Re: Think tank stuff and reality

[Mbindnerdc@aol.com]

Enron is an interesting situation.  Yesterday morning ABC's This Week featured 
it.  I fear that many in the policy community are drawing the wrong lesson, 
however.

Many are now calling for legislation to limit the exposure of employee stock 
ownership in 401(k) plans.  They ignore the real reason for the Enrol debacle.

For decades many have been decrying the size of executive compensation, which 
include large stock option awards and stock grants to executives.  Enron points 
to why these are not only unfair but a bad idea.  Such excessive awards in 
effect reinforce the mindset of  executives that they are set apart from the 
other employees of the firm.  By giving executives more than their share firms 
reward them for cheating lesser employees out of their fair share.  They 
provide executives a direct financial incentive to look out for their own 
interests at the expense of the employees and even the share holders.  There is 
not much moral distance from taking more than you are entitled to cooking the 
books and making deals from self-interest rather than the interest of the firm. 
 

In the case of Enron, does anyone doubt that the books would not have been 
cooked had the executives been the servants of their fellow employees rather 
than their masters?  Would the fraud at Enron have occurred absent the 
overcapitalization of the executives?  Hardly.  There would have been no 
incentive to cook the books or to hide liabilities.

The answer then, is more employee-ownership, not less.  This is why I favor 
equal stock grants (rather than stock options) to each employee, regardless of 
salary, on a monthly basis (with the reinvestment of dividends to reward 
longevity).  Broad based employee ownership with factional representation on 
the board (professionals, unions, management, outside investors each 
represented in proportion to their holdings) would prevent the excess executive 
compensation now awarded in many firms - and without specific government 
regulation of executive pay (which the conservatives would never allow).

Michael Bindner
Virginia