On Shareholder Employees
The subprime mortgage crisis has resulted in the loss of a lot of jobs—and in several fields. Construction and finance have taken the biggest hit, but other industries have been affected as well. Furniture manufacturers and home building suppliers, for example, have been among those to recently lay off workers.
It can be devastating to lose a job, particularly if you’ve been with an employer for a long time or if the industry you’re in is going through tough times. Unfortunately, this isn’t the worst case employment situation, as the workers at Bear Stearns have found out.
JPMorgan’s acquisition (bailout) of Bear Stearns, the fifth largest investment bank in the United States, is estimated to result in the loss of jobs for as many as half of Bear Stearns’ 14,000 employees. But perhaps even more troubling for many of these employees is the fact that the acquisition has also wiped out their savings.
More than 30 percent of Bear Stearns’ shareholders are employees. In fact, the company is known as a shareholder culture. The basic idea of a shareholder culture is great: Invest in the company and watch it grow…we all share in the profits. That is, unless something goes wrong.
At Bear Stearns, something went terribly wrong. Employees (and other shareholders) went from owning stock valued at $170 per share last year to stock that was valued at $2 per share on March 17 when JPMorgan basically stepped in to save Bear from bankruptcy. (JPMorgan has since raised the offer to $10 per share.)
What does it mean to an employee/shareholder? If she invested over the years and had 1,000 shares of Bear Stearns worth $170,000 in 2007, the stock is now worth $10,000. To say that’s a huge difference is an understatement.
How the devaluing of Bear Stearns stock impacts an employee/shareholder depends on where the person is at in her life. If she’s nearing retirement, it creates a new reality with which she must contend. But older employees aren’t the only ones likely to be hurt by the loss of savings. People rely on savings for all kinds of plans, including home purchases and sending children to college.
At this point, Bear Stearns employees no doubt wish they could revisit their investment choices. Hindsight always allows for amazing insight.
And yet there may be a lesson here for other employees who are also shareholders. While it’s wonderful to invest in your company it’s wise to do so with caution. As with any investment portfolio, diversification is key.
It’s worth recognizing that your job is already a huge investment. If you choose to invest a large portion of your savings in the same vehicle you could be setting yourself up for a rough ride. Indeed, if the company runs into problems the potential loss might be more than you can bear.
Career Editor, SingleMindedWomen.com