As Bear Stearns becomes the latest corporate giant to implode, anew group of employees must face retirement with far less savingsthan they anticipated. While the Bear Stearns debacle isreminiscent of Enron Corp.'s $2 billion pension disaster, ithighlights a different potential employee investment drama. Howwill retirement savings held in Employee Stock Ownership Plans(ESOPs)–such as the one at Bear Stearns–fare if more companiesdisappear into the mortgage morass.

Bear Stearns workers own 30% of the financial services company;investments that were rendered pretty much worthless even as bidderJPMorgan Chase increased its takeover offer five-fold to $10. Butthey aren't the only ESOP participants concerned about theirsavings. Last year, 11.2 million Americans held $928 billion inemployee-stock-ownership plans, stock bonus plans andprofit-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 participantsheld $675 billion in similar plans.

Observers say it's too early to determine if the Bear Stearnsdebacle will force other companies to reconsider ESOPs as aretirement savings tool, or if employees will call for change, butthere is a precedent. Following Black Monday and the 1987 stockmarket crash, many companies with ESOPs disappeared, and the skydidn't fall, notes Jack Van Der Hei, a Temple University businessprofessor. “So that's not likely to happen this time either,” saysVan Der Hei. But this calamity, and the Enron one before it (whereplan sponsors invested too heavily in corporate stock), dounderscore an important lesson : “Employees must diversify theirretirement holdings. And companies must help them,” says Van DerHei.

That's starting to happen. At Bear Stearns, for example, mostemployees already have other investments in defined benefit (DB) ordefined contribution (DC) plans to supplement the ESOP funds overwhich they have no control. Moreover, among recently hired 401(k)participants in plans that offer company stock, only 42% hademployers' shares in their accounts in 2007, down from 60% in 1998,according to the Employee Benefit Research Institution. Yet anotherpositive sign is that only 23% of those companies that matchemployee 401(k) contributions still make up the difference instock, almost half the 45% that followed that practice in 2001,according to Pam Hess, senior retirement consultant at HewittAssociates. “The issue of how much is too much corporate stock tohold is always a critical concern,” says Hess. “And it's becomingeven more critical.”

What can Bear Stearns employees do to try and win back some oftheir lost investment? One thing that they apparently cannot do,according to experts, is sue the financial services company formishandling its fiduciary duties, since ESOPs exist to provideworkers with stakes in their company. However, the employees cansue Bear Stearns for failing to disclose material adverse financialinformation 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 willclosely follow the outcomes to determine if they need to rethinktheir plans.