2005 IBM Stockholder Proposal on Executive Compensation.

Resolved: The Stockholders request that the Board of Directors adopt a policy that the
compensation of senior executives will be determined in the future without regard to any
"pension income" from a defined benefit pension plan that the accounting rules may require
IBM to treat as an addition to its reported income and earnings per share.

Statement of Support

IBM uses criteria to compensate the performance of its senior executives, such as reported net
income and earnings per share, that includes "income" from defined benefit pension plans.
However, compensation decisions should not ne influenced by such "pension income," in my
view, because that "income" does not reflect the results of operations, money that is actually
available for use by the company, or the actual performance of the executives involved.

IBM's annual report for 2003 reports "periodic pension income" from various defined benefit
pension plans of about $803 Million or 7% of its pre-tax income. This compares with $1.2
Billion, or nearly 16% of its pre-tax income in 2002, $1.5 Billion or 13% of its pre-tax income
in 2001, and $1.3 Billion, or 11% of its pre-tax income in 2000.

In all, "pension income" accounted for more than $4.8 Billion of IBM's pre-tax income for the
four year period. However, as the managing director of Standard & Poors observed in Investors
Business Daily, "it's not the company's money. It stays in the pension fund." (Oct. 25, 2002)

Despite this fact, the 2003 and 2004 proxy statements report that IBM's top senior executives
were given more than $100 Million dollars of performance-based compensation based, in part,
on either net income or earnings-per-share. From 2000 through 2003, this compensation included
more than $46 Million in annual bonus awards, $27 Million in restricted stock and $31 Million in payouts under the Long Term Incentive Plan.

By using reported net income and earnings per share as compensation criteria, and failing to
subtract pension income from the reported numbers, I believe IBM has compensated its top
executives as if they actually contributed to the production of $4.8 billion in "pension income"
through their efforts in managing operations. However, their management of operations did not,
in fact, have anything to do with the production of that income.

In my view, this situation constitutes a clear violation of the principle of pay for performance.
Moreover, instead of generating $4.8 billion in cash from pension plans, the 2003 proxy
statement disclosed that IBM has actually paid $4 billion into the U.S. Pension plan in order to assure that it is "fully funded."

My proposal won more than 36% of the votes cast at the 2004 Annual meeting. With your
support, we may persuade the Board that pension income should no longer be used in a way
that boosts executive pay.