Why Read It?
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Explains how the biggest collapse in US corporate history occurred, in an interesting and understandable style.
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Discusses how a hugely successful energy company moved away from its core competency to become a major player in many new markets.
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Shows how chasing profits at all costs, and not admitting mistakes, created a corporate culture that was deeply flawed.
Getting Started
In a non-technical manner, What Went Wrong at Enron depicts the increasing breakdown in trust and the range of factors that contributed to such a spectacular corporate implosion. It examines the management personalities, company culture, use of special purpose entities, and the executive deception that led to Enron’s collapse. Enron is shown to be a corporate product of both a willingness to bend the rules and also the opportunity to do so.
Authors
Peter C. Fusaro is Chairman of Global Change Associates, co-founded the Energy Hedge Fund Center, and is an energy industry expert.
Ross M. Miller has served as a consultant to several financial institutions, authored many articles, and appeared on TV as an industry expert.
Context
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Explains how Enron first flourished in the deregulated energy and utility markets, and became a huge corporate success story.
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Shows how Enron became innovative as a key market maker in expanding areas such as water supply, pollution credits, and weather-related risks.
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Discusses the controversial use of special-purpose vehicles.
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Provides insight into the problems of mark-to-market accounting principles, the lack of full disclosure, how being the counterparty to every arbitrage trade, and the deals financed by its high stock price, brought about Enron’s troubles.
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Looks at what lessons can be learned from Enron’s downfall, including the need for improvements in corporate ethics and truthfulness, honesty, and transparency and disclosure in accounting and corporate structures.
Impact
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Exposes the lack of strategic knowledge brought about by the separation of senior management and those on an operational level.
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Discusses the problems associated with competing goals within Enron.
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Shows the damage caused by the constant positive spin that was put on performance and style, and how this led to even more exaggeration and fraudulent reporting.
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Looks at how other factors such as debt, competition, inadequate planning, and the loss of investor confidence contributed to the bankruptcy.
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Examines the failings due to self-interest and an intimidatory corporate culture.
Quotations
“The idea that drove Ken Lay and fueled Enron was that of the power of the free market system.”
“A series of missteps (both accidental and calculated) and just plain bad luck brought Enron’s more nefarious dealings to light, precipitating its ultimate collapse.”
“For Enron, everything was beginning to go wrong at once.”
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