the U.S. Internal Revenue Service (IRS) allows an additional $5000 retirement contribution for those aged 50 years and older. It is estimated that the average net worth of the typical American household is less than $15,000 excluding home equity. A non equity position is reached if automobiles and other possessions are factored out. Additionally less than 25 percent own any stocks, bonds or even a money market account and most are unable to cover monthly operating expenses without a paycheck. Furthermore about fifty percent of the elderly over 65 would live in poverty without their meager Social Security payments.4

It is estimated by American Consumer Credit Counseling that the total U.S. credit card debt in the first quarter of 2002 was approximately $60 billion. The average credit card interest rate at about 18.9% on the average.5 Estimates show that approximately half of all credit card holders only pay the minimum each month with a total of 1.2 billion credit and retail cards in North America.6

Similar to GM workers described earlier, many workers, blue collar or otherwise face a real dilemma. The employers claim they can no longer afford to keep them although the employee has done the same job (developed a skill) over their entire career and in many cases, lack the time, stamina, and/or ability to retrain for or start a new career. There is the additional defacto age barrier of entry for a new profession. Workers at GM and similar firms often earned a substantial income due to longevity and a strong union. These salaries 2 www.nysut.org/legislation/2002earlyretirement.html, last verified March 24, 2006. 3 http://news.moneycentral.msn.com/ticker/article.asp?Symbol=US:GM&Feed=AP&Date=20060324&

ID=5595889, last verified March 24, 2006. 4 www.freerepublic.com/forum/a38356912243a.htm, last verified March 20, 2006. 5 http://ask.yahoo.com/20040209.html, last verified March 25, 2006.

http://www.consumercredit.com/cardstats.htm


cannot be replaced by other work which they are qualified to perform. Krzeszewski for example earned yearly wages averaging close to $90,000 including substantial overtime pay.7

One of the biggest fears of these employees is that they may no longer have health insurance after retirement. We should also not be misled by the syntax chosen. Although programs are often referred to as buyout offer or early retirement incentive they very often do not provide the employee much choice. As Krzeszewski stated, If he stays, Delphi may well try to terminate its pension plan and turn it over to the federal government, resulting in the capping of retirement benefits. The company could in addition eliminate health insurance and has already signaled its intention to sharply reduce hourly wages of workers for those who do not opt for the buyout offer.8

From a global perspective a recent BBC article reported that the Church of England is also concerned about its employees ability to have enough funds for retirement.9

2. A new societal problem

The generation dubbed Babyboomer those born between 1940 and early 1960s are the first to face this problem on large scale unlike previous generations. Historically, companies provided pension plans for their employees that paid retired employees a percentage of their working income. In other words, companies were obligated to pay a certain pension, regardless of how the stock market performed. These types of plans were sometimes referred to as pension or defined benefit plans.

The covenant between corporations and employees is undergoing a fundamental overhaul regarding pensions. Industry Leaders historically would not have considered the option of canceling pension plans due to the notion of corporate responsibility. There was a covenant so to speak between the employer and employee that was bonded by mutual loyalty.

Pension and defined benefit plans still exist today, but many are now closed to new employees. Additionally, when finances get tight or it seems a better corporate decision in the minds of current management, many companies feel no sense of loyalty or obligation to deliver what they had for years promised their employees would be available at retirement.

6 Ibidem. 7 http://news.moneycentral.msn.com/ticker/article.asp?Symbol=US:GM&Feed=AP&Date=20060324&

ID=5595889, last verified March 24, 2006. 8 Ibidem. 9 http://news.billinge.com/1/hi/business/1310604.stm, last verified March 24, 2006.


3. The employer breaks their end of the bargain

The headline reads, US Air To Axe Pensions.10 Feds clear bankrupt airline's proposal to create a new, cheaper pension plan for its pilots. Bankrupt US Airways Group Inc. cleared its last big hurdle in restructuring when the government said it had approved the carrier's proposal to terminate its pilots' pension plan and replace it with a cheaper one. The action by Pension Benefit Guaranty Corp., a federal corporation, clears the way for the No. 7 U.S. airline to receive final bankruptcy court approval.11

In the late 1990s, a number of business enterprises decided to adopt defined contribution pension plans in order to reduce the expense and the risk of paying set-amount pensions. Granted, the expense and risk for employers has increased dramatically as people have been living longer and the cost of health benefits, especially for retirees because they are older have risen quickly and exponentially. However, there has been other market as well as psychological factors at work.

4. Scandal

Enron As the scandal unfolded, Enron's employees lost their jobs and their pensions. Its stockholders lost their shirts. Its accounting firm lost its credibility and its ability to operate as an auditor. About the only ones to walk away from Enron's fall intact were a number of executives who pocketed millions of dollars in compensation despite the company's collapse. 12

The rise of corporate scandals over the past two years, which caused a significant drop in stock prices, also cost New York State's economy $2.9 billion, cut State tax revenues by $1 billion and decreased the State pension fund value by $9 billion according to a report issued today by State Comptroller Alan G. Hevesi. The report noted that corporate scandals cost New York City approximately $260 million in tax revenues, and cost the New York City pension fund almost $7 billion in value. 13

Consider the Corporate Scandal Sheet.

10 www.webprowire.com/summaries/446274.html, last verified March 24, 2006. 11 Ibidem. 12 http://levin.senate.gov/newsroom/release.cfm?id=210071, last verified March 24, 2006. 13 www.osc.state.ny.us/press/releases/aug03/082003.htm, last verified March 24, 2006.

http://www.osc.state.ny.us/press/releases/aug03/corpgovernrpt.pdfhttp://www.osc.state.ny.us/press/releases/aug03/corpgovernrpt.pdf


5. The Corporate Scandal Sheet

Penelope Patsuris, 08.26.02, 5:30 PM ET NEW YORK With the avalanche of corporate accounting scandals that have rocked the

markets recently, it's getting hard to keep track of them all but our Corporate Scandal Sheet does the job. Here we'll follow accounting imbroglios only avoiding insider-trading allegations like those plaguing ImClone, since chronicling every corporate transgression would be impractical and our timeline starts with the Enron debacle.

Table 1

Company

When Scandal Went Public

Allegations Investigating Agencies Latest Developments Company Comment

Adelphia Communications (otc: ADELA - news - people )

April 2002

Founding Rigas family collected $3.1 billion in off-balance-sheet loans backed by Adelphia; overstated results by inflating capital expenses and hiding debt.

SEC; Pennsylvania and New York federal grand juries

Three Rigas family members and two other ex-executives have been arrested for fraud. The company is suing the entire Rigas family for $1 billion for breach of fiduciary duties, among other things.

Did not return repeated calls for comment.

AOL Time Warner (nyse: AOL - news - people )

July 2002

As the ad market faltered and AOL's purchase of Time Warner loomed, AOL inflated sales by booking barter deals and ads it sold on behalf of others as revenue to keep its growth rate up and seal the deal. AOL also boosted sales via "round-trip" deals with advertisers and suppliers.

SEC; DOJ

Fears about the inquiry intensified when the DOJ ordered the company to preserve its documents. AOL said it may have overstated revenue by $49 million. New concerns are afoot that the company may take another goodwill writedown, after it took a $54 billion charge in April.

No comment.

Arthur Andersen November 2001

Shredding documents related to audit client Enron after the SEC launched an inquiry into Enron

SEC; DOJ

Andersen was convicted of obstruction of justice in June and will cease auditing public firms by Aug. 31. Andersen lost hundreds of clients and has seen massive employee defections.


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con. tab. 1

Bristol-Myers Squibb (nyse: BMY - news - people )

July 2002

Inflated its 2001 revenue by $1.5 billion by "channel stuffing," or forcing wholesalers to accept more inventory than they can sell to get it off the manufacturer's books

SEC

Efforts to get inventory back to acceptable size will reduce earnings by 61 cents per share through 2003.

Bristol will continue to cooperate fully with the SEC. We believe that the accounting treatment of the domestic wholesaler inventory buildup has been completely appropriate.

CMS Energy (nyse: CMS - news - people )

May 2002

Executing "round-trip" trades to artificially boost energy trading volume

SEC; CFTC; Houston U.S. attorney's office; U.S. Attorney's Office for the Southern District of New York

Appointed Thomas J. Webb, a former Kellogg's CFO, as its new chief financial officer, effective in August.

No comment.

Duke Energy (nyse: DUK - news - people )

July 2002

Engaged in 23 "round-trip" trades to boost trading volumes and revenue.

SEC; CFTC; Houston U.S. attorney's office; Federal Energy Regulatory Commission

The company says an internal investigation concluded that its round-trip trades had "no material impact on current or prior" financial periods.

Although the effect [of these trades] on the company's financial statements was immaterial, we consider improper trades in conflict with the company's policies. To address this we have made changes to our organization, personnel and procedures.

Dynegy (nyse: DYN - news - people )

May 2002

Executing "round-trip" trades to artificially boost energy trading volume and cash flow

SEC; CFTC; Houston U.S. attorney's office

Currently conducting a re-audit. Standard & Poor's cut its credit rating to "junk," and the company said it expects to fall as much as $400 million short of the $1 billion in cash flow it originally projected for 2002.

Dynegy believes that it has not executed any simultaneous buy-and-sell trades for the purpose of artificially increasing its trading volume or revenue.

http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=BMYhttp://www.forbes.com/markets/company_news.jhtml?ticker=BMYhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=BMYhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=CMShttp://www.forbes.com/markets/company_news.jhtml?ticker=CMShttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=CMShttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=DUKhttp://www.forbes.com/markets/company_news.jhtml?ticker=DUKhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=DUKhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=DYNhttp://www.forbes.com/markets/company_news.jhtml?ticker=DYNhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=DYN


con. tab. 1

El Paso (nyse: EP - news - people ) May 2002

Executing "round-trip" trades to artificially boost energy trading volume

SEC; Houston U.S. attorney's office

Oscar Wyatt, a major shareholder and renowned wildcatter, may be engineering a management shakeup.

There have been no allegations or accusations, only requests for information. The company has confirmed in multiple affidavits that it did not engage in "round-trip" trades to artificially inflate volume or revenue.

Enron (otc: ENRNQ - news - people )

October 2001

Boosted profits and hid debts totaling over $1 billion by improperly using off-the-books partnerships; manipulated the Texas power market; bribed foreign governments to win contracts abroad; manipulated California energy market

DOJ; SEC; FERC; various congressional committees; Public Utility Commission of Texas

Ex-Enron executive Michael Kopper pled guilty to two felony charges; acting CEO Stephen Cooper said Enron may face $100 billion in claims and liabilities; company filed Chapter 11; its auditor Andersen was convicted of obstruction of justice for destroying Enron documents.

No comment.

Global Crossing (otc: GBLXQ - news - people )

February 2002

Engaged in network capacity "swaps" with other carriers to inflate revenue; shredded documents related to accounting practices

DOJ; SEC; various congressional committees

Company filed Chapter 11; Hutchison Telecommunications Limited and Singapore Technologies Telemedia will pay $250 million for a 61.5% majority interest in the firm when it emerges from bankruptcy; Congress is examining the role that company's accounting firms played in its bankruptcy.

No comment.

http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=EPhttp://www.forbes.com/markets/company_news.jhtml?ticker=EPhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=EPhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=ENRNQhttp://www.forbes.com/markets/company_news.jhtml?ticker=ENRNQhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=ENRNQhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=GBLXQhttp://www.forbes.com/markets/company_news.jhtml?ticker=GBLXQhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=GBLXQ


con. tab. 1

Halliburton (nyse: HAL - news - people )

May 2002

Improperly booked $100 million in annual construction cost overruns before customers agreed to pay for them.

SEC

Legal watchdog group Judicial Watch filed an accounting fraud lawsuit against Halliburton and its former CEO, Vice President Dick Cheney, among others.

Halliburton follows the guidelines set by experts, including GAAP (generally accepted accounting principles).

Homestore.com (nasdaq: HOMS - news - people )

January 2002

Inflating sales by booking barter transactions as revenue.

SEC

The California State Teachers' Retirement pension fund, which lost $9 million on a Homestore investment, has filed suit against the company.

No comment.

Kmart (nyse: KM - news - people )

January 2002

Anonymous letters from people claiming to be Kmart employees allege that the company's accounting practices intended to mislead investors about its financial health.

SEC; House Energy and Commerce Committee; U.S. Attorney for the Eastern District of Michigan

The company, which is in bankruptcy, said the "stewardship review" it promised to complete by Labor Day won't be done until the end of the year.


Merck (nyse: MRK - news - people )

July 2002

Recorded $12.4 billion in consumer-to-pharmacy co-payments that Merck never collected.

None

The SEC approved Medco's IPO registration, including its sales accounting. The company has since withdrawn the registration for the IPO, which was expected to raise $1 billion.

Our accounting practices accurately reflect the results of Medco's business and are in accordance with GAAP. Recognizing retail co-payments has no impact on Merck's net income or earnings per share.

Mirant (nyse: MIR - news - people )

July 2002

The company said it may have overstated various assets and liabilities.

SEC

An internal review revealed errors that may have inflated revenue by $1.1 billion.

This is an informal inquiry, and we will cooperate fully with this request for information.

http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=HALhttp://www.forbes.com/markets/company_news.jhtml?ticker=HALhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=HALhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=HOMShttp://www.forbes.com/markets/company_news.jhtml?ticker=HOMShttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=HOMShttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=KMhttp://www.forbes.com/markets/company_news.jhtml?ticker=KMhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=KMhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=MRKhttp://www.forbes.com/markets/company_news.jhtml?ticker=MRKhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=MRKhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=MIRhttp://www.forbes.com/markets/company_news.jhtml?ticker=MIRhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=MIR


con. tab. 1

Nicor Energy, LLC, a joint venture between Nicor (nyse: GAS - news - people ) and Dynegy (nyse: DYN - news - people )

July 2002

Independent audit uncovered accounting problems that boosted revenue and underestimated expenses.

None

Nicor restated results to reflect proper accounting in the first half of this year.

Our focus now is to stabilize this venture and put some certainty to its financial results. The company is evaluating its continued involvement in this venture.

Peregrine Systems (nasdaq: PRGNE - news - people )

May 2002

Overstated $100 million in sales by improperly recognizing revenue from third-party resellers

SEC; various congressional committees

Said it will restate results dating back to 2000; slashed nearly 50% of its workforce to cut costs; is on its third auditor in three months and has yet to file its 2001 10-K and so, consequently, is in danger of being delisted from the Nasdaq.

We have been and will continue to cooperate with the SEC and the Congressional committee.

Qwest Communications International (nyse: Q - news - people )

February 2002

Inflated revenue using network capacity "swaps" and improper accounting for long-term deals.

DOJ; SEC; FBI; Denver U.S. attorney's office

Qwest admitted that an internal review found that it incorrectly accounted for $1.16 billion in sales. It will restate results for 2000, 2001 and 2002. To raise funds, Qwest says it is selling its phone-directory unit for $7.05 billion.

We are continuing to cooperate fully with the investigations.

Reliant Energy (nyse: REI - news - people )

May 2002

Engaging in "round-trip" trades to boost trading volumes and revenue.

SEC; CFTC

Recently replaced Chief Financial Officer Steve Naeve with Mark M. Jacobs, a managing director of Goldman Sachs and a Reliant adviser.

We're cooperating with the investigations.

http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=GAShttp://www.forbes.com/markets/company_news.jhtml?ticker=GAShttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=GAShttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=DYNhttp://www.forbes.com/markets/company_news.jhtml?ticker=DYNhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=DYNhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=PRGNEhttp://www.forbes.com/markets/company_news.jhtml?ticker=PRGNEhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=PRGNEhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=Qhttp://www.forbes.com/markets/company_news.jhtml?ticker=Qhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=Qhttp://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=REIhttp://www.forbes.com/markets/company_news.jhtml?ticker=REIhttp://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=REI


con. tab. 1

Tyco (nyse: TYC - news - people ) May 2002

Ex-CEO L. Dennis Kozlowski indicted for tax evasion. SEC investigating whether the company was aware of his actions, possible improper use of company funds and related-party transactions, as well as improper merger accounting practices.

Manhattan district attorney; SEC

Said it will not certify its financial results until after an internal investigation is completed. The Bermuda-based company is not required to meet the SEC's Aug. 14 deadline. Investors looking to unseat all board members who served under Kozlowski may launch a proxy fight to do so.

The company is conducting an internal investigation and we cannot comment on its specifics, but we will file an 8-K on the initial results around Sept. 15.

WorldCom (nasdaq: WCOEQ - news - people )

March 2002

Overstated cash flow by booking $3.8 billion in operating expenses as capital expenses; gave founder Bernard Ebbers $400 million in off-the-books loans.

DOJ; SEC; U.S. Attorney's Office for the Southern District of New York; various congressional committees

The company stunned the Street when it found another $3.3 billion in improperly booked funds, which will bring its total restatement up to $7.2 billion, and that it may have to take a goodwill charge of $50 billion. Former CFO Scott Sullivan and ex-controller David Myers have been arrested and criminally charged, while rumors of Bernie Ebbers' impending indictment persist.

WorldCom is continuing to cooperate with all ongoing investigations.

Xerox (nyse: XRX - news - people ) June 2000

Falsifying financial results for five years, boosting income by $1.5 billion

SEC

Xerox agreed to pay a $10 million and to restate its financials dating back to 1997.

We chose to settle with the SEC in April so we can put the matter behind us. We have restated our financials and certified our financials for the new SEC requirements.

Editor's Note: The Corporate Scandal Sheet ceased being updated as of September 2002.14SEC: Securities and Exchange Commission. CFTC: Commodity Futures Trading

Commission. DOJ: U.S. Department of Justice The Scandal Sheet raises a number of important questions. One, such a list has not

existed in prior times and secondly, the transgressions are bold, intentional, and calculated. It is hardly believable that there is a lack of accountability amongst a mass of employers, 14 www.forbes.com/2002/07/25/accountingtracker.html, last verified March 24, 2006.

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managers, and executives. It is also noteworthy that members of Board of Directors operate in such a state of ignorance or incompetence that they allow such gross mismanagement and conduct to take place. It is of course recognized that not all business enterprises are poorly managed.

6. A few spoil it for the rest

Of all of the business enterprises in operation in the United States of America the above list represents a small number. But the above small group controlled, influenced and made a huge mark on the economy. Most business enterprises are probably making a good faith effort to serve their customers, employees, and stockholders. The result of the outrageous behavior uncovered in the large scandals and the resulting long-term negative ramification on Americans pensions and the market in general triggered new regulations. New government regulation and oversight is a common response mechanism to an injustice followed by mass public outcry. Compliance with government regulation can be time consuming, onerous, and costly.

The Sarbanes-Oxley Act of 2002 was signed into law by President George W. Bush on July 30, 2002.15 There are two sections of the Act that require CEO/CFO certification of periodic reports filed with the SEC. Pursuant to Section 302 of the Act, the SEC has recently promulgated rules under which CEOs and CFOs must certify annual and quarterly reports filed with the SEC. Section 906 of the Act is self-executing and provides that a companys CEO and CFO must certify that each periodic report containing financial statements filed with the SEC "fully complies" with the reporting requirements of the Securities Exchange Act of 1934 and that the information contained in the periodic report "fairly presents, in all material respects, the financial condition and results of the operations" of the company. Any CEO or CFO who files a certification knowing that the report did not comply or was false is subject to criminal fines and imprisonment. 16

7. Conclusion

Given that employees are now aware of the potential danger of relying on the employer in their retirement years, or indeed relying on having their respective job until retirement, the burden has shifted from employer to employee. Some may argue that the market is at work

15 U.S.C.A. 7263. 16 http://ceb.com/newsletterv4/business_law1.htm, last verified March 24, 2006.


whereas we live and work in a capitalist society and it is the responsibility of the individual to shoulder the responsibility for the retirement years.

Workers certainly should be saving and managing their own alternative retirement accounts in addition to employer pension and the government social security. Numerous investment vehicles such as traditional IRA accounts, ROTH IRA accounts, private banking accounts, bonds, real estate, or commodities are readily available.

The problem with the recommendation above is that most employees have no idea about investments or retirement planning; do not even know who to ask or what questions to ask. Other employees are so busy that they do not make time to monitor their pension fund or to learn how to read a financial statement. Further, after recent headline stories about business corruption, can the financial statements be trusted for accuracy and completeness by those who can understand them?

Bibliography

1. www.freedictionary.org/index.php, last verified March 23, 2006 2. www.nysut.org/legislation/2002earlyretirement.html, last verified March 24, 2006 3. http://news.moneycentral.msn.com/ticker/article.asp?Symbol=US:GM&Feed=AP&Date

=20060324&ID=5595889, last verified March 24, 2006 4. www.freerepublic.com/forum/a38356912243a.htm, last verified March 20, 2006 5. http://ask.yahoo.com/20040209.html, last verified March 25, 2006 6. http://news.moneycentral.msn.com/ticker/article.asp?Symbol=US:GM&Feed=AP&Date

=20060324&ID=5595889, last verified March 24, 2006 7. http://news.billinge.com/1/hi/business/1310604.stm, last verified March 24, 2006 8. www.webprowire.com/summaries/446274.html, last verified March 24, 2006 9. http://levin.senate.gov/newsroom/release.cfm?id=210071, last verified March 24, 2006 10. www.osc.state.ny.us/press/releases/aug03/082003.htm, last verified March 24, 2006 11. www.forbes.com/2002/07/25/accountingtracker.html, last verified March 24, 2006 12. U.S.C.A. 7263 13. http://ceb.com/newsletterv4/business_law1.htm, last verified March 24, 2006

Reviewers: Prof. dr hab. in. Jan Stachowicz Prof. dr hab. Wojciech Dyduch

http://www.freedictionary.org/index.phphttp://www.nysut.org/legislation/2002earlyretirement.htmlhttp://news.moneycentral.msn.com/ticker/article.asp?Symbol=US:GM&Feed=AP&Date=20060324&ID=5595889http://news.moneycentral.msn.com/ticker/article.asp?Symbol=US:GM&Feed=AP&Date=20060324&ID=5595889http://www.freerepublic.com/forum/a38356912243a.htmhttp://ask.yahoo.com/20040209.htmlhttp://news.moneycentral.msn.com/ticker/article.asp?Symbol=US:GM&Feed=AP&Date=20060324&ID=5595889http://news.moneycentral.msn.com/ticker/article.asp?Symbol=US:GM&Feed=AP&Date=20060324&ID=5595889http://news.billinge.com/1/hi/business/1310604.stmhttp://www.webprowire.com/summaries/446274.htmlhttp://levin.senate.gov/newsroom/release.cfm?id=210071http://www.osc.state.ny.us/press/releases/aug03/082003.htmhttp://www.forbes.com/2002/07/25/accountingtracker.htmlhttp://ceb.com/newsletterv4/business_law1.htm

Agnieszka GRZESIOK Technical University of Silesia Faculty of Organization and Management Institute of Management and Administration

THE RIGHT OF OFFSET OF THE VALUE OF PROPERTY LEFT BEYOND THE PRESENT POLISH BORDERS

Summary. This article describes one form of the right to compensation for property left beyond the present borders of the Polish State. The issue of compensation for property left by Polish citizens in the territories annexed to the USSR, was intended to be regulated in domestic law, according to a series of so-called republican agreements. The Polish State took upon itself the obligation to compensate persons who were repatriated from the territories beyond the Bug River and had to abandon their property there. On 8 July 2005 the Sejm passed the Act on the realisation of the right to compensation for property left beyond the present borders of the Republic of Poland, which entered into force on 7 October 2005. The right to compensation shall be realized in one of the following forms: offsetting of the value of the property left beyond the present borders of the Polish State against: the sale price of property or the right of perpetual usufruct owned by the State Treasury; the fees for perpetual usufruct of land owned by the State and the sale price of buildings and other premises or dwellings situated thereon; or the fee for transformation of the right of perpetual usufruct into the right of ownership of property, a pecuniary benefit to be paid from the resources of the Compensation Fund.

Keywords: Repatriate property, right to compensation, real estate of the State

Treasury, right of offset

PRAWO ZALICZENIA WARTOCI MIENIA ZABUASKIEGO

Streszczenie. Niniejszy artyku omawia wybrane aspekty zarzdzania nieruchomociami Skarbu Pastwa w odniesieniu do osb, ktre realizuj uprawnienie do rekompensaty z tytuu pozostawienia mienia poza obecnymi granicami Pastwa Polskiego. Postanowienia umw republikaskich dotyczyy ewakuacji zabuan oraz zasad opisu mienia pozostawionego przez nich poza granicami Polski, nie zawieray jednak szczegowych postanowie w zakresie

A. Grzesiok 36

rekompensat za pozostawione mienie. Prawo to zostao skonkretyzowane w ustawodawstwie krajowym, poczwszy od lat czterdziestych po chwil obecn. Sposb kompensowania by oparty, co do zasady, na jednolitej koncepcji normatywnej moliwoci zaliczenia wartoci pozostawionego mienia na poczet ceny kupna nieruchomoci lub opat z tytuu dzierawy, lub uytkowania wieczystego nieruchomoci pastwowych. Zatem przedmiotem rozwaa bd: tzw. prawo zaliczenia, wybrane aspekty wyceny nieruchomoci zabuaskich, dokonywanie zbycia tyche nieruchomoci oraz charakter prawny prawa zaliczenia.

Sowa kluczowe: mienie zabuaskie, prawo do rekompensaty, nieruchomoci

Skarbu Pastwa, prawo zaliczenia

1. Introductory remarks

Migrations of the polish population were a result of WWII and the establishment of a new political map of Europe. The conclusion of the War brought about modifications of the territory of the Polish State1. On 27 July 1944 the Polish Committee of National Liberation (PKWN) signed an agreement with the government of the USSR concerning the Polish-Soviet border, according to which the Curzon line was to become a base line of the frontier with a couple of corrections in favor of Poland. Settlements concerning the population of Polish, Ukrainian, Belarusian, Lithuanian and Jewish nationalities were also a consequence of the new shape of the border2.

From the moment of delimitating the eastern frontier of Poland along the river Bug, the main stream of which was the base the Curzon Line, the former Borderlands understood as the eastern territories of prewar Poland were referred to as areas beyond Bug. As a result, the term property left beyond Bug refers to immovable assets left by repatriates on the

1 Provisions of the August 1939 Ribbentrop Molotov Pact enabled the seizure of Eastern Polish territories by the

Red Army, initiated on 17 September 1939. Territories of Western Belarus and Ukraine were incorporated to USSR. C.f. J. oyski, Wczenie polskich ziem wschodnich do ZSRR (1939-1940). Problemy ustrojowe i prawne, Acta Universitatis Wratislaviensis Prawo 1994, No CCXXXIII, p. 88 ff.; W. Czapliski, Wybrane problemy prawne zwizane z paktem Hitler-Stalin, Przegld Zachodni 1991, No 3, p.73 ff.; P. aski, Refleksje na temat da odszkodowawczej zabuan z tytuu utraty mienia na Kresach Wschodnich w wietle prawa midzynarodowego i prawa polskiego, Ruch Prawniczy, Ekonomiczny i Socjologiczny 2002, v. 2, p. 41.

2 These were settlements from 9 September 1944 r. between PKWN and the government of BSSR (Belarussian Soviet Republic) concerning evacuation of Polish citizens from the territory of B.S.S.R. and Belarussian population from the territory of Poland, and the government of USSR (Ukrainian Soviet Republic) concerning evacuation of Polish citizens from U.S.S.R. and the Ukrainian population from the territory of Poland; as well as the settlement from 22 September 1944 with the government of LSSR (Lithuanian Soviet Republic), concerning the evacuation of Polish citizens from L.S.S.R. and the Lithuanian population from the territory of Poland, and the agreements from 6 July 1945 between TRJN (Polish Temporary Government of National Unity) and the government of USSR on the right to change Soviet citizenship of persons of Polish and Jewish nationality resident in WSSR into Polish and their evacuation to Poland, and on the right to change Polish citizenship into Soviet of persons of Russian, Belarussian, Ukrainian and Lithuanian nationalities resident in Poland and their evacuation to the USSR.

The right of offset of the value 37

territory of the Belarusian SSR, Lithuanian SSR and Ukrainian SSR after WWII as a result of the modification of borders of the Republic of Poland3.

The invoked republican agreements obliged the Polish state to create a mechanism of compensation for persons displaced to the territory of Poland within its new borders. The compensations provided for in the agreements were justified by the necessity to enable relatively normal existence to the displaced Polish citizens together with their families, once these people declared their attachment to the Polish nation, which decision was expressed in the willingness to move onto the territory of the Polish State. The value of the compensation was to be determined by the insurance value of immovable assets left behind the new border, calculated in Polish Zlotys (PLN) for the period before 1 September 1939.

Initially questions concerning the offset rights were regulated incidentally, while enacting on other issues, such as awarding farming properties or managing municipal and settlement areas, later they were included in laws concerning the administration of immovable property. The authorities strived to organize a new place of residence and job vacancies for the repatriates, possibly similar to the ones left behind. As a consequence peasants were assigned to developed agricultural properties, while city dwellers received property in the form of a flat. Then, the promised compensation took the shape of settlement of the sale price for the property or fees for perpetual usufruct. An offset took place according to the size of the acquired property, whether farming or not, as a part of sales transaction of particular assets.4

Both the Act of 12 December 2003 on setting off the value of the property left beyond the present borders of the Polish State against the sale price of property or the right of perpetual usufruct held by the State Treasury,5 as well as the currently binding Act of 8 July 2005 r. on the realization of the right to compensation for property left beyond the present borders of the Republic of Poland6 provide a complete regulation of the question of compensations. This is a consequence of heavy criticism prompted by the previous fragmented enactments, and the

3 Under the impact of the USSR from the Teheran Conference (28 November - 1 December 1943) the allies

concordance grew when it comes to acceptance of Polish territorial expansion in the west of the country as compensation for Polish eastern territories annexed by the USSR. The line of the eastern border was later confirmed in Yalta (4 - 11 February 1945). C.f. S. Ciesielski, Przesiedlenia ludnoci polskiej z Kresw Wschodnich do Polski 1944-1947, Warszawa 1999, p.14.

4 C.f. R. Trzaskowski (in:) Sadomski J., Trzaskowski R., Zaradkiewicz K.: Mienie zabuaskie jako otwarta kwestia majtkowa w prawie polskim, Warszawa 2002, p. 60; G. Bieniek, Mienie zabuaskie (in:) Nieruchomoci. Problematyka prawna (ed.) G. Bieniek, S. Rudnicki, Warszawa 2006, p.150 ff.; A. Grzesiok, Rekompensaty za mienie zabuaskie, cz I. Nieruchomo, 2006, v.2, p.15 ff., G. Bieniek (in:) Komentarz do ustawy o gospodarce nieruchomociami, Zielona Gra 2000, p. 375; J. Szachuowicz (in:) Gospodarka nieruchomociami, Warszawa 2005, p. 513; J. Siegie, Ustawa o gospodarce nieruchomociami. Komentarz. Jaktorw 1999, p. 352; M. Wolanin, Ustawa o gospodarce nieruchomociami. Komentarz. Warszawa 1998, p. 361; S. Kolanowski, A. Kolarski, Ustawa o gospodarce nieruchomociami. Komentarz. Warszawa 1998, p. 294 ff.; J. Woasiewicz, Analiza prawnohistoryczna uprawnie zabuaskich, Biuletyn Biura Informacji Rady Europy 2002, v.3, p.28.

5 DzU (Journal of Acts) 2004, No. 6, pos. 39. 6 DzU 2005, No. 169, pos. 1418 later amended.

A. Grzesiok 38

will to satisfy definitely the claims of persons who left immovable assets behind the contemporary state borders, reducing at the same time the value of the compensation. The 2003 Act introduced for the first time an arbitrary reduction of the equivalent value to 15% of the abandoned property.

The currently binding 2005 Act provides for a compensation which amounts to 20% of the value of immovable assets left behind the border. The compensation may assume the form of either a payment of money or the right of offset the latter being the subject of this paper. According to the Act, also people who evaded evacuation or displacement, and as a result did not undergo the evacuation procedure, are entitled to receive the compensation. Moreover, the Act of 8 September 2006 amending the Act on the realization of the right to compensation for property left beyond the present borders of the Republic of Poland and certain other Acts7 broadened the scope of the entitled persons, granting the right of compensation to people who left property behind the contemporary border of the Republic of Poland in accordance with the agreement between the Republic of Poland and the Union of Soviet Socialist Republics on the modification of the border between the two states from 15 February 1951.8

The requirements that a person entitled to compensation for the property left abroad has to meet are: Polish citizenship on the starting date of the War, residence in the Borderland and the fact of abandoning these areas as a result of War, as well as current Polish citizenship9. The data of the Ministry of Treasury show that presently there are over 100,000 of persons entitled to compensation, and the average value of compensation amounts to PLN 42,000.

2. Realisation of the right of offset

As far as the offset right is concerned the Act currently in force provides for the possibility to set off the value of the abandoned real property against the sale price of a property owned by the State Treasury, or against the price for acquiring the right of perpetual usufruct of immovable assets owned by the State Treasury, as well as against the initial and

7 DzU No. 195, pos. 1437. 8 C.f. H. Kanikowska, Opinia do ustawy z dnia 8 wrzenia 2006 r. o zmianie ustawy o realizacji prawa do

rekompensaty z tytuu pozostawienia nieruchomoci poza obecnymi granicami Rzeczypospolitej Polskiej oraz niektrych innych ustaw, Biuro Legislacyjne Kancelarii Senatu (Legislative Office of Senate Chancellary); K. Zaradkiewicz (in:) Mienie zabuaskie.., p. 16.

9 C.f. R. Sztyk, Realizacja prawa do rekompensaty za nieruchomoci pozostawione poza obecnymi granicami Rzeczypospolitej Polskiej, Rejent 2006, No. 3, p. 49; M. Wolanin, Mienie zabuaskie nowe regulacje prawne, Nieruchomoci. C.H. Beck, 2006, No. 4, p. 6; S. Kolanowski, Kresy Wschodnie i mienie zabuaskie, p. 34; G. Bieniek, Mienie zabuaskie, op. cit., p. 179.


subsequent fees for the right of perpetual usufruct of a land property and the sale price of buildings and other constructions or premises situated on this land.

Most basically, the law in question provides that repatriates are entitled to the setoff of the value of the real estate left behind the border against various types of liabilities that these persons owe to the State Treasury. The liabilities may be the fees for the right of perpetual usufruct or the sale price of building land, as well as the sale price for buildings located on the acquired property, construction or other premises, and the sale price of farming properties owned by the State Treasury.

Provisions of the Act award to repatriates the compensation for immovable assets left abroad. The compensation may be expressed in the form of ownership or the right of perpetual usufruct, as well as in the entitlement to acquire these rights.10

Another way of the realization of the right of offset is the possibility to transform the right of perpetual usufruct already held of a property owned by the State Treasury into ownership of that property without the necessity to pay additional fees arising from the transformation of the title (from the right of perpetual usufruct of the property belonging to the State Treasury into its ownership). This procedure seems justified by the willingness to achieve a comprehensive regulation of the questions concerning property left abroad by repatriates. As opposed to the Act of 4 September 1997 on the transformation of the right of perpetual usufruct held by natural persons into the right of ownership, the entitlement awarded by 2005 Act does not assume the shape of gratuitous transformation11.

The scope of possible realization of the right of offset was additionally broadened by the amendment of the Act of 30 August 1996 on commercialization and privatization. The amendment added art. 53 paragraph 4. Pursuant to the new provision the entitled persons may set off 20% of the value of the abandoned property ascertained by an administrative decision or certificate against a part of the sale price of an enterprise corresponding to the value of rights to immovable property owned by the enterprise specified in the enactments on the

10 C.f. A. Grzesiok, Realizacja uprawnie zabuaskich w aktualnym stanie prawnym, Zeszyty Prawnicze

Wyszej Szkoy Ekonomii i Administracji w Bytomiu, v. 2, Bytom 2006, p. 51 ff., S. Kolanowski, Kresy Wschodnie i mienie zabuaskie, op. cit., p. 36; M. Wolanin, Mienie zabuaskie - nowe regulacje prawne, Nieruchomoci. C.H. Beck, 2006, No. 4, p. 9 ff.; R. Sztyk, Realizacja prawa do rekompensaty za nieruchomoci pozostawione poza obecnymi granicami Rzeczypospolitej Polskiej, Rejent 2006, No. 3, p. 51 ff.

11 Such a gratuitous entitlement is owed only to persons who were awarded the right of perpetual usufruct of a property in exchange for expropriation in favor of the State Treasury before 5 December 1990, as well as persons expropriated pursuant to the decree on Warsaw land. C.f. A. Cisek, J. Kremis, Ustawa o przeksztaceniu prawa uytkowania wieczystego , op. cit., p. 48 ff.; A. Cisek (in:) System Prawa Prywatnego, Prawo rzeczowe, Vol. 4, ed. E. Gniewek, 2004, p. 182 ff.; B. Burian, Pierwszestwo nabycia nieruchomoci, Zakamycze, 2004, p. 44; S. Jarosz-ukowska, Konstytucyjna zasada ochrony wasnoci, Zakamycze, 2003, p. 154; M. Wolanin, Przeksztacenie prawa uytkowania wieczystego we wasno, Zielona Gra 2001, p. 97; G. Bieniek (in:) Bieniek G., Hopfer A., Marmaj Z., Mzyk E., rbek R.: Komentarz do ustawy o gospodarce nieruchomociami, Zielona Gra 2000, p. 374.

A. Grzesiok 40

realization of the right to compensation for property left beyond the present borders of the Republic of Poland. The confirmed value of compensation may also be set off against a part of the sale price or fees for perpetual usufruct of immovable assets sold as property which does not constitute a component of the enterprise, taken over by the State Treasury after the expiry or termination of a contract for awarding the property to the enterprise for non-gratuitous use.

The value of immovable property left beyond the contemporary borders of Poland is set off against the price to the amount of 20% of the value of the real estate after a valorization; the setoff takes place in the procedure of acquisition of the property by entitled persons.12

The alienation of the assets is administered by authorities and entities entrusted with the task of exercising ownership rights in relation to immovable assets of the State Treasury. Among these we may enumerate the Military Housing Agency, Military Property Agency and Agricultural Property Agency, as well as starosts and mayors of cities of the poviat status. Entities administering the assets of the State Treasury in the course of their sales must not refuse to accept the payment of price of the sold property as the realization of the right to compensation in the form of offset of the value of the property left beyond the contemporary borders of the Republic of Poland against the sale price13.

As accepted in practice of tender organization, the tender announcement includes additionally information concerning the possibilities of participation in the proceedings of persons entitled pursuant to the 2005 Act. The note informs such offerors about exemption from the obligation of submitting vadium to the amount which does not exceed the value of the ascertained right to compensation. The amount should be determined in a decision of a Voivode issued in compliance with the Act or in a proper note of the Voivode made in the decision or certificate issued in compliance with separate enactments.14

12 C.f. M. Wolanin, Mienie zabuaskie, op. cit., p. 10; R. Sztyk, Realizacja prawa do rekompensaty, op.

cit., p. 51; S. Kolanowski, Kresy Wschodnie i mienie zabuaskie, op. cit., p. 36; G. Bieniek, Mienie zabuaskie, op. cit., p. 181 i nast.

13 C.f. M. Wolanin, Mienie zabuaskie, op. cit., p. 10; S. Kolanowski, Kresy Wschodnie i mienie zabuaskie, op. cit., p. 37; R. Sztyk, Realizacja prawa do rekompensaty, op. cit., p. 47.

14 The offset rights were provided in: art. 16 of the decree of 6 September 1944 on agricultural reform, art. 18 1 pt. 4 of the decree of 6 September 1946 on organization of agriculture and settlement on Western Territories and the former Free City of Gdask, art. 9 of the decree of 6 December 1946 on the transfer by the State of non-agricultural immovable property on Western Territories and the former Free City of Gdask art. 14 of the decree of 10 December 1952 on the cession on the part of the State of non-agricultural immovable property for housing purposes and individual construction of detached houses, art. 8 of the Act of 28 May 1957 on the sale by the state of housing premises and building land, art. 21 of the Act of 12 March 1958 on the sale of state owned agricultural immovable property and settlement of certain matters connected with agricultural reform and agricultural settlement of persons, art. 17 of the Act of 14 July 1961 on the administration of terrain in cities and settlements, art. 88 (81) of the Act of 29 April 1985 on the management of land and immovable property expropriation, art. 212 of the Act of 21 August 1997 on the administration of real estate.


As regards persons who have already realized their entitlement in part after the date when the decision was issued the exemption from the obligation to submit vadium concerns only the remaining value of the setoff right, the remaining part of the compensation limit stated in the decision. The exemption is connected with the necessity to submit to the president of the tender commission a written declaration to pay an amount equal to the value of the vadium (which would be submitted otherwise) should the offeror abstain from entering into the contract. The declaration should be submitted along with the original decision or certificate ascertaining the right to compensation in the form of offset of the value of the abandoned property against the sale price. In the case of accession to the tendering by legal heirs it is necessary to present a court decision ascertaining the acquisition of inheritance or dividing the inheritance.

Where the entitled person is exempted from the duty to submit vadium up to the value corresponding to the worth of property left beyond the border, he shall be admitted as a participant if he pays the remaining part on general terms.

As far as acquisition of immovable property is concerned the provisions of the Act on the administration of real estate15 concerning the determination of ways and periods of use and development of land properties are not ap

ORGANIZACJA I ZARZĄ - Politechnika Śląska · Ekonomika i Organizacja Przedsiębiorstwa 2005, nr...

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