Bear Stearns and Employee Ownership

One of the motifs running through the Bear Stearns implosion stories has been that employees owned 30% of the company, creating echoes of another Enron. The story is more complicated, and we have been at some pains (largely successful) to help reporters understand the differences. Bear Stearns does have an ESOP, which owned somewhat less than 3% of the stock in 2007. The ESOP was one of three retirement plans and, at the end of last year, accounted for about 22% of all retirement assets held in the plans. The remaining assets were in diversified investments. Beyond that, another estimated 27% of the stock was held by individual employees, primarily through one of three "key" employee award programs. In just the last two years, over $500 million in awards were issued just to the top five executives at the company, and the CEO at one point had over $1 billion in equity. There is no way to know just know many other employees were defined as "key" or how much ownership they had, but it is safe to say few of these people will be in the situation of many Enron workers who were left unable to retire even in modest circumstances. So while the situation is indeed very painful for Bear Stearns employees, it is quite different from the numerous "stock-drop" problems that left workers with severely depleted 401(k) accounts.