Enron Losses May Inspire 401(k) Reforms
Dec. 4 -- Roger Boyce believed so much in the future of his employer of almost 30 years, the troubled energy company Enron, that he put all of his 401(k) funds in the company's stock.
But that's not all. Boyce also purchased shares in Enron stock as part of a company stock option plan over the years. In addition, he received some 15,000 shares in Enron stock as an outright gift from the company, as well as the stock contributions the company matched in his 401(k) plan.
All told, Boyce, a 67-year-old retired Enron employee living in Minneapolis, owns between 25,000 and 26,000 shares of the company's stock. At the end of last year, that was worth around $2 million. It is now worth under $10,000.
Boyce says now that his most crippling mistake was not diversifying his retirement funds into other investments. But at the time, his loyalty and faith in the company, along with continuous opportunities to accrue more and more Enron stock, kept him putting more of his eggs in one basket.
"Enron continued to be very, very strong during that time," say Boyce. "The thinking was why should I put something in money markets at two or three percent when I can have Enron?"
Devastating Losses
With the crippling losses suffered by many Enron employees like Boyce in their retirement funds as a result of the company's devastating stock plummet, some industry watchers are calling for changes in the way 401(k) retirement funds are regulated.
One of the key questions is whether or not there should be a limit on the amount of company stocks that employees can hold. Some, like Eli Gottesdiener, principal of the Gottesdiener Law Firm, a Washington, D.C.-based firm representing Enron workers in a lawsuit against the company, suggest capping the amount of company stock an employee can own at 10 percent of their assets, or five percent if the company awards matching stock.
"We have laws that people have to wear seatbelts," argues Gottesdiener. "We have seen that trying to tell people you don't put all your eggs in one basket doesn't work. Employers pump their stock and employees forget common sense."
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