The Enron scandal is sparking calls for major changes in one of
the best perks that businesses offer: employee stock programs. But
some warn that the reforms hold dangers for companies and workers
Proposals from Congress and the White House could soon limit how
much company stock an employee could have in a 401(k) retirement
Others would change laws regarding when employees could diversify
the company stock in the tax-deferred retirement savings program.
And still others would place new limits on stock options, and
could even require corporate executives to give back options
proceeds if their companies have to restate earnings or engage in
Millions of workers could be affected in thousands of companies,
ranging from corporate behemoths such as Coca-Cola to Silicon Valley
"The trend line of all the proposals are in essence to restrict
company stock," said Michael Keeling, a lobbyist and president of
the ESOP Association, which represents about 1,200 companies with
have employee stock ownership programs. "It's a big, big deal."
About 19 percent of all 401(k)s contain company stock contributed
by employers or purchased by employees, according to the research
group National Center for Employee Ownership. About 10 million
workers, ranging from high-paid executives to entry-level factory
workers, get stock options.
Lawmakers want to protect employees from the same fate as about
15,000 former Enron Corp. employees. Those workers lost an estimated
$1.2 billion when the stock that made up the bulk of their 401(k)
accounts plummeted as the Houston-based energy giant's accounting
scams came to light and it filed for Chapter 11 bankruptcy court
"We want to make sure that the life savings of our nation's
workers are protected, even when an employer's stock collapses,"
Sen. Barbara Boxer, D-Calif., said in introducing one of an
estimated 18 post-Enron proposals that involve company stock
At the same time, lawmakers and others are trying to prevent the
types of executive stock abuses such as those that occurred at Enron
from happening again.
Some proposals, for instance, would prohibit company executives
from exercising stock options during so-called "blackout" periods
when rank-and-file employees can't sell company stock held in their
401(k) plans. During a blackout period at Enron, when the company
was switching pension plan administrators, most employees were not
allowed to sell their plummeting stock, even though top executives