Enron Lessons From Enron Pride Goes Before

Enron

Lessons from Enron

Pride goes before the fall, so they say, and there is certainly a high degree of hubris present in "the smartest guys in the room." As it is pointed out early in the film by Amanda Martin-Brock, former executive at Enron, "The fatal flaw at Enron, if there was one, you say it was pride -- and then it was arrogance, intolerance, greed." Pride, intolerance, and greed may all be seen as characteristics demonstrated by Enron boss Kenneth Lay. From the beginning, when danger signs were revealed to be emanating from Enron traders Louis Bourget and Thomas Mastroeni, Lay decided to look the other way. Not only did he look the other way, however; he actually encouraged their "gambling": "Please keep making us millions," he stated. Here it was: pride -- the belief that he could control the chaos no matter what; intolerance -- unwillingness to consider the point-of-view of investors and other board members terrified by the fact that Bourget and Mastroeni were virtually "cooking the books"; and greed -- rather than reducing risk, Lay promoted his traders' gambling: he wanted more. This paper will show how one lesson that can be taken away from the Enron scandal is that pride, intolerance and greed can kill a company.

Sen. Peter Fitzgerald identified the main reason for Enron's failure: Lay "puts earnings before scruples." When his top traders were sentenced and put behind bars, Lay had to come up with another avenue to wealth. His traders had gambled away all the company's reserve funds. Some new "smart" guys were needed to replace the old ones. He brought in Jeff Skilling.

Lay thought of himself as a visionary (another element of his pride) and he thought of Skilling as the same. Martin-Brock calls Skilling "a prophet," who showed Enron "the way" to make all the money that Lay envisioned his company making. In 1992, Enron became the biggest buyer and seller of natural gas in North America. It became "a kind of stock market for natural gas." Why be hindered by pipelines? Energy could be traded as easily as stocks and bonds.

One of Skilling's favorite books had been The Selfish Gene, which told how human nature is steered by "competition and greed." Competition and greed became the unofficial corporate motto of Enron. Hubris was there as well, of course. Even before Skilling joined Enron -- back when he first applied to Harvard Business -- he had been asked by a professor whether he was smart. Skilling's reply: "I'm fucking smart." This may well have been the refrain of Skilling's own personal anthem.