Employee Stock Ownership after Enron: Proceedings of the 2003 Annual Meeting, Association of American Law Schools Section on Employee Benefits

43 Pages Posted: 13 Aug 2021

See all articles by Norman P. Stein

Norman P. Stein

Drexel University Thomas R. Kline School of Law

Colleen E. Medill

Independent

Susan J. Stabile

University of St. Thomas - School of Law (Minnesota)

Jeffrey N. Gordon

Columbia Law School; European Corporate Governance Institute (ECGI)

Louis H. Diamond

Buchanan Ingersoll, P.C.

Damon Silvers

American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)

Patricia Dilley

University of Florida Levin College of Law; National Academy of Social Insurance (NASI)

Date Written: August 5, 2003

Abstract

Professor Norman P. Stein: This session is entitled "Employee Stock Ownership After Enron," and I assume that title has drawn into this room people who know something about either Enron or employee stock, or both. For our purposes, the Enron story has as its focus the Enron 401(k) plan, which was the principal retirement plan for most Enron employees. Employees could make elective contributions to the 401(k) plan, which offered nineteen investment options, one of which was Enron stock. The 401(k) plan also provided that Enron would match employee contributions up to 3 percent of compensation.' Enron's match, however, was made in Enron stock. The plan placed restrictions on the Enron stock: employees could not sell that stock until the employee attained age 50.

Not surprising for a plan so structured, employees' 401(k) accounts were heavily weighted toward Enron stock. Indeed, 62 percent of the plan's value was, prior to Enron's fall, invested in Enron stock. Moreover, some Enron officers encouraged Enron employees to invest 401(k) assets in Enron stock, even when they knew that Enron's future was at serious risk because of business problems and accounting fraud. When Enron did implode, so did the retirement savings of many of its employees.

Our panelists today are Colleen Medill, who will look at some of the current proposals for 401(k) reform after Enron through the lens of behavioral economics; Susan Stabile, who will introduce some ideas about the relationship between ERISA liability and securities law; Jeffrey Gordon, who will look, in the context of United Airlines's ESOP, at how the structures in which employee stock ownership is facilitated can affect the prospects of the firm and its employees; Louis Diamond, who will describe the tax treatment of employer stock in defined contribution plans, which is really quite extraordinary in our income tax; Damon Silvers, who will speak about the labor movement and its ambivalent feelings about employer stock, and also its views on some of the proposals to control it in defined contribution plans; and Patricia Dilley, who will comment on how a nominally unified tax treatment of employer stock for rank-and-file employees and executives, in fact, results in two distinct tax regimes because of the differences in bargaining power and the ability to control the timing of their compensation.

Suggested Citation

Stein, Norman P. and Medill, Colleen and Stabile, Susan J. and Gordon, Jeffrey N. and Diamond, Louis and Silvers, Damon and Dilley, Patricia, Employee Stock Ownership after Enron: Proceedings of the 2003 Annual Meeting, Association of American Law Schools Section on Employee Benefits (August 5, 2003). Employee Rights and Employment Policy Journal, Vol. 7, No. 1, 2003, Available at SSRN: https://ssrn.com/abstract=3900104

Norman P. Stein (Contact Author)

Drexel University Thomas R. Kline School of Law ( email )

3320 Market Street
Philadelphia, PA 19104
United States

Colleen Medill

Independent

Susan J. Stabile

University of St. Thomas - School of Law (Minnesota) ( email )

MSL 400, 1000 La Salle Avenue
Minneapolis, MN Minnesota 55403-2005
United States

Jeffrey N. Gordon

Columbia Law School ( email )

435 West 116th Street
Ctr. for Law and Economic Studies
New York, NY 10027
United States
212-854-2316 (Phone)
212-854-7946 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Louis Diamond

Buchanan Ingersoll, P.C.

Damon Silvers

American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)

815 16th Street, NW
Washington, DC 20006
United States

Patricia Dilley

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States
352-392-2270 (Phone)
352-392-7647 (Fax)

National Academy of Social Insurance (NASI)

1776 Massachusetts Avenue, NW
Suite 615
Washington, DC 20036-1904
United States

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