1. Betting It All on Company Stock is Risky Business
Los Angeles Times – November 30, 2001
Presented by: Alyssa Phillips

2. Enron’s Impact
Enron employees lost more than $1 billion of their retirement funds that are unlikely to be recovered.
This has showed the dangers of employees owning too much of their company’s stock in 401(k) plans.
Millions of American’s have no choice but to bet their retirement savings on the success of their employers.

3. Enron Continued
Gary Kemper, Enron maintenance foreman, claimed, “We just didn’t see the cliff coming. No one did.”
He filed a lawsuit against Enron accusing Enron executives of failing their fiduciary duty to workers by using company stock as a match and encouraging workers to put their own money in stock.
Enron failed to tell employees about their huge financial problems.

4. Increased Productivity & Loyalty?
Many companies believe that making employees shareholders increases productivity and loyalty.
Does this thought still hold true today?
Organizations feel by doing this, their stock will be kept in “friendly hands,” reducing the risk for a hostile takeover.
When the company does well, employees benefit, but employees also feel the blow when companies do not do so well.

5. Investment Options
Approximately 2,000 US companies, which cover 6 million of the nation’s 40 million 401(k) participants, offer their own stock as an investment option.
Some of those companies include: Coca- Cola Co., Lucent Technologies Inc., P&G, and Enron.
By contributing part of a paycheck to a tax- deferred acct., workers save for retirement in 401(k) plans. Those contributions are often matched by employers.

6. Sounds good, but…
Companies that match in stock usually restrict employees from selling those shares.
Workers generally cannot sell their shares until they are near retirement age.
Research found that less than 1% of plans restrict their employees from selling company matching shares, but those plans cover around 2.8 million workers.

7. Investing in Company Stock
Some workers compound the problem by investing their own money in company stock offered through the plans.
Most financial planners believe that no more than 10-15% of a portfolio should be invested in shares of one company.
Employers that have 401(k) plans are not required to offer a cash match on company stock.

8. Setting Limitations
Employers are prohibited from requiring workers to invest more than 10% of their 401(k) contributions in company stock.
Employees who are given a variety of investment choice can choose to put in as much money in company stock as they please.

9. Enron Again…
Enron may have violated the law when it blocked employees from selling co. shares during a 4-week period in Oct. & Nov.
This blockage was just before revelations of the extent of their problems being made public.
It was said the co. was not trying to force employees to stay invested, but was rather trying to switch from one 401(k) plan to another.

10. Former Benefits
Many workers in the late 1990s benefited greatly from ignoring diversification rules and picking up company stock.
For ex., Enron’s stock had more than quadrupled in the 5 years before it was announced the company’s earnings had been exaggerated.
Kemper said his conservative nature prevented him from loading up on Enron shares.

11. The Moral of the Story
Be wary of how much you invest in company stock because you never know when it will all be flushed away.
Enron is a perfect example of how much success an employee can enjoy with stock options for only so long before everything is taken away in an instant.
Not all stock options are bad, but in today’s ever-changing economy, be wary of where your money is going!