Former and current employees are getting a letter from Microsoft this week.
It says no more Microsoft stock will be bought for the company’s 401k plan. The question is why.
The answer is Dudenhoeffer.
Or rather, the Dudenhoeffer decision, handed down by the Supreme Court last year.
John Dudenhoeffer worked at a bank that bought its own stock for the company retirement fund just before the housing downturn.
He said the bank should have known its own stock was overvalued – and it should have protected him.
In the decision, the judges recognized that company insiders are in a sticky situation. They know stuff, but they’re in a position of trust.
So the judges told companies to just stop buying any more of their own stock for employees’ retirement plans. In exchange they will be offered some amount of protection in future lawsuits.
So Microsoft is taking the Supreme Court’s advice.
Employees can still choose to buy Microsoft stock through the Employee Stock Purchase Program.
It’s just Microsoft won’t be adding more to its 401K.