I'm not moving on! I find this all fascinating!

My understanding is that an unusually high percentage of compensation at Bear is (was?) paid out as company stock, which accounts for the high employee ownership. If that is right, then it is less that the employees voluntarily failed to diversify, and more that the compensation plan led to the concentration.

There's two different issues, one evoking more sympathy than the other. I'm speculating on the facts here, so take this with a grain of salt.

I don't know how it broke down at Bear, but there's usually a dividing line in most big companies between those employees who are incentive compensation eligible and those who are not. If you are granted stock options or restricted stock, moreover, it has a vesting schedule. Holding the stock once you have vested is an employee diversification issue.

One feels for the executives who may have lost the value in their restricted stock, although chances are the plan has a change in control provision so they'll end up with JPM stock at the exchange ration. I realize that's cold comfort, but they are executives and have, I think, less claim on our sympathy than the employees in the other category, which is those (assuming Bear did it) either got their 401(k) match in Bear stock, or worse, actually selected Bear stock as a place to put their own money, again a diversification error, and one I think employees make a lot.

It certainly is tragic that the employees have lost significant savings. Thankfully they will get more than $2/share.
Not only did JP set aside $6B in reserves for 'other transaction expenses', but JP is also offering full-indemnification of the BSC D&O's.
It would be interesting to see how the D&O insurance programs are structured, there will be a few carriers increasing their reserves this quarter.

Dear readers and Bear employees:

This is going to affect all of us, not just the poor employees. Regardless of the employee's fortunes to be determined, the sad fact is the deal was done on a Sunday when no one could have sold their investment shares. The deal was done withoiut anyone knowing about it until it was too late. WE better hope it does not hapen to us, now that the precedent is set that this is okay to do!

In order to understand what was going on here, we need to know what the distribution was of that employee-ownership.

How much was in the hands of the very top management? How much of the rest was owned by those who would have been the equivalent of partners had Bear Stearns been non-public (as Goldman was, until recently). It doesn't bother me if these two categories hold lots of their personal wealth in the Firm -- that's really an incentive model for those with the power to change Firm performance and the responsibility for Firm losses.

What I'm most concerned about was how much falls into the remaining category -- holdings by ordinary employees, whether low-level bankers, or secretaries and so on. It is, indeed, a bum deal if a secretary decided to put her/his retirement or savings money overwhelmingly into Bear Stearns, so that when they lose their job (which is likely for lots of them), they also lose their savings.