In the 1970s, the Continental Can company was attempting to cut costs in its plants. Revenue and profits were okay, but Continental wanted to provide even higher returns for its investors, so it started to look for ways to lower the bottom line and ensure future growth.

After some quick financial analysis, the company identified several areas that were draining the treasury. But many areas of the budget were off-limits--for example, the union would never allow broad wage cuts, decreases in benefits, etc. Continental also looked at employee pensions, but any decrease in pension payouts would surely draw the ire of the union.

Now some quick background: Like most companies, Continental Can offered a pension plan to employees, but under the current contract, employees were required to stay with the company a number of years before they became "vested" in the pension plan. Once employees vested and finally retired from the company, they stood to draw a pension from Continental Can for the rest of their lives. But if an employee left the company before becoming vested in the plan, they got nothing.

Union bargaining units agreed to programs like this all the time because it afforded a pension plan to the people who mattered: long-term employees. (Remember, a short-term or transient employee is less likely to join the union than a lifer, and once someone leaves a job, even if they did join the union, they were no longer expected to pay union dues once they moved on to another company. So it was in the best interest of the union to encourage long-term employment amongst company employees.)

By exploiting the pension vesting requirement, Continental execs cooked up with a plan that would potentially save the company millions in pension payments. Thanks to the relatively recent computerization of most corporations' payroll and human resources departments, it was discovered that a simple computer program could be written to flag a user when he or she had stayed with the company a certain number of years. Using this tool, Continental Can was able to routinely target and lay off employees months (and sometimes just weeks) before they became vested in the retirement plan, allowing the company to hire someone new to do the job while freeing itself of the obligation to ever pay that person a single payout from the pension fund.

Arrogantly enough, the computer system developed by Continental Can was named BELL,
a reverse acronym for "Let's Limit Employee Benefits."

The system would stay in place, firing people left and right without anyone the wiser for years. Finally, in the early 80s, the BELL system came to light and an investigation began, resulting in a class action lawsuit filed by the United Steel Workers of America, Continental's union.

Continental Can was found guilty under the Employee Retirement Income Security Act and was eventually required to pay restitution to all of the employees who had been unfairly fired and denied pension benefits.

This horrible example of one company defrauding its employees--a story that predates Enron by almost three decades--is the quintessential example of how far companies will go to deny employee benefits in order to achieve higher returns on Wall Street. The story of Continental Can and BELL is taught in most first-year MBA human resources classes as an example of "how to screw up labor relations with your company from now until the end of time."

Most writeups of this type will cite a source, but it's difficult to cite "No Springs' MGT 501 Class Notes" as a source, so I looked around a bit and found that Time Magazine actually covered this issue some time back in an article called "BENEFITS: Too Slick with The Pink Slips" (14 Jan 1991). Should be available at your local library, if you'd like to read more about this interesting story.

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