Wasn't Me

If you're not yet suffering from post-Enron guilt by incorporation, you will be.
Magazine Contributor
2 min read

This story appears in the April 2002 issue of Entrepreneur. Subscribe »

As the Enron debacle unfolds, the corporation's shareholders won't be the only ones in pain. With leery investors, burdensome 401(k) proposals and tight corporate credit, formidable challenges lie ahead.

Lenders are now bolting at the hint of any financial irregularity, particularly in the energy sector. But the intensified scrutiny could be a boon for efficient, honest operations, particularly if you have an activist, independent board able to meet the higher expectations for fiduciary vigilance.

Meanwhile, Congress is writing laws to protect shareholders, especially when those shareholders are employees. At press time, proposals to change 401(k) rules included encouraging employer contributions in cash instead of stock, letting employees sell company stock contributions after just 90 days and limiting the percentage of company stock held by an individual employee to 10 percent.

According to Mark Sommers, national retirement services practice leader at Invesmart in Pittsburgh, some companies may no longer be able to offer 401(k) plans as a result of the new rules. Limits on stock contributions, he says, would hurt cash-poor companies and eliminate an important market for securities. "If the theory behind stock contributions is to make the employee feel like an owner, these rules would defeat a primary motivation for companies to set up these plans," Sommers says.

If there are any post-Enron winners, they could be entrepreneurs involved in developing green energy sources. "Enron, though an innovative company, represents more conventional fossil fuels," says Ron Pernick, president of Clean Edge Inc., a market research firm in Oakland, California. "People are looking for security in less volatile energy sources like wind, solar and eventually fuel cells."

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