Gangrel - you are correct that diversification away from your company’s stock is a smart move, though, at times, it may not be as easy as it sounds. There may be some people that elected to invest heavily in the company on purpose, but after Enron, anyone who did so was simply not paying attention. Three-year vesting periods are common, with bonuses paid out at anywhere from 25%-75% in this restricted stock. Beyond that, many firms require VPs and MDs to hold a certain percentage of their overall compensation in the company’s stock, again, to align their interests with that of the firm. They can be required to maintain that stock ownership, even though it may be a large percentage of their entire portfolio. When you are drawing a $150k base and taking in a bonus in excess of 1-5x that amount partially paid out in restricted stock, you’re stuck with those holdings while you work there. Granted, this is just an example of how the compensation may be set up, but it isn’t an uncommon model. Again, likely not their fault.
i heard jc flowers was a potential buyer, though they were bidding on parts of the firm instead of the whole thing
CFAdummy Wrote: ------------------------------------------------------- > I’d bet that most of the upper management got > compensated with stock options. Most of the > employee ownership was probably from senior > management. > > However, they probably have an employee stock > purchase plan. > > I work for one of the big ibanks. Theres an option > to put your 401k into company stock, and also a > purchase plan to buy stock and get 2 options. > However, there is a requirement to hold on to this > stock for 2 years and the options vest 2 years. > > I asked a question the other day of whether or not > to invest in this plan and I got mixed answers. > I’m probably not going to put money into the stock > purchase plan. > > Well, I feel sorry for low level employees who put > money into these plans if Bear had one. I would strongly recommend doing neither. If the ESP offers the stock at a discount, I would recommend enrolling in the ESP, then selling the shares at market price as quickly as you acquire them. If the only perk to the ESP is the stock options, I would stay away. As for 401(k), your retirement money has no business whatsoever being in the same company as your paycheck comes from. Some companies used to mandate that a % of 401(k) went into company stock, but after Enron, et. al., laws were passed prohibiting such restrictions. Please do yourself a favor and take advantage of those laws.
gangrel Wrote: ------------------------------------------------------- > Hate to sound calous here, but it seems to me that > if a Bear employee had a substantial amount of his > life savings tied up in investments in Bear, he > has no one to blame but himself. If we are > talking about bank accounts, the principal should > be ok because of FDIC insurance. If, however, we > are talking about Bear stock…well, these folks > worked in the FINANCE industry. Isn’t investing > your LIFE SAVINGS in your EMPLOYER’S STOCK the > exact opposite of DIVERSIFICATION? Isn’t > DIVERSIFICATION the FIRST RULE of INVESTING? > > Tons of Enron employees violated this very same > cardinal rule, and lost big. However, they at > least had the excuse of not necessarily working in > the investment industry, and therefore not knowing > what a mistake this is. I would venture to say > that the folks at Bear don’t have quite the same > excuse of ignorance. It’s not that simple. Quite often an employee is given restricted company stock as a bonus, and they aren’t allowed to sell it for a set period. This makes it very difficult to diversify as there’s no way compliance would let you short sell against your restricted stock (or perform mos other hedging activity…). Finally, holding large amounts of company stock is a good move politically, which could have significant career benefits. May sound silly, but it is what it is
ahahah Wrote: ------------------------------------------------------- > gangrel Wrote: > -------------------------------------------------- > ----- > > Hate to sound calous here, but it seems to me > that > > if a Bear employee had a substantial amount of > his > > life savings tied up in investments in Bear, he > > has no one to blame but himself. If we are > > talking about bank accounts, the principal > should > > be ok because of FDIC insurance. If, however, > we > > are talking about Bear stock…well, these > folks > > worked in the FINANCE industry. Isn’t > investing > > your LIFE SAVINGS in your EMPLOYER’S STOCK the > > exact opposite of DIVERSIFICATION? Isn’t > > DIVERSIFICATION the FIRST RULE of INVESTING? > > > > Tons of Enron employees violated this very same > > cardinal rule, and lost big. However, they at > > least had the excuse of not necessarily working > in > > the investment industry, and therefore not > knowing > > what a mistake this is. I would venture to say > > that the folks at Bear don’t have quite the > same > > excuse of ignorance. > > > It’s not that simple. Quite often an employee is > given restricted company stock as a bonus, and > they aren’t allowed to sell it for a set period. > This makes it very difficult to diversify as > there’s no way compliance would let you short sell > against your restricted stock (or perform mos > other hedging activity…). Finally, holding > large amounts of company stock is a good move > politically, which could have significant career > benefits. May sound silly, but it is what it is I can see where that would be a difficult position. I guess my strategy under those circumstances would be to not consider any bonus payout as part of compensation. That way, when I leave/retire, if it still has value, it would be a windfall, nothing more, nothing less.
.
i read somewhere that employees owned like 30% of the company’s stock. thats just insane…
from reuters: “The sale of Bear came as a shock to the firm’s 14,000 staff, who own roughly 30 percent of the company. “The valuation is virtually nothing,” said a Singapore-based Bear Stearns employee. “It is indeed rock bottom. We have tanked. It’s very, very sad. Everyone is in mourning.” The mood among U.S. staff was similarly solemn. “My job’s been eliminated,” said one male employee arriving for work in New York. He’d been given 90 days’ notice.” what the hell are company executives doing letting internal ownership rise to levels like that?! these are supposed finance experts, yet they did nothing about this situation. truly negligence on their part.
actually high level of employee ownership is what bear wanted and bragged about, at least internally. the mgmt intended that way. jeff_s Wrote: ------------------------------------------------------- > what the hell are company executives doing letting > internal ownership rise to levels like that?! > these are supposed finance experts, yet they did > nothing about this situation. truly negligence on > their part.
CFAdummy Wrote: ------------------------------------------------------- > I’d bet that most of the upper management got > compensated with stock options. Most of the > employee ownership was probably from senior > management. > > However, they probably have an employee stock > purchase plan. > > I work for one of the big ibanks. Theres an option > to put your 401k into company stock, and also a > purchase plan to buy stock and get 2 options. > However, there is a requirement to hold on to this > stock for 2 years and the options vest 2 years. > > I asked a question the other day of whether or not > to invest in this plan and I got mixed answers. > I’m probably not going to put money into the stock > purchase plan. > > Well, I feel sorry for low level employees who put > money into these plans if Bear had one. Anyone who puts a SIGNIFICANT portion of their retirement $$$ into their company’s stock is retarded. Even if they aren’t CFA charterholders and haven’t learned about risk diversification, they should be familiar with one word. ENRON
Haven’t any of these people seen the movie Fun with Dick and Jane?
Super I Wrote: ------------------------------------------------------- > CFAdummy Wrote: > -------------------------------------------------- > ----- > > I’d bet that most of the upper management got > > compensated with stock options. Most of the > > employee ownership was probably from senior > > management. > > > > However, they probably have an employee stock > > purchase plan. > > > > I work for one of the big ibanks. Theres an > option > > to put your 401k into company stock, and also a > > purchase plan to buy stock and get 2 options. > > However, there is a requirement to hold on to > this > > stock for 2 years and the options vest 2 years. > > > > > I asked a question the other day of whether or > not > > to invest in this plan and I got mixed answers. > > I’m probably not going to put money into the > stock > > purchase plan. > > > > Well, I feel sorry for low level employees who > put > > money into these plans if Bear had one. > > > Anyone who puts a SIGNIFICANT portion of their > retirement $$$ into their company’s stock is > retarded. Even if they aren’t CFA charterholders > and haven’t learned about risk diversification, > they should be familiar with one word. > ENRON well, at least they can vote against the deal…
gangrel Wrote: ------------------------------------------------------- > Ok…the CEO’s were lying. I can’t remember the > last time I didn’t make the assumption that any > CEO was lying! Normally a safe bet with all legal constraints in place now.
gomakeitreal Wrote: ------------------------------------------------------- > actually high level of employee ownership is what > bear wanted and bragged about, at least > internally. the mgmt intended that way. > > > > > jeff_s Wrote: > -------------------------------------------------- > ----- > > what the hell are company executives doing > letting > > internal ownership rise to levels like that?! > > these are supposed finance experts, yet they > did > > nothing about this situation. truly negligence > on > > their part. Enron bragged about lots of things, too. Look where that got them… 30% owned by employees. Looks like much of that was through 401(k). I can see where bonuses and options were tied up by agreements, but anyone who loses their 401(k) because it was tied up in employer stock and the employer went broke has no one to blame but themselves. Especially people who work in the bloody industry!
> > Sounds pretty callous to me. Most banks pay > bonuses partially (or fully) in restricted stock > with lengthy vesting periods. This causes many > employees to maintain overly large holdings in > their employer in an attempt to align their > interests with that of the bank, force employees > to stay with the bank longer to receive their > stock (although with continually rolling vesting > periods, when you leave, you are forced to leave > something on the table), and to get away without > having to pay out cash. Not their fault. If so, maybe they should have bought some puts? Or they slept thru their CFA exams? 
Too many people were drinking the company kool-aid. The discounted stock price for the employees in the ESOP sure looks enticing, but not at the risk of turning your portfolio a monochromatic high risk mess.
I work at Bear. I can answer any direct questions to the best of my knowledge.
goldenboy09 Wrote: ------------------------------------------------------- > I work at Bear. I can answer any direct questions > to the best of my knowledge. How’s the atmosphere there?
grizzums Wrote: ------------------------------------------------------- > CFAdummy Wrote: > -------------------------------------------------- > ----- > > why is BSC trading at 3 and not at 2 today? > > > BSC was offered 0.05473 shares of JPMorgan Chase > common stock, which happened to be valued at > (roughly) $2/sh at close of Friday. Look at the > price action of JPM today… > > This is still a developing story, who knows what > shareholders are going to do. Even if that were the case, JPM is up about 10% today, that would put the BSC shares roughly at $2.20. JPM is paying in cash so whether JPM’s stock goes up or down doesn’t really matter. Bear is above $2 for two reasons. Some of it is short covering, but the big reason is people are betting that the offer will be rejected and the shares will fetch more from another bidder. This is probably unlikely but many traders are willing to take a chance that it will happen.
goldenboy09 Wrote: ------------------------------------------------------- > I work at Bear. I can answer any direct questions > to the best of my knowledge. 1) Is it true that there will be a class action suit against Bear’s auditors- Ernst &Young? 2) Naive and optimistic question:)-Any chances of Bear’s shareholders voting against the takeover? I know quite a few guys who dont care if the loose their entire stock in Bear, as long as JPM doesnt take it at such a low price.