Enron: the smartest guys in the room
Enron: The Smartest Guys in the Room
Enron Corporation was an energy, commodities, and service company out of Houston, Texas founded by Kenneth Lay in 1985. Lay built natural gas power energy in East Texas which helped Enron’s stock rise. Louis Borget, Andrew Fastow, and Jeffery Skilling were the top management executives from 1985 until 2001. Each helped to bring about the demise of the company in multiple ways.
One of the first scandals in Enron involved President Louis Borget and two traders were discovered betting on Enron Stocks. The company books were altered to inflate profits so that the company appeared to be more profitable that it actually was. Borget was diverting company money into personal offshore accounts. Auditors tried to uncover the problem, but Borget and the traders had a separate set of books that they kept from the auditors. Kenneth Lay, who was aware of this unethical practice, and encouraged Borget to continue “making us millions”, two months later the separate set of books were brought to the investigators and Enron fired the two traders and Borget had to serve one year in jail. After his biggest money maker was put behind bars Lay needed to find him a new money maker. So Lay hired Jeffrey Skilling to be the CEO. Jeffrey Skilling would only accept job if Enron adopted a mark-to-market accounting strategy. Mark-to-market accounting allowed the company to book potential profits on certain projects immediately after contracts were signed, regardless of the actual profits that the deal would eventually make. This gave Enron the ability to look like they were a profitable company. Skilling put together a performance review committee that graded employees and fired the bottom fifteen percent each year which made the employees very competitive and created a very tough working environment. Traders were very aggressive and they made it to where if you wanted to be in the market you didn’t have a choice to deal with Enron.
Enron Corporation was an energy, commodities, and service company out of Houston, Texas founded by Kenneth Lay in 1985. Lay built natural gas power energy in East Texas which helped Enron’s stock rise. Louis Borget, Andrew Fastow, and Jeffery Skilling were the top management executives from 1985 until 2001. Each helped to bring about the demise of the company in multiple ways.
One of the first scandals in Enron involved President Louis Borget and two traders were discovered betting on Enron Stocks. The company books were altered to inflate profits so that the company appeared to be more profitable that it actually was. Borget was diverting company money into personal offshore accounts. Auditors tried to uncover the problem, but Borget and the traders had a separate set of books that they kept from the auditors. Kenneth Lay, who was aware of this unethical practice, and encouraged Borget to continue “making us millions”, two months later the separate set of books were brought to the investigators and Enron fired the two traders and Borget had to serve one year in jail. After his biggest money maker was put behind bars Lay needed to find him a new money maker. So Lay hired Jeffrey Skilling to be the CEO. Jeffrey Skilling would only accept job if Enron adopted a mark-to-market accounting strategy. Mark-to-market accounting allowed the company to book potential profits on certain projects immediately after contracts were signed, regardless of the actual profits that the deal would eventually make. This gave Enron the ability to look like they were a profitable company. Skilling put together a performance review committee that graded employees and fired the bottom fifteen percent each year which made the employees very competitive and created a very tough working environment. Traders were very aggressive and they made it to where if you wanted to be in the market you didn’t have a choice to deal with Enron.