Altogether, 346 companies in the S&P 500 index offer DB plans. Merrill Lynch analysts estimate that the DB plans of 98 percent of those companies will be underfunded at the end of this year.

On aggregate, the pension funds of these 346 companies are expected to be underfunded by $640 billion—or 69 percent of the total assets in their pension plans, according to a published account of the study.

Excluding postretirement funds, DB plans at these companies are underfunded by $323 billion.

At the end of 2001, the DB plans of the S&P 500 companies were actually overfunded by $500 million.

And, at the end of 2000, the funds were overfunded by a staggering $215 billion.

The situation only figures to worsen. As the S&P 500 heads to its third straight double-digit loss—it's down 28 percent so far this year—S&P 500 companies are assuming that their long-term returns on pension fund investments will be 9.3 percent, according to one published account that cities Adrian Redlich, director of Merrill Lynch's global analytic and thematic research.

Merrill's estimates are based on the assumption that the actual return on plan assets will be a negative 10 percent this year, and that company contributions and benefits paid this year are in line with 2001 payouts, according to the report.

The companies with the biggest underfunded DB plans include some real marquee names, including GM, Ford Motor, IBM, SBC Communications, and Boeing.

Unlike a defined contribution plan, a DB plan guarantees a certain payout to retired employees.

Most Employees Say Scandals Threaten Economy
Is the recent rash of accounting scandals an isolated event involving just a few bad apples, as President Bush suggested in a speech this summer?

Not according to the rank and file of Corporate America. Roughly 91 percent of employees at U.S. public companies consider the recent corporate accounting scandals to be a serious problem for the nation's economy, according to a recent survey conducted by Fleishman-Hillard Inc., a public relations firm.

More than 80 percent of the respondents said "executive greed is driving corporate wrongdoing," while 60 percent believe that the stock market forces companies to focus on short-term profit and performance, which in turn encourages dishonest corporate accounting practices.

In fact, 72 percent felt Corporate America was focused more on meeting stock market demands than customer needs. That said, 41 percent of the surveyed workers said that investor demands have lately reduced their own companies' focus on meeting their customers' needs.

Despite the current overall environment of concern regarding corporate governance, corporate earnings, and the economy, it is not clear that companies have improved their communication with employees.

Just 39 percent of the survey participants agreed or strongly agreed that their company is communicating more financial information to them now. Around 40 percent either disagreed or strongly disagreed with that statement.

Yet despite the lack of communication from their bosses, many employees still feel they can make a difference at their company.

More than three out of four employees (77 percent) agreed with the statement, "Your performance as an individual affects the value of your employer's stock."

Interestingly, nearly half of the respondents agreed or strongly agreed that they now feel more encouraged to raise questions about their company's corporate accounting practices than they did before the topic became a national concern.

"Employees have been motivated by the high-profile problems of a few companies, and by the overall economic and financial market concerns, to take a hard look at the organizations they work for and their leaders," said Don Etling, co-chair of Fleishman-Hillard's internal communications practice. "It is clear they are holding their management, and their CEOs in particular, more accountable. But the results of this survey also indicate that employees believe they can make a positive impact through their everyday activities at work."

Other findings from the survey:

• Just 6 percent of respondents is considering employment change due to either their employer's current financial results or reputation for corporate accounting practices.
  
  

• Of those 42 percent of survey respondents who currently do not own options to purchase their company's stock, 56 percent expressed a desire to have stock options, including more than half of the nonmanagerial employees surveyed.
  
  

• More than 7 out of 10 (72 percent) respondents felt that the information they receive from their employers about financial results is "adequate to very comprehensive," while only 6 percent believed that this information is "totally inadequate."
  
  

Fleishman-Hillard conducted the survey of a randomly selected sample of 200 employees of publicly held corporations in 40 states during the period from July 27 to August 7, 2002.

• « previous
• 1
• 2