I am Enron

Posted on 13 October 2009

The man that once stated “I am Enron” is back in the news.  The US Supreme Court today announced that they have decided to hear Jeffrey Skilling’s appeal based on two things, “honest services” and area of venue.  Jeffrey Skilling is currently serving a 24 year prison term for his 2006 fraud conviction.  I am eager to hear why our supreme court has picked this one case to review when there are so many issues out there that they could look at.  I for one am not overly excited to hear that my tax money is going to be spent once again on a guy that ruined tens of thousands of employee’s lives, duked investors out of billions, and already has had considerable tax money spent on him.  My hope is that the $23 million lifetime retainer that Skilling paid his lawyers, money that should have probably been returned to employees and shareholders, was not influential in getting it to this point but it has no doubt helped.

For being Enron, Skilling certainly developed one hell of a case of amnesia in August of 2001 when he seemingly “forgot” everything and anything that might be taking place in the company he helped build – and suddenly stepped away from.  Skilling had joked that the difference between the Titanic and California is that one of them sunk with the lights on.  Jeffrey Skilling captained the ship (the self proclaimed “world’s leading company”) that went from billions in assets to zero in less than a month, but in his case he was the rat that tried to bail early.

If you have an hour and a half to kill someday, and you haven’t seen the documentary “Enron: The Smartest Guys in the Room” I would highly suggest the history lesson.  There are a couple other great documentaries out there as well, but this one does a very good job of covering the “culture of Enron”.  One of my favorite parts is when Skilling participates in an Enron internal video mocking the mark-to-market accounting technique that he demanded Enron use.  What a sad chapter in America’s history these clowns provided…

The Rise and Fall

The Rise and Fall

3 responses to I am Enron

  • Eric Brewer says:

    I share your displeasure with Skilling’s case review and feel he should serve out the remainder of his sentence. When he does get paroled, he will step right back into the “High Life” as many of his personal assets were untouched during his sentencing. Though there may be some media coverage about his parole, Skilling will simply retire to one of his estates and fade away – enjoying a very nice retirement exchanged for few years in prison.

    Ahh……the beauty of white collar crime.

    Going beyond Skilling, let’s not forget the most important lesson learned from Enron – greed will prevail in unregulated capitalistic markets. Generally speaking, current executive compensation policies demand managers to outperform themselves either quarterly or annually. A few bad quarters or years may be forgiven, but eventually investors will lose confidence and managers will be replaced. In Enron’s case – Skilling, Lay, and Fastow used their political leverage to change legislation in their favor. These changes allowed the firm to continue unrealistic growth via new markets and accounting practices. Because everyone who benefitted from these changes was getting their cut (executives, auditors, legislators, political parties, and investors) no one questioned the practices. It wasn’t until the firm had spiraled so far out of control that questions were ever raised. Greed fueled the success and decline of Enron. This example is not unique – though the severity may be – and leads me to question the definition of a successful company.

    Is our measure of a successful business simply monetary? I fully understand (I think) the objective of any firm is to turn a profit. It would be difficult to raise capital on the promise of a doubtful return. What is the relationship between investor confidence and sustainable business? If a business does not grow, does it mean it is not successful? Should growth even be in the definition of success? Would it ever be possible to get investors to measure the success of a firm by other means than fiscal?

    • Travis Todd says:

      Hey Eric!
      I hope all is well.

      Regarding the topic of “unregulated capital markets”, here is another good history lesson – that has yet to be resolved. http://bit.ly/4jj9KN

      You raise some interesting questions. Generally I feel like the drive for “quarterly earnings” on Wall Street, and compensation based on such, is the biggest evil. When millions of dollars of bonus money ride on quarterly performance, it’s no wonder things like Enron happen.

      What if the board of directors started giving CEO’s their bonus’ based on some fraction of the trailing ten year stock price from when the CEO leaves the company (as opposed to current stock price). The argument is always that no “good” CEO will take that job because they don’t have control – but I don’t buy it.

      I’m not saying it’s the right answer, but my point is that incentive drives focus on performance. You would probably see a shift to CEO’s that actually build companies for long term health, good succession plans, and a solid well trained team that takes the company into the next decade.

      Just a thought…

  • enron case says:

    […] school, to some it even became a laughing stock, I remember late night shows were practicallyI am Enron | Brooding on Matters | Travis TThe man that once stated I am Enron is back in the news. The US Supreme Court today announced that […]

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