Labor's Loss

As Bear Stearns becomes the latest corporate giant to implode, a new group of employees must face retirement with far less savings than they anticipated. While the Bear Stearns debacle is reminiscent of Enron Corp.'s $2 billion pension disaster, it highlights a different potential employee investment drama. How will retirement savings held in Employee Stock Ownership Plans (ESOPs)--such as the one at Bear Stearns--fare if more companies disappear into the mortgage morass.

Bear Stearns workers own 30% of the financial services company; investments that were rendered pretty much worthless even as bidder JPMorgan Chase increased its takeover offer five-fold to $10. But they aren't the only ESOP participants concerned about their savings. Last year, 11.2 million Americans held $928 billion in employee-stock-ownership plans, stock bonus plans and profit-sharing plans that primarily invest in company stock, according to the National Center For Employee Ownership in Oakland, Calif.. That was up from 2006 when 10.5 million plan participants held $675 billion in similar plans.

Observers say it's too early to determine if the Bear Stearns debacle will force other companies to reconsider ESOPs as a retirement savings tool, or if employees will call for change, but there is a precedent. Following Black Monday and the 1987 stock market crash, many companies with ESOPs disappeared, and the sky didn't fall, notes Jack Van Der Hei, a Temple University business professor. "So that's not likely to happen this time either," says Van Der Hei. But this calamity, and the Enron one before it (where plan sponsors invested too heavily in corporate stock), do underscore an important lesson : "Employees must diversify their retirement holdings. And companies must help them," says Van Der Hei.

That's starting to happen. At Bear Stearns, for example, most employees already have other investments in defined benefit (DB) or defined contribution (DC) plans to supplement the ESOP funds over which they have no control. Moreover, among recently hired 401(k) participants in plans that offer company stock, only 42% had employers' shares in their accounts in 2007, down from 60% in 1998, according to the Employee Benefit Research Institution. Yet another positive sign is that only 23% of those companies that match employee 401(k) contributions still make up the difference in stock, almost half the 45% that followed that practice in 2001, according to Pam Hess, senior retirement consultant at Hewitt Associates. "The issue of how much is too much corporate stock to hold is always a critical concern," says Hess. "And it's becoming even more critical."

What can Bear Stearns employees do to try and win back some of their lost investment? One thing that they apparently cannot do, according to experts, is sue the financial services company for mishandling its fiduciary duties, since ESOPs exist to provide workers with stakes in their company. However, the employees can sue Bear Stearns for failing to disclose material adverse financial information that could affect the company's value. And they have. Already, at least two class action suits have been filed in U.S. District Court in New York. And you can be that other ESOPs will closely follow the outcomes to determine if they need to rethink their plans.

Article found in Retirement Plans

Crisis Mentality

While most CFOs and other C-suite executives know the importance of working with investor relations professionals early and frequently during crisis periods, such as the mortgage meltdown, only half the executives and IR professionals recently surveyed by Thomson Financial said they make a point of meeting with investors following bad news such as the Carlyle Capital and Bear Stearns disasters to bolster investors' confidence in their companies before rumor and speculation overtake facts.

Most officials, of course, are reticent to reveal more information about corporate finances than they must. So it's no surprise that only 24.5% issue detailed earnings guidance, 15.1% contact journalists with news and 11.3% announce share buyback programs. A scant 7.5% of respondents say they make sure their corporate Web sites are up to date. That's not a good strategy, suggests Thomson advisers. "First and foremost, reach out to reporters and bloggers and try to show how your company is different; how it's unlikely the be the next casualty," Thomson consultants said in a briefing paper to corporate clients. "For example, perhaps the firm has a clean balance sheet, is generating exceptional cash flow or doesn't have the same exposure in subprime loans. Or that the company has assets whose attributes far outweigh any potential liability." Then hold key investors' hands, put legal's number on speed dial and polish up the Web site, according to the briefing.

The idea, Thomson suggests, "is to get the message out there that your company won't be next."

Careers

Associated Banc-Corp., the $1.6 billion diversified bank holding company, based in Green Bay, Wis., named Douglas M. Schosser to the newly created position of director of finance. Prior to joining the bank, Schosser assumed the role of CFO for the northeast region of KeyCorp. He also served as CFO for KeyCorp subsidiaries, including McDonald Financial Group, Victory Capital Management and Key PrivateBank.

Gerber Scientific Inc., the $574.8 million leader in integrated automation solutions, with headquarters in South Windsor, Conn., appointed Michael R. Elia executive vice president and CFO. Elia joins Gerber after serving as CFO of The Frank Gates Cos. Prior to that, he was senior vice president and CFO of FastenTech Inc. He has also served as CFO for Insilco Holding Co., as well as CFO for Jordan Telecommunications Products Inc.

Deutsche Bank AG, the $101 billion bank, with headquarters in Frankfurt, Germany, has named Stefan Krause CFO, effective Oct. 1 and a member of the bank’s management board effective April 1. Krause, 45, will succeed current CFO Anthony di Iorio, who has announced his retirement. Prior to joining Deutsche Bank, Krause was a member of the management board of BMW AG and had served as the automaker’s CFO from May 2002 through September 2007. He has also assumed responsibility for sales and marketing.

Sally Beauty Holdings Inc., the $2.5 billion beauty-supply distributor in Denton, Texas, appointed the company’s chief accounting officer and controller, Mark Flaherty, interim CFO. Flaherty, 44, replaces David L. Rea, who resigned, effective April 11, to pursue other opportunities. Flaherty previously served as CFO for Tandy Brands Accessories. The company will be searching for candidates both internally and externally.

Article found in Careers

Aveksa Locks the Data Doors

Aveksa Inc. has launched the third generation of its Enterprise Access Governance Platform for entitlement- and roles-management. “Aveksa 3.5 provides companies with an automated, policy-based approach for governing user access in order to mitigate access-related business risks,” says Brian Cleary, vice president of marketing. The latest version enhances the role-lifecycle capabilities used to define, maintain and modify corporate roles over time. Cleary says it also provides improvements in access data collection and unification, access review and certification, monitoring capabilities and data mapping. Access management took on increased importance after Sarbanes-Oxley mandated segregation of duties, and it took on new meaning following the Societe Generale rogue trading debacle. “Access governance failures have created real problems—lost revenue, reputational damage and increased operating expenses,” says Cleary. Many companies are still manually using spreadsheets, Cleary says. “That’s labor intensive and not very cost effective,” he says.

Automated Auditing With COSO

Reliant Solutions Inc. has started selling ReliantAuditor, a continuous risk management solution for audit executives that includes a COSO framework. After working closely with client Mindspeed Technologies over the past two years to develop the technology, Reliant says the product is now generally available. Dipak Shah, Reliant CEO and cofounder, says Reliant integrates continuous monitoring of internal controls with automated audit operations and risk assessment and a COSO risk framework. Why COSO? “After talking with the biggest U.S. companies, it became crystal clear that COSO is the predominant choice,” says Shah. Mindspeed is pleased. “Reliant has automated and integrated all the key components of auditing into giving us a dynamic framework for managing our internal controls and the ability to have true continuous auditing,” says Bill Hagerman, Mindspeed’s executive director of internal audit.

Article found in Risk Management, Tools