And while there is still a lot of confusion about exactly what happened and why, ythe issue of participant overindulgence in company stock is certainly not a new concern for our industry. This week we asked readers, ‘Is the evaporation of Enron’s 401(k) balances an ‘early’ warning sign of things to come – or an aberration unduly hyped by the media and political agendas? Or, is it just too early to know?’
More than half of this week’s respondents (56.8%) termed the current Enron furor as an aberration. Those readers tended to view the current coverage as ‘hype’ by people who either didn’t know –or didn’t care –how things really worked. Many of those also appeared reluctant to feel sorry for Enron workers who apparently voluntarily invested a preponderance of their own contributions in the stock. And, as one reader noted, ‘ The popular press never tells stories of how many people gained hundreds of thousands of dollars in the Wal-Mart profit sharing plan or how low level clerks held company stock in a bank’s plan that was acquired by a larger bank then another and then another and suddenly had worth in the high six figures.’
Another noted, ‘If we “protect” participants from investing too much of their 401(k) assets in company stock, will we also protect them from imprudent holdings in their self-directed brokerage accounts, or from non-diversified use of sector funds (internet)? What form of protections should we provide for IRAs? Account holders can make equally non-effective investment decisions with their traditional IRA, Roth, SEP, SIMPLE and rollover account balances.’
Over a third (35%) saw it as a portent of future troubles. In fact, as some correctly noted, Enron isn’t the first sit ation like this to come to the media’s attention (ColorTile ring a bell?). These readers were all to aware of participants inclination to overdo company stock –ignoring all the ‘eggs in one basket’ education –and saw Enron as a possible wake-up call for other plans/participants, if nothing else. One reader recalled that Enron ‘ showed up in a proprietary report last year by Strategic Insight and NewRiver in 9th place on the Top 10 DC Plans with Company Stock; other notable names in the top-10: Dell, Anheuser-Busch, MarshMac, GE, Time Warner, Medtronic, American Express.’
The remaining 8% saw the whole situation as ‘too early to tell.’ Frankly, since little details continue to emerge, this position appears to deserves merit. We’re all ‘victims’ of our own experiences and at this point we have largely heard from just one ‘side’ of the issue. Let’s hope that those in Washington wait to understand the full picture before they try to ‘fix’ things.
Which of course, brings us to this week’s Editor’s Choice:‘You forget to add another option-that it was pure, unmitigated greed and arrogance that went unchecked. In this sense, I hope it is an aberration.’
As do we all. Thanks to everyone who participated in our survey!
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