Disclosure in the Post-Enron Environment

Abstract

Some employers invest substantial time designing company-sponsored benefit, bonus or compensation plans to accomplish an intended purpose. As a result, these plans often contain details, conditions and definitions to limit the plan to provide only what the employer intended. Other employers create a benefit, bonus or compensation plan without much thought to details until the day comes for the employee payout. Recent cases demonstrate the risks associated with not providing full and accurate benefit information to employees. Judges and juries have been receptive to employee claims such as fraud or breach of contract based on the communication of inaccurate benefit information. In the wake of Enron, additional issues arise concerning the use of stock options and fiduciary duties. This article examines several cases and provides practical advice for employers to minimize the risk of liability.