Upon viewing Enron: The Smartest Guys in the Room, one is left with an overpowering feeling that business majors and law students in America’s colleges and universities should be compelled to view this shocking exposé. Its recounting of the greatest corporate scandal in American history is a cautionary tale of staggering proportions. The story which ends in once-powerful űber executives being led off in handcuffs identifies a number of important themes, including deregulation vs. government oversight, and irresponsible speculation vs. transparency and accountability.
In spite of the complexities involved in Enron’s epic fall, its story boils down to a surprisingly simple moral. “Many people think it’s about complicated transactions,” said Bethany McLean, co-author of the book upon which the documentary was based. “But it’s really a story about people – a human tragedy” (Gibney, 2005). In the end, the American judicial system caught up with the criminal activities of the company’s officers, but not before thousands had lost their life savings, and retirement and pension funds. It is indeed a human tragedy, but the worst of it is that it could very well happen again in an environment where accountability is considered dispensable and a mere impediment to profitability. The rising tide of deregulation that typified the Bush years allowed Enron to operate in concealment, avoiding oversight that
would have saved energy consumers in California millions and considerable personal misery; prevented Enron from playing by its own rules and protected its employees who lost everything when the company collapsed.
Ken Lay, Jeff Skilling, Andy Fastow and Enron’s other ringleaders were living in a fantasy world of their own creation, one they were convinced would insulate them
from the legal constraints that govern most corporations. It’s difficult to fully appreciate the arrogance it took to assume that Congress, the Securities and Exchange Commission and the news media wouldn’t call the company to account for practices such as mark-to-market accounting, particularly when it became widely known that the company’s bottom-line numbers didn’t support the profits Enron claimed every quarter. The bravado displayed by Skilling and Lay in the face of Congressional scrutiny was equal parts greed and good acting from men whose confidence, spectacular track record and ties to powerful friends in Washington left them feeling invulnerable (McLean and Elkind, 123). It’s a cautionary tale of staggering proportions, a warning that scruples and moral behavior still have a place in corporate boardrooms. Enron: The Smartest Guys in the Room is a chronicle of powerful men to whom no one was willing to say the emperor has no clothes (Gibney, 2005).
Of course, it’s easy to feel invulnerable when you have friends in the White House. The film is careful to point out the connection between the heads of Enron and the George W. Bush administration. Bush and Vice President Dick Cheney were cronies of Ken Lay, who had also been close to Bush’s father. At one point, Lay was even considered for the post of Energy Secretary in the second Bush administration. In 2001, a prominent consumer interest group in
Washington blew the whistle on the politically incestuous nature of Enron’s relationships within the federal government. Public Citizen published a study entitled Blind Faith, which found that deregulation had a very dark side. “Enron developed mutually beneficial relationships with federal regulators and lawmakers to support policies that significantly curtailed government oversight of their operations” (Slocum, 3). By maneuvering to remove government oversight of its trading practices, which were based on the idea that it could make more money speculating on electricity costs than physically producing energy, Enron was able to exploit the market and manipulate prices (Ibid, 4). Public Citizen’s study brought to light one relationship the film largely overlooked. Working through Sen. Phil Gramm, R-TX, another political crony, Enron was able to expedite the deregulation of energy commodity trading, allowing the company to gain control of much of California’s energy market.
It stretches the bounds of credulity that the company could have accomplished so much and misled so many for so long. But with deregulation blunting the threat of public scrutiny, Enron was able to perpetuate its peculiar mythology through an effective lobbying and public relations initiative. Its smokescreen was that Enron was an innovative, even revolutionary leader in a brand new field. In the film, Lay is seen encouraging his employees to try new ideas and be daring, to take risks. This message gave the company the gloss of legitimacy and the appearance that it embodied that most American of business virtues, bold initiative. However, no P.R. campaign could hide the fact that Enron was reporting profits despite massive losses. When it was all dragged into the public spotlight, it quickly became apparent that government had
sacrificed its responsibilities to political expediency. Subsequent corporate meltdowns in the prime mortgage scandal reinforced the most important lesson from the Enron tragedy. Ethics are important to the corporate world; when ethics fail, the government must be prepared to protect the public interest by discharging its regulatory duty.
Works Cited
Enron: The Smartest Guys in the Room. Dir. Alex Gibney. Perf. George W. Bush, Barbara
Boxer, Peter Coyote, Jeffrey Skilling. Magnolia Pictures. 2005. Film.
McLean, B., Elkind, P. The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall
of Enron. Berkeley, CA: Portfolio Trade. 2004.
Slocum, T. Blind Faith: How Deregulation and Enron’s Influence Over Government Looted
Billions from Americans. Public Citizen. 2001.
