Compensation Management News
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December 17, 2001
The Inequalities in Owning Company Stock
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Millions of rank-and-file workers at hundreds of companies have found themselves shackled to big chunks of company stock; meanwhile, executives can exercise wide latitude in what they do with theirs, the WSJ notes.
Because of the law capping tax-deductible executive compensation at $1 million a year, many companies top off their executive pay packages with stock options, as well as bonuses and other incentives that are typically paid in stock, much of it unencumbered.
The WSJ, using filings with the Securities and Exchange Commission, reports that hundreds of companies use their own stock in lieu of cash as their matching contributions to employees' retirement-savings accounts.
And the majority of those restrict the ability of employees to sell the shares and move the proceeds into mutual funds and other alternatives offered through their 401(k)s.
Gillette, for instance, doesn't let employees switch out of its stock contributions to their 401(k)s until age 50, according to government filings. At Coca-Cola Co., it's age 53.
Similar restrictions are applied at Procter & Gamble Co., Qwest Communications International Inc., and Enron Corp., now facing lawsuits over employees' 401(k) losses.
So far this year, Gillette employees have had to watch the company-contribution portion of their retirement savings shrink by millions of dollars as the share price has fallen 11%, the WSJ reports.
Employees at Coca-Cola have endured a share-price decline this year of 18%. Procter & Gamble shares have been flat.
The companies point out that executives participate in the same 401(k) plans as other employees, subject to the same restrictions. Still, the newspaper observes, the bulk of company stock that executives own is usually held outside such restricted accounts.
To view the Wall Street Journal article via CareerJournal.com, click here.
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