Enron: The Smartest Guys in the Room

 

 

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Unbelievable, how did they get away with what they did? Very good to watch. They were the inovators for trading electricity. Recommend watching.

I know this will not be as popular a critique of this film as others, because it raises some questions that fly in the face of some of the emotions driving many of the responses here.

Let me say upfront, that this is a very effective documentary. It does bring out a lot of facts that many are unaware of, especially those who have gotten their news on this event in the form of sound-bites. It does a great service and is to be commended in that regard.

In terms of Ken Lay and Jeffrey Skilling, if I could lessen their pain and suffering for what they both did with their power and leadership, by waving my hand in a dark room .... I wouldn't bother to wave it. They got off easily in comparison to what they did. No arguments here. My emotions run high too when I consider the human suffering they inflicted by their abuse of their power and influence.

The pain and suffering inflicted by their irresponsibility, greed and ego-maniacal behavior is too great to even begin to calculate. Jobs were lost, families destroyed, retirements ruined, suicides prompted, divorces in the wake of financial ruin, and this is just the tip of the iceberg.

So, if all this is true, what could I have to say about this film that could argue for the techniques used in comparison with that?

Just this;

Emotions are a legitimate response to the magnitude of this event. When emotions replace critical thinking and follow an agenda however, a disservice is done to those watching as well as those whose suffering is dehumanized and diminished by their suffering being used as a tool for political or ideological purposes.

I think this movie missed some salient elements that would have resulted in a more even-handed dealing with the issues.

What emotional issues am I referring to?

How about the use of camera techniques to morph an Enron executive into a red skinned effigy of Satan? How about the focus on George W. Bush as governor of Texas, a constitutionally weak governorship, while ignoring the current president and appointer of SEC governance at the time? How about mentioning contributions to the GOP, which is true, while ignoring similar contributions to the Democrats?

I viewed this film in the context of a Master's Degree class asking the question of whether leadership really matters, and what this film has to say in regard to that question.

Enron was more than a single event. Enron took place in a context that included:

1. The Toxic Leadership of Lay, Skilling and a host of others in Enron. This comes through in the documentary and is more clearly presented than any other element. This is understandable and defensible in my opinion. Both these "gentlemen" misused their power and position and violated any number of ethical standards. They deserve what they get in this documentary and more.

2. Shareholder profit expectations at the tail end of the Dot Com were driven through the roof by the excitement of investors believing they just couldn't lose in the strongest bull market run ever witnessed in modern times. Enron struck upon the "innovation" of accounting for "potential" profits at the inception of an idea and using this as a basis for valuation. It wasn't a new idea. It was a new application though in the context of a company supposedly dealing in hard energy commodities. The movie captures this, but doesn't give the context of how this accounting was used in intellectual companies such as the dot-coms. Enron is isolated in this instance and context is lost.

3. The complicity of Arthur Anderson as the auditors of the firm. Corporate auditing had moved by this time from being an adversarial relationship to one of a willingness of the auditor to view itself as a "partner" with its "client." Anderson was the recipient of over $1 million dollars a week for their oversight role in auditing Enron. They acted to preserve this at the expense of holding Enron to accounting standards that were designed to be enforced to the benefit of shareholders and analysts. This more than anything else, is what led to Sarbanes-Oxley legislation following Enron's colossal collapse. The movie references this, but in the end paints Anderson and its employees, a similar number of whom lost their jobs when Anderson failed too, as fellow victims. Really?

4. Stock Analyst's complicity in the presentation of the numbers "massaged" by Skilling and Company. The movie rightly captures the influence exerted upon such brokerages as Merrill Lynch et al to keep the positive presentation flowing. It fails however, to hold as accountable those who could have raised the issues presented earlier. McLean story in Fortune is amazing, not for its raising hard questions, but for the fact that it took this long for someone to ask them. This documentary would have you infer that they were victims or complicit with Enron management. There is a much bigger picture here, that is not completely captured and further minimized in the agenda to take Enron and caste it into the desired light of sole corporate corrupter. Enron was complicit. They were not the only ones and Stock Analysts manipulated their analysis to benefit themselves and companies like Enron before Enron came along. They still do. Where's the statement on that?

5. Banker's cooperation in the debt manipulations needed to extend the Ponzi Scheme that was at work here in presenting quarter after quarter of illusory profits. Try to walk into a bank with no balance sheet and ask for a loan and see how far you get. Enron was not the banking industry. Again, who was overseeing the banks at this time? Was it George W. Bush? Maybe the heretofore unnamed president prior to January of 2001 had some responsibility too. Who was that, anyway?

6. Deregulation in California certainly played a role. Pete Wilson and the California legislature made some decisions that opened a pandora's box in a manner not seen for many years. Was the idea of limiting options speculation leverage by debt a new one? No. This had happened in the past with similar predictable fall-out. Why did Enron engage in the activity it did? Because they could. Who allowed them to and created an environment where to fail to do so meant competitors would? Does it excuse Enron? No, it doesn't. What they did was legal however in the strictest sense in view of the deregulation of the industry. Why not focus more upon those in the state and at the Federal level who made it so? Why simply focus on Schwarzeneger based upon a "guilt by association" type argument because he met one time with Kenneth Lay. Could there have been complicity? Maybe. No proof however, coupled with a limited scope that ignores others with more proof to incorporate. Hardly seems balanced to me.

7. The greatest outcome of this whole debacle was Sarbanes-Oxley legislation. Why no mention of this? Does the need for such legislation perhaps, lessen the agenda of the documentary and the points they wanted to make?

Hopefully you get the picture. This is not a hatchet job documentary in the vein of Michael Moore where all rational thought is thrown out the window to make a political point. It is some ways is more insidious than that. One senses that more than political passion, there is a set agenda here to make a point and to lead the average watcher to conclusions that fail to appreciate the big picture.

That is a shame in my opinion. I give it 3 stars because it does educate and I am in no way a defender of Enron, Lay or Skilling. I don't blindly support Bush and Republicans either. There is plenty of blame to go around at many different levels. This film misses the opportunity to make a broader statement and to educate more broadly and in view of that, 3 stars are the most I can give it. I do recommend people view it. Just view it critically.

Informative. Best seen after reading book such as "Conspiray of Fools". Shocking clips depicting traders. Hard to watch exec's lying through their teeth!

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