Friday, July 22, 2005

Enron. Ask Why.

Paul and I saw the Enron documentary last night. Interesting–very interesting. There were a few things that really struck me.

Apparently Enron orchestrated the black-outs in California years ago to drive energy prices higher. They viciously manipulated (reduced) the supply to raise the prices of energy. The estimated cost of this to the state was $35 billion.

The Traders.
Every image I saw and every voice I heard was young and male. These men joked with each other about raping California and gleefully talked about squeezing Granny tighter with increased energy costs. Their response to the wildfires that summer: "Burn baby burn". They eagerly anticipated natural disasters as an excuse to raise the energy prices higher and/or justify the temporary closure of more plants to further restrict supply across the state.

Jackals, scoundrels, carrion – these men turned my stomach. What is worse is that I knew them. Not personally, of course. But I lived with men cut from this cloth in my 1L year at the professional school dorm. Nothing but profit and power matters to these men–nothing. They are completely enthralled with a ‘survival of the fittest’ mentality, religiously believe in the invisible hand of the marketplace and love the cut throat nature of their business. Other people’s lives are just pieces in their game and instead of tragedy or helplessness evoking sympathy it causes bloodlust in these men. Spoiled. Greedy. Heartless.

Diffusion of Blame.
The documentary took pity on most of the Enron employees and laid most of the blame at the feet of Ken Lay, Jeff Skilling, a few other executives and the vicious traders. The stockholders and lower employees were portrayed as perfectly innocent ‘victims’.

The Women.
There were three important women in this documentary. The first was an attorney-turned business woman who got out of Enron before the shit really hit the fan. The second was the Fortune reporter who first pricked the Enron bubble with a questioning article. The third was the whistleblower. There were other women shown attending staff meetings–but they obviously weren’t players. The other women in the documentary were the topless strippers that executives expense-accounted and one executive in particular was obsessed with strippers. He cashed out early for $300 million.
The relationship with the Bush administration was alluded to, but honestly there didn’t seem to be any concrete evidence of wrong-doing. Mostly innuendo and documentation of the chumminess between Enron and the Bushies. As much as I hate Bush and expect that his paws were dirty, too, there just wasn’t any proof.

Now for my thoughts. First, I call Bullshit on the victim attitude about all of the stockholders and employees. Let’s re-evaluate the role of shareholder. It means owner. Ownership has risks and responsibilities.

First, if you don’t agree with the policies of a company (environmental, labor, politically.....) then either don’t buy stock in that company, OR endeavor to change the policy through your ownership position.

Second–the profits: review the balance sheets–don’t whine and complain that you got fucked over when you did absolutely no research yourself. Apparently the financial sheets didn’t add up for years–everyone had the ability to see that the emperor wore no clothes, but they instead believed the hype and fawned over his cape of gold. Certainly, certainly, certainly the sophisticated banks, auditors and analysts were the most egregious in their blindness–but all investors should either educate themselves about the companies they invest in, OR depend completely on the experts and treat the stock market like Vegas.

Third–again, the profits. All of the people bitching and moaning about how much money they lost really need to consider this realistically. If the stock value was steadily increasing and highly overvalued, then please adjust your loss accordingly. If you invested $50,000 in Enron stock–but it was valued at $450,000 due to overvalue before crashing down to $2,000–you did NOT ‘lose’ $448,000–you really lost $48,000 (plus a rational interest rate–which would also have tanked when the economy nose-dived) and the unearned illusion of $400,000. Obviously $48,000 is a huge amount of money for most people, but it isn’t the fortune of almost a half million. Get your numbers straight.

Also, why did so few of these ‘victims’ question what was going on when the good times were rolling? As long as Enron made them money hand over fist, then the stockholders weren’t at all interested in the company’s policies. Expensive corporate jets, strippers, amazing executive salaries, purchase of politicians, the rape of California’s energy market.....who cares so long as the stock prices rise. It isn’t until after the shit and the fan connect that employees and stockholders become ‘appalled’ at these practices. The greed at the top is the same as the greed at the bottom–only the proportions are different. I can imagine some ‘greenie hippy’ being chided by his co-workers/friends for being too stupid/principled to invest in such a ‘sure thing’ as Enron. Profit above all else–it’s the American Way.

The non-repentant Losers. We hear from one of the traders who admitted that he rode this wave of wealth and was afraid to ask hard questions–because the answers might force him to re-evaluate his behavior–and force him out of this lucrative market. We heard from a Public Relation guy who seemed crushed that his company betrayed him–how many times did he spin the company’s message to investors, analysts and other players in the financial market? He certainly didn’t seem to realize that he was the mouthpiece of Enron and that it was his skill as a spin doctor that allowed Enron to become as huge as it was before crumbling. Company lies to
him? Bad. He spews company lies to public? Just doing my job.

The non-repentant Winners. Namely, the female attorney who got out early enough to not be stained. It wasn’t mentioned, but apparently she got out of Enron well before the foundation started crumbling. However, she was there to help build this shaky foundation. She is also an attorney, so I will hold her to a higher standard of ethical behavior. She speaks with concern about Enron’s path and the motivations behind Skilling and the other executives. She doesn’t say it, but she obviously Got The Fuck Out of There because she was smart enough to see the future. Not a bit of remorse and it doesn’t appear as if she feels any responsibility for the end result, even though she was a key player since the beginning. Her exit wasn’t described, but my guess is that she cashed out when things were really rolling and became rich in the process.

Finally–men and women. The only analyst/reporter who called the company’s bluff was a very young woman. She was writing an article and the balance sheets just didn’t add up–even though she isn’t an accountant. Apparently the graft was noticeable enough for a non-sophisticated party to catch it. Enron pressured her not to write the article after trying unsuccessfully to explain the fuzzy math to her, but she wrote it anyway. Good Girl. The employee whistleblower was promoted to a higher position, as assistant to one of the masterminds, that required her to crunch the numbers and she realized how f-ed up the books were. Once again, she blew the whistle. Jeff Skilling testified before Congress that both of these women were just too stupid to understand basic accounting–even after Enron bankrupted. He blamed their actions for the ‘run on the bank’ that caused Enron to crumble.

Skilling cashed out his stocks and resigned abruptly a few weeks before the collapse. Still he testifies that the company was sound before he left and it was just the meddling of these stupid women that caused the stupid market to get cold feet. Remember, this is a man who bowed down to the invisible hand and believes that free markets are an intrinsic good. Why does he suddenly lose his ardor for the wisdom of his precious marketplace?

Obviously this is argument by analogy instead of studies, but it was striking that the ruthless behavior was inordinately male. The people who rose above the threats to reveal the truth were women. Is this an anomaly, or is there something gendered that causes men and women to value money/truth/power/fairness differently?

Finally, the lawyers, accountants and analysts. Bad, bad, bad. These people all hold positions of public trust. Lawyers and accountants are bound by rules of professional ethics. Obviously, they were blinded by the money too and disregarded their responsibilities to their profession and their clients. Unacceptable. Totally unacceptable. I think anything I write about this is simply a rehash of the underlying greed from the smallest stockholder to the CEO that allowed this to happen. Their betrayal is worse because of the positions of trust that they occupied, but the motivation is shared with many: either willfully committing fraud or purposefully burying their heads in the sand because the money was just too good.

Anyway, an interesting documentary. I am not an expert on the Enron situation, so I can’t critique whether or not the facts were accurately presented. Certainly at times the arguments became sort of mushy and I felt like the film fudged sometimes to make things seem more egregious, but I don’t know enough to point them out. There was also footage of the frighteningly fascinating Milgram experiments regarding obedience. However, the connection wasn't made as clearly as I would have liked, and it seemed to assume that the audience was already informed about this bedrock of social-psychology. (yes, I'm doing the same thing). The doc was good--Check it out.

As a side note–yes this is the sort of unmitigated geekiness that occurs when Two Dorks Date.


At 11:44 PM, Anonymous Anonymous said...

Fuck you, and the poodle you rode in on. You are clearly a stupid, self-righteous, know-it-all. Enron was the darling of Wall Street, the analysts, the investment bankers, etc., etc., and its reputation as one of the top companies was cited as an example of great American innovation from top business schools to corporate board rooms. Fortune magazine named Enron the most innovative and admired company in the world for six years in a row. So as share holders and employees we were supposed to examine the books? Are you just stupid? Enron obviously did not keep accurate "books" and neither did their accounting firm, Arthur Anderson. For nearly every job opening at Enron there were 200 to 800 applications. Yes, as employees we were highly competent and did our jobs, and we did them exceedingly well, but we didn't know what a few executives at the top of the company and what a number of bankers, analysts, accountants, lawyers, and board of directors knew or should have known. Had we known, we would not have worked there. I did in fact contact the New York Times and was in regular contact with one of their reporters providing him with information about Enron activities that I believed were ethical matters of concern. And, by the way, the biggest concern of your heroine of the movie, Sharon Watkins, if you read her memo to Ken Lay, was that her stock options were at risk. I do, however, think that was a legitimate concern when you have invested so much time and hard work into your job. Most everyone I knew who worked at Enron were intelligent, eager, decent, hardworking people. Or is that not good enough for you? And no connection to the Bush administration? You must have been taking a nap during that part of the movie. Bush appointed Ken Lay's man to head the FERC, knowing he would do nothing about the crisis in California. That was just one example. So take your smug and ill-informed sanctimony and shove it up your gash. Sincerely, a former Enron employee who appears in the movie The Smartest Guys in the Room.


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