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
