Lost causes? No, just huge challenges...

FIRST things first. Hearty congratulations to Ben Verwaayen on his appointment as (strikingly well-paid) chief executive of BT. An enthusiastic welcome, too, for John Armitt, the man from Costain who is taking over the running of Railtrack.

These men are taking on two of the toughest jobs in British industry. Both deserve our sincere best wishes.

They face different challenges. BT acknowledged months ago that it would have to search overseas to find someone to succeed Sir Peter Bonfield as chief executive. Even in its new, simplified form, the company remains a cumbersome beast to manage. And a chief executive will also have to work in the looming shadow of chairman Sir Christopher Bland.

At Railtrack, meanwhile, John Armitt joins an organisation which is, to put it mildly, in a state of flux. Its future status is unclear. One constantly hears that morale within Railtrack is at rock bottom. As we report today, the company's performance, measured in terms of its blame for disrupted services, has grown worse.

Armitt faces a formidable challenge. But never, ever assume that a company - be it BT, Railtrack or any other - that has gone into decline cannot be saved.

Look back over the past decade or so, and we have witnessed some amazing examples of corporate rebirth. About a decade ago, Asda was, even on the admission of those then working for it, going bust. It survived, prospered, gave its rivals a terrible fright and was then bought by Wal-Mart for £6.7 billion.

There are many other retailing examples. Look at Next. Just like Asda, it trod perilously close to the edge but stormed back. Little more than a year ago, many were writing off Arcadia, yet the company's share price has since trebled.

Don't overlook one example very pertinent to the new man at Railtrack. Costain suffered six consecutive years of losses and had to be rescued before Armitt came along and nursed it back to health.

Will he succeed at Railtrack? In a few years, will we be relaxing in clean, fast, comfortable trains as they whisk us around the country with unfailing reliability?

Will we be smiling as we silently praise Armitt (or Sir John as he will doubtlessly be by then) for so transforming the quality of rail travel? And will we by then be wondering why everyone was so sceptical back in 2001 (yes, just a few years ago!) that slumbering British Telecom could be revived, nay transformed, by a Dutchman little known in Britain and whose track record had looked less than impressive.

Of course, we can't have a clue. We probably won't have a clue in six months, or in a year. But don't assume that BT or Railtrack are lost causes. Don't write them off.

Enron lessons
AT least we have learned an important lesson from the collapse of Enron. Thousands of employees have lost their jobs. But even worse was the fact that most of the money in their retirement funds was invested in Enron shares, which are now worthless. For them, the company's collapse has been an unmitigated disaster.

In Britain, there are strict rules limiting how much of an employee's money may be invested in his or her employer's shares. In broad terms, no more than four% of the pension fund for employees of Acme Widgets may be put into Acme Widgets shares. Not so in the US. There, the socalled 401(k) plan is everywhere.

To oversimplify vastly, 401(k) is like a personal pension here, where employees shovel money into a fund that then grows or otherwise, its worth determined by the value of the investments that the money buys. The catch is that, in America, companies often encourage staff to invest their pension money in the company's own stock, as in the Enron case.

Some of the most respectable names in corporate America have a huge proportion of their employees' retirement funds tied up in the company's own shares. Coca-Cola, General Electric and McDonald's all have three-quarters of their 401(k) money invested in their own equity. In the case of Procter & Gamble, the proportion is a staggering 95%.

This doesn't break the law. But it does break every rule of good financial sense. No disinterested investor, someone without any connection to the company, would choose to put so great a proportion of their savings into a single stock.

But to do so when a person's livelihood is already bound up with a company makes the mistake doubly grave. If the firm goes belly-up, employees risk losing not only their salary but also their pensions.

Aligning employees' interests with those of their company is one thing. But to make them so vulnerable to any rise or fall in its fortunes is criminally foolish.