Re: Think tank stuff and reality

[Mbindnerdc@aol.com]

What likely happened in the Enron situation will most likely be considered 
insider trading.  What led the Enron executives down this dark path was the 
implicit signal given to them in their compensation package that they are above 
the law and above the other employees.

You know the golden rule - he who has the gold makes the rules.  

It has a corollary - he who makes the rules gets the gold.

More employee-ownership, not less, which will lead to the abolition of obscene 
stock options to executives (as opposed to legislating such a prohibition) will 
prevent future Enrons.

Mike Bindner


In a message dated Mon, 14 Jan 2002  6:27:09 PM Eastern Standard Time, "Joseph 
Doggett" <joseph.doggett@worldnet.att.net> writes:

> A thought that I had was how something is implemented and administered.
> Enron executives had the ability to liquidate their stock and take the
> proceeds.  Did non-executive employees have the same rights?  I doubt that
> they did.  Executives were able to maneuver with greater freedom.  They
> could work to ensure that the price of the stock was high, and then they
> could compensate themselves for their efforts.  When the facade faded or was
> exposed, then the executives simply moved to another scheme.  However, the
> employees, who trusted their financial stability to the stock, probably, in
> a 401-K, were/are unable to "move on."  Rather, they have to leave with
> nothing and begin anew.
>     Perhaps a discussion about how an employee-ownership plan is
> administered, what the rights of the shareholders are (all shareholders),
> who can do what, and if someone can not perform some action that another
> can, then the disparity between ability needs to be investigated.
> 
> 
> ----- Original Message -----
> From: <Mbindnerdc@aol.com>
> To: <orglabor@cog.kent.edu>
> Sent: Monday, January 14, 2002 3:22 PM
> Subject: Re: Think tank stuff and reality
> 
> 
> > 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
> >