Four years after Enron's collapse, nearly 1 in 10 workers still invest most of their retirement savings in their company's stock plan.
"In the aftermath of Enron, it's shocking that so many workers are still investing most of their retirement funds in company stock," said Brian Bruce, adjunct professor of finance at SMU's Cox School for Business."Diversification is key. It's not just about company stock. It's about not putting too much of your financial capital in any asset."
The Employee Benefit Research Institute says older workers had the highest percentage of their investments in their company's stock. Bruce explains that there are a variety of factors for why some workers still take these risks, including company stock discounts, familiarity with the investment, and limited options for investing. At SMU, Bruce teaches an MBA portfolio class where students manage investment decisions on $3 million of SMU endowment.
SMU Law Professor Alan Bromberg, an expert on security fraud and shareholder lawsuits, says the courts need to recognize it's a natural tendency for workers to invest heavily in their company stock. Such investors do so, he says, because they see direct benefits from their labors showing up in the company stock price.
"We're in a period of less protection for defrauded investors," says Bromberg. "Congress has done a considerable amount to discourage shareholder lawsuits. I'm not surprised that many workers still invest heavily in their company stock plans. They want to invest in a company that they know and trust. But when defrauded by that company, they deserve more protections, more remedies."
To reach Bruce or Bromberg, call SMU Office of News & Communications at 214-768-7654; see more experts at www.enronexperts.com.
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Director of National Media Relations
SMU Office of Public Affairs