Post-Enron, Publishers Review 401(k) Plans

By: Lucia Moses

The Enron Corp. collapse has much of Corporate America looking critically at its own business practices — and newspapers are no exception.

In the most striking example, Gannett Co. Inc.’s board of directors last week amended the company’s 401(k) plan to permit employees to diversify all their plan investments.

While Gannett said its board still views company stock as a good investment, the amendment seemed like the right thing to do, according to company spokeswoman Tara Connell. “Enron just made everyone stop and say ‘Whoa,'” she said.

Media General Inc. also reviewed its retirement plan, which restricts workers from transferring more than 25% of their funds that are in company stock each quarter. The company decided to leave the plan unchanged, but use its next corporate newsletter to reassure employees that “we were not Enron,” Chief Financial Officer Marshall N. Morton emphasized.

Other companies said their plans already give employees full flexibility to diversify their 401(k) holdings, so no changes were warranted.

At Gannett, employees under age 55 previously could not sell the company’s shares they received as a match. Enron workers lost fortunes after the company-match portion of their plans plunged in value while they were barred from selling the shares.

In general, though, analysts said public newspaper companies don’t engage in the balance-sheet trickery that brought down Enron. “The newspaper business, from a cash-flow and a balance-sheet perspective, has always been very transparent,” said Peter Appert, who follows the industry for Deutsche Banc Alex. Brown. “This is a sector that benefits from the flight to quality.”

An index of the five biggest public newspaper companies was up 4.7% from Jan. 1 to Feb. 19, while the Standard & Poor’s 500 Index was down 3.8% over the same period. Part of that strength can be attributed to confidence in the group vis-a-vis Enron, Appert said.

Newspaper companies stressed that they have always taken pains to provide full disclosure of their finances, but that doesn’t mean they won’t strive to be even more transparent. Kevin Gruneich, a Bear, Stearns & Co. publishing analyst, said he wouldn’t be surprised if companies provide more financial details in their next quarterly 10-Q and annual reports, which start coming out next month.

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