Wary of Stock Reform Calls

By Bob Keefe Cox News Service | THE JOURNAL RECORD, February 11, 2002 | Go to article overview

Wary of Stock Reform Calls


Bob Keefe Cox News Service, THE JOURNAL RECORD


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 alike.

Proposals from Congress and the White House could soon limit how much company stock an employee could have in a 401(k) retirement plans.

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 misleading accounting.

Millions of workers could be affected in thousands of companies, ranging from corporate behemoths such as Coca-Cola to Silicon Valley start-ups.

"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 protection.

"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 programs.

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 could. …

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