As an employer, I appreciate working with employees who truly believe in our company and its mission to help people. If you are an employee, no matter how much you may love your company, you still need to realize that sometimes bad things happen to good companies.
Let’s take, for example, the thousands of Enron employees who, in 2001, went from working for a high-flyer to the unemployment line. This is not to say that Enron was a “good” company; it was really a complex farce of a company. Very few people knew it at the time. The poor workers were unaware of the internal problems. When the underlying deception was discovered, most of the workers lost their 401(k) retirement accounts, too.
The loss of these accounts wasn’t actually due directly to Enron’s collapse. The loss was due to employees who “drank the Kool-Aid” and put their entire retirement nest egg into one place—Enron stock. Many employees had six-figure jobs with seven-figure 401(k)s, most of which were invested in company stock. Therefore, when Enron collapsed, employees lost not only their jobs, but also their nest eggs.
In another example, consider the stock boy who came to me for investment advice. He was no ordinary stock boy; he was one of the first employees of Amazon.com. When I met with him, he had $1.5 million of exercisable stock options. I suggested he cash in and profit from his fortune.
He proceeded to tell me that I was basically an idiot because Amazon was the greatest company ever. Knowledge of his two small children, tiny apartment, $13-an-hour job, and pregnant wife prompted me to overcome my pride. The year was 1999, and the technology part of the stock market was rising dramatically. I thought Amazon was a good investment, but in the case of expiring stock options, timing is a bigger issue.
Since he would not take my advice, I suggested he sell half of his options and invest the rest into a residence for his growing family. He went to tell me off as an ignorant so-and-so. I have no idea why he wanted to meet with an advisor in the first place, other than to gloat about his good fortune.
Six months later, the stock market crashed. Six months later, his stock option strike price was higher than the value of the stock, meaning his options were completely worthless, and they expired with no value. No house, no investments, but he still had his $13-an-hour job!