- The Washington Times - Saturday, February 2, 2002

As the Enron fiasco unfolds in the weeks and months and investigations ahead, surely there will be many hard les-

sons to be learned. Whether they will translate into reforms is another and tougher question. But the need for some changes in the law should be self-evident, at least to anybody not in accounting.

For example, auditors should not be consultants to the same companies they audit; the conflict of interest involved should be even more apparent after this Enron/Arthur Andersen disaster.

There's another sad lesson to be learned from the experience of the poor folks at Enron, now maybe literally poor because their retirement funds consist largely of worthless Enron stock. Unlike the Kenneth Lays at the top of this particular food chain, they weren't allowed to sell their stock as it declined in value stock the company had used to match the employees' contributions to their 401(k) plans.

Nor is locking workers into their company's stock a practice confined to Enron. A recent study of retirement plans came up with these revealing percentages:

At companies that allow their employees to invest their retirement funds in company stock, but don't contribute shares themselves, only 22 percent of the assets in workers' 401(k) plans are in company stock. (It's called diversifying.)

But at firms that direct their own stock into retirement plans, 53 percent of all the savings consists of company stock.

At Enron, an even larger 58 percent of the employees' retirement funds were in Enron's own stock.

At Procter & Gamble, the figure was 94.7 percent, the highest among the 219 companies surveyed, although P&G says its broader retirement plan consists of only 87 percent of its own stock. Which is impressive enough.

There's nothing wrong with a healthy company allotting its own stock to its workers/owners. But there's a lot wrong with locking them into it as if the stock weren't their property but the company's. Call it corporate socialism.

Why not let the employees sell the stock if they wish, and invest the proceeds in their retirement fund? Isn't that what a free market is supposed to be about?

But according to a recent Associated Press report, "Many large companies that contribute their own stock to retirement funds prohibit workers from transferring the savings to other types of investments until they reach their 50s."

It gets worse: Some firms require their employees to put at least a part of their own contributions to their retirement funds into the company's stock.

What can be the justification for this kind of Big Brotherism? According to one professor who's studied this trend, many of the companies "say if they can't put in company stock, they won't make contributions" to the retirement plans.

That's their choice, but it's a self-destructive one. Companies without 401(k) plans may lose out on the savviest employees, who will look for better opportunities and the freedom to invest their own money.

But are workers wise enough to look after their own retirement? Well, many might do better than Kenneth Lay, who was supposed to know what he was doing at the head of Enron. Despite collecting more than $200 million over three years in salary, bonuses and stock options, Ken Lay was such a poor investor he had to borrow money and sell Enron's stock to pay off his debts. But the lower-downs were stuck with their ever-less-valuable Enron stock. Given how this hot-shot exec ran his affairs, yes, I'd rather have the working stiffs look after their own assets.

As new and, let's hope, better rules and regulations are put into place for retirement plans, it would help to remember just whose money this is. And that people should have some say over their own property, at least in a free country.

P.S. Those looking at Social Security might keep that same principle in mind. It's not just private companies that insist on keeping people locked into less than the best investments.

Paul Greenberg is a nationally syndicated columnist.

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