Company Loyalty

Fundamentals of Market Investing by Adam J. McKee

All corporate managers love loyalty in their employees.  Many companies reward loyalty with an award of company stock or stock options.  After the meltdown with Enron, it has become harder for employees to invest their entire nest egg in company stock, but I suggest that the best amount of company stock to hold in your retirement portfolio is zero shares.  The story of Enron is fascinating to a criminal justice student, and the legal liability implications of what happened when that company failed are fascinating.  To those that worked for the company, the business failure was devastating.

The company engaged in all sorts of smoke and mirrors financial practices designed to fraudulently pump up the price of Enron’s common stock.  Many employees thought they had millions of dollars invested in those stocks, and were preparing to retire in style.  When the “accounting irregularities” became known, the value of those stocks soon plummeted to zero.  We have all heard stories of the telephone company lineman that retired a millionaire because of how well his company stocks appreciated over the years.  The thing to remember is that eventually, every company goes bankrupt.  If you work for a company, your paycheck depends on its success.  You don’t want to suffer a double hardship where you can lose both your job and your savings at the same time.

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Last Updated: 6/25/2018

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