Throwback Thursday – Enron on eBay

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Editor’s Note: In the great Facebook tradition of posting old pictures on Thursdays, today, we’re posting a throwback article from 2002 – immediately following the Enron scandal. I found it interesting, and I hope you do too. – Kortney

As written by John Smith – from Ethikos Sept/Oct. 2002

The former Enron Complex in downtown Houston, Texas
The former Enron Complex in downtown Houston, Texas

Sometime in late February of this year, during the growing media frenzy engulfing the Enron Corporation, a question popped up on our company intranet asking something to the effect, “Have you looked at any of the Enron items on eBay?” At the time, I answered no. But I have to admit that it did make me a bit curious. I had previously been on eBay, the online auction house, two or three times to browse and was the unsuccessful bidder in my one and only auction. Typing “enron” in the eBay search engine brought me to a listing of literally thousands of trinkets, articles of clothing and other items that were all allegedly associated with Enron Corporation. As I picked through the list, I was intrigued by anything touting Enron’s core values or that promoted ethical behavior or that offered a glimpse of the culture that had been created at the former energy giant.

Lessons to be learned?
Working in an ethics/compliance office, I wondered if any of the items might contain a lesson or some insight that might help our company avoid such a fate or that might help our office avoid certain pitfalls. I started bidding on some of the items. I only won a small percentage of the items I bid on. Still, I’m amazed I was able to win what I have since I know now that I may have been bidding against the Smithsonian Institution and the current Chair of the U.S. Sentencing Commission for an Enron code of ethics, among other things. Over about a two-month period I acquired more than a dozen items including the
following:

1. Enron Values Cube. A small cube that can be folded into different shapes to reveal several images of employees, Enron Headquarters and the new Enron South office tower that was never fully occupied. The cube was apparently given to employees to promote Enron’s four values of respect, integrity, communication and excellence (a.k.a. R.I.C.E.) and the new south tower.

2. Enron Code of Ethics. The 64-page loose-leaf binder version given to human resources employees is dated July 2000. The binder contains a four-page memo from former Enron Chairman Ken Lay that discusses the code, and a one-page Certificate of Compliance that was intended to be signed by every employee to acknowledge he or she had received and read the code. One of the more interesting sections to read is entitled “Conflicts of Interests, Investments, and Outside Business Interests of Officers and Employees.” The section is two and one half pages long and is largely devoted to describing the specific procedures to follow when granting exceptions to the policy. By this time the limited partnerships, begun by former Enron Chief Financial Officer Andrew Fastow, were firmly entrenched. It would be interesting to see if the Conflict of Interest policy preceding the creation of the partnerships was this flexible. In the Responsibility for Reporting section, employees are encouraged to report violations in any one of three ways:

• Writing a letter to the Enron compliance officer. (Note: The code does not appear to identify this individual.)

• Telephoning the Office of the Chairman of the company. (At first glance one would think this meant calling Enron Chairman Ken Lay directly which, to the average employee, may have been quite intimidating.)

• Sending an e-mail addressed to the Office of the Chairman. (Again, this gives the impression that the message is going to Chairman Ken Lay.) The code states that an employee telephoning from his or her extension or an outside line will be completely anonymous. It also states that an employee e-mail sent to the Office of the Chairman will also be completely anonymous, but in neither case does it explain how this anonymity is maintained.

3. Enron Mouse Pad. A traditional rectangular mouse pad depicting an overworked Enron employee asleep at his office computer with a half-eaten sandwich beside him. The pad promotes Enron’s intranet called “VISION” and includes the “Endless Possibilities” tag line. The pad also contains the following quote from William Shakespeare’s A Midsummer Night’s Dream: “If we shadows have offended, think but this and all is mended. That you have but slumbered here, while these VISIONS did appear.” The image depicted seems to glorify the workaholic employee who stays at the office past his normal bedtime. This piece probably more than any other revealed some insight into the culture that was evolving at Enron. It appeared to be sending the message that this was the ideal employee, someone for everyone to emulate.

4. Enron Credit Mouse Pad. A round liquid-filled mouse pad with a watery picture as the background and the following advertisement: “Smooth Sailing—Credit risk can be like turbulent seas–ever changing. Enron Credit helps you identify sea changes and take action to keep them from rocking the boat. Measure, mentor and manage your credit risk. Speed. Simplicity. Solutions.” Floating inside the liquid are eight, tiny Enron logos. It has been reported that Enron invested heavily in risky business ventures at home and abroad and in the end had great difficulty managing its own credit risk.

5. Enron Vision And Values. Videotape given to new employees that features then Enron Chairman Ken Lay and then Enron President and CEO Jeff Skilling discussing Enron’s four values of respect, integrity, communication and excellence. The tape is broken into two sections: What We Believe and How We Behave.

Notable quotes from Ken Lay:

1) “We do create entrepreneurial centers….We do allow people a lot of discretion in how they run their businesses.”

2) “We really do want to be excellent at everything we do. Excellence hopefully in the ideas that we have, excellence in the people we have, excellence in how we treat our people, operate our plants, deal with our customers, protect the environment.… Like everything else we do we kind of set the standard.”

Notable quotes from Jeff Skilling:

1) “It’s a tough world out there; a very competitive world. There probably are times that there’s a desire to cut corners.…We can’t have that at Enron.”

2) “We’ve found that the quality of ideas is proportional to the distance from the fiftieth floor.” (Some self-deprecating humor.)

3) Prophetically the tape ends with Mr. Skilling saying, “It’s a wild ride,” and then both he and Mr. Lay begin laughing. This statement seemed odd and out of place. It is as if only a true Enron insider would understand why Mr. Skilling’s statement was so funny.

6. Enron ‘Our Vision’ Poster (22”x 17”). It reads: “OUR VISION: From the World’s Leading Energy Company to… The World’s Leading Company.”

7. Enron 2000 Corporate Responsibility Report. A twenty-eight page report detailing Enron’s social, environmental, health and safety performance for the calendar year 2000. The opening statement from former Enron Chairman Ken Lay starts out by praising Enron’s record earnings for the year of $1.3 billion. Eventually Mr. Lay reinforces the Enron R.I.C.E. values of respect, integrity, communication and excellence.

8. Enron 1999 Annual Report. A total of sixty-six pages featuring several Enron employees, executives and even the Enron board members photographed in some unusual poses. For instance, one of the Enron board members is shown with fists raised in a boxing pose. The Enron R.I.C.E. values are also prominently displayed. One of the main themes throughout the report is “Enron asks, Why?” Ironically, this question is listed in response to the statement, “During the summer there are still brownouts in the U.S.” There have been recent articles that suggest Enron engaged in unethical tactics to drive up prices during the California power crisis. Note 16 to the Consolidated Financial Statements discusses Related Party Transactions. It includes a very cryptic description of the partnerships created by Enron’s former Chief Financial Officer Andrew Fastow. The partnerships with names including LJM, LJM2 and JEDI were special purpose entities that now appear to have been set up to keep debt off of Enron’s balance sheet and that significantly enriched Mr. Fastow and some of his handpicked colleagues. Some reports estimate the partnerships earned approximately $45 million for Mr. Fastow and his associates. The Note states only that, “a senior officer of Enron is the managing member of LJM’s general partner” without naming the officer. The last sentence reads, “Management believes that the terms of the transactions with related parties are representative of the terms that would be negotiated with unrelated third parties.” It has been reported that in some instances, employees working in Mr. Fastow’s organization had the unenviable position of representing Enron in negotiations with the partnerships.

9. Enron Laminated Values Poster (6”x 8”). Two-sided. One side promotes the Enron R.I.C.E. values of respect, integrity, communication and excellence. The flip side lists eight awards won by Enron under the title, “Can’tStop the Momentum”—including Fortune magazine’s “Most Innovative Company in America” six years in a row.

10. Enron Computer Monitor Mirror. A small, concave mirror designed to stick on the corner of a computer monitor enabling employees to see behind them. The seller of this mirror claimed to be an Enron employee and joked that the mirror was needed “so you could see who was stabbing you in the back.” Several articles have described the performance review process at Enron, also known as “rank and yank.” As part of the process, management groups evaluated employees at regular intervals and the expectation was to purge the lowest-ranked 20 percent. One former employee quoted in a New York Times article summed up “rank and yank” this way: “If you were ranked high and well thought of, you made a beaucoup of money. If you disagreed with anything, if you spoke what you thought was the truth, you didn’t fare too well.”

It is apparent from the many items described that Enron’s core values of respect, integrity, communication and excellence were heavily promoted at the company. However, it appears that over time there was what could be termed a “culture shift”: Dissent was less tolerated, and a shortsightedness prevailed when it came to achieving goals and reaping rewards. A culture took hold in which personal greed became a motivator—whether or not it aligned with one’s duty to protect the shareholder. As noted, the two parts of the Enron Vision and Values video were titled, “What we believe” and “How we behave.” Employees are very perceptive. If the what-we believe values espoused by a corporation are not consistently observed in the how-we-behave culture, the message to employees is crystal clear.

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