17 May 2006
Enron’s True Fault
Kenneth Lay’s and Jeffrey Skilling’s lawyers have been claiming that the failure of Enron was not a criminal act. Indeed, the fault of their incompetence to run their innovative company lay at the hands of their Board of Directors. Those elected representatives of Enron’s shareholders were beholding to its management, but abdicated their responsibility on behalf of those who elected them to assure that Enron was being effectively managed.
Of course, the Directors were really elected by mutual, trust, and investment funds, who probably controlled the majority of Enron’s shares. The directors of those funds were complicit confusing the role of Enron’s management between ensuring the profitability of the company and convincing the market that its share value had no where to go but up. For the real role of a leading company’s CEO and top management today is not necessarily to create value with microeconomic success, but to create value through good Public Relations.
Lay and Skilling were certainly effective at that, until the bubble burst. Their imminent conviction is to scapegoat them for the distortion of the investment market that has been caused by putting future personal wealth in the hands of greedy believers in their own ability to beat the inevitable deflation of monetary value. It’s enough to make me a gold-bug.
Kenneth Lay’s and Jeffrey Skilling’s lawyers have been claiming that the failure of Enron was not a criminal act. Indeed, the fault of their incompetence to run their innovative company lay at the hands of their Board of Directors. Those elected representatives of Enron’s shareholders were beholding to its management, but abdicated their responsibility on behalf of those who elected them to assure that Enron was being effectively managed.
Of course, the Directors were really elected by mutual, trust, and investment funds, who probably controlled the majority of Enron’s shares. The directors of those funds were complicit confusing the role of Enron’s management between ensuring the profitability of the company and convincing the market that its share value had no where to go but up. For the real role of a leading company’s CEO and top management today is not necessarily to create value with microeconomic success, but to create value through good Public Relations.
Lay and Skilling were certainly effective at that, until the bubble burst. Their imminent conviction is to scapegoat them for the distortion of the investment market that has been caused by putting future personal wealth in the hands of greedy believers in their own ability to beat the inevitable deflation of monetary value. It’s enough to make me a gold-bug.
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