The Tao of Enron: Spiritual Lessons from a Fortune 500 Fallout (Hardback)

Chapter One

It had been raining all day. The damp air left my skin wet, yet my mouth felt dry and parched. Why? This afternoon I would find myself at the epicenter of the Enron debacle, sharing a cup of coffee with Ken Lay, the former CEO and chairman of the board of Enron Corp.

We met at Lay's diminutive twelfth floor corner office in Houston's River Oaks Bank building. Lay's daughter/attorney, Elizabeth, and spokesperson, Kelly Kimberly, accompanied him. We sat around a large table with the man some would call the most hated man in America and for half an hour talked about the gospel. I also asked him about his family.

"The family's never been closer," he replied. "The family's faith has never been stronger." We talked about prayer and forgiveness and family and the meaning of life and the sovereignty of God. And Ken articulated the stark reality that it's hard to go through something this difficult without faith. He explains with conviction that faith is what sustains him.

After our meeting, I wondered, Does it make sense for a man in the twilight of his life to destroy the company he created, wipe out his legacy, and spend the rest of his years defending his family against lawsuits? Is this the doing of Ken Lay? And I answered, no.

But was it his responsibility? Now, that's a different question. As of September 19, 2002, Ken was facing 125 lawsuits-and the number continues to mount every day.

Ken shows all the signs of a man in crisis. His brow wrinkles, his eyes rest behind dark circles, he speaks cautiously-and yet he is the same charismatic leader who compels those still around him to follow him and believe they will succeed. Though some employees have chosen to take Lay to court, others confess a continued loyalty to this man whom they believe was duped by unscrupulous underlings. One Enron executive I know personally says, "I would work for Ken Lay again. I still believe in the man."

When I compared Ken's previous year to the tragic story of Job, he said, "I still have my wife and my children. They haven't left me." And he says it with sincere gratitude, for they all have paid a hefty price.

Ken admits that there are forks in the road, and neither I nor anyone else on this earth knows where the road will take Ken Lay. Many would like to see him in jail. In fact, California Attorney General Bill Lockyer said, "I would love to personally escort Lay to an 8 by 10 cell that he could share with a tattooed dude who says, 'Hi, my name is Spike, honey.'" It is strange to hear such strong rhetoric from an attorney general when Lay has not yet been charged with a crime, but this is the tone in the fallout from Enron.

For years Lay had been moving toward his own plans for retirement when his corporate exit got sidetracked by Jeff Skilling's resignation as CEO. No doubt Lay's family would like for him to simply be a father and grandfather again instead of a man plagued by scandal. As a family they are clearly searching for peace amidst the storm.

Yet many others face their own ferocious storms-and most of them do not enjoy the luxury of anything like Ken Lay's River Oaks mansion and protected millions. They must turn into the howling winds without such comforts.

IT DIDN'T WORK OUT

For ten years, Wayne Stevens, sixty-one, worked for Portland General Electric, a subsidiary of Enron. He retired in January of 2001 from his job as a serviceman at the Trojan Nuclear Plant in Rainier, Oregon. His job involved dismantling and decommissioning radioactive pipes and pumps-slow and careful labor.

Stevens' wife, Katherine, still works for PGE, as she has for the past seventeen years. Before the company's collapse, the couple owned stock worth over $700,000. They held on to the stock even after the first waves of tough times hit and Enron disclosed a loss of about $500 million. They believed in the company. "What's a half-billion dollars to a $70 billion company?" they asked.

Even if they had wanted to sell, though, they couldn't have done so because of the company "lockout." From mid-October to late November, Enron employees found themselves unable to access their accounts. Enron said it was in the process of changing 401K managers, and thus had frozen the assets. But during that period, the stock plummeted from about $32 a share to $9.06, and by November 29 it had dropped to thirty-six cents. It lost 99 percent of its value as investors abandoned ship en masse. The freeze began to look less like procedural bureaucracy than a conspiracy to keep employees from joining the exodus. Since then, hundreds of angry investors have joined a class-action lawsuit to look into the legality of the lockout; the plaintiffs include dozens of PGE employees.

The experience at PGE helps to explain why the Enron debacle has so devastated employee investors. On average, PGE employees invested 62 percent of their portfolios in Enron stock, according to one estimate. The Stevenses sold or rolled over most of their stock at thirty-three cents a share.

"We were like most of the people here," said Wayne Stevens. "For years the media had been saying how great a company this was, one of the jewels of the energy business. You know ... we just believed them. Even now, I still think [Enron is] going to come back," he said, paused, and then declared, "I don't know why I keep thinking that."

Stevens describes himself as conservative and admits to getting excited when his stock began to rise. "When Enron bought PGE, the stock went through the roof," he said, "and like everybody else we got excited, but we were careful. A lot of friends around us were putting everything into Enron stock. They were making money hand over fist. We had most of our money in mutual funds. But then we moved it over to Enron stock too. We put everything in one basket. We know that you shouldn't do that. But once we did it, we never moved. We were pumping money into it the last couple of years, putting the max that the law would allow, buying stock on the side, out of our own pockets, all thinking of the future, that this money would keep us from having to sell our land. We wanted to save that for our kids.... You never dreamed [Enron would] ever go bankrupt."

The Stevens clan planned to use their money to keep their land, twenty-four acres settled by Stevens' grandparents, who traveled from Michigan in 1901. "That's 101 years in the family," said Stevens. "I grew up on this land from the time I was nine years old, and I have so many memories of it, every inch of this ground. I've got myself in this land. We wanted to leave it to our kids, so they'd leave it to their kids, and it would carry on in the family name. But it didn't work out."

GETTING EMOTIONAL

Janice Farmer, a sixty-one-year-old Florida widow, got very emotional while testifying at a U.S. Senate Commerce, Science, and Transportation Committee hearing on the Enron disaster. She described the plunge of her $700,000 retirement fund (built up over sixteen years) to $24,000 during Enron's speedy collapse. Her daughter accompanied her to the hearing to support and help her through her testimony.

"I cannot help but feel that I and thousands of employees like me have been lied to and cheated," Farmer told the senators. "I trusted the management of Enron with my life savings. Senators, I won't mince words here. They betrayed that trust."

Farmer finds comfort in the only retirement support she can count on; in one year she will begin receiving monthly checks from Social Security. "It is extremely important for seniors to know they've got Social Security," said Farmer in a telephone interview from her home in Orlando. "I'm very thankful that Social Security is in my future."

For now, Farmer is making ends meet by counting on a $63 monthly pension check from a previous employer. "Retirement wasn't supposed to be like this," she said. "This wasn't what Enron, America's genius energy supplier, had promised."

Farmer told the senators that she had felt proud to invest in Enron stock. "We were a loyal and hardworking group of employees," she said. "We lived, ate, slept, and breathed Enron because we were owners of the company. I trusted the management of Enron with my life savings."

Eventually she said she became concerned over the stock's slide and called on October 22 to sell her shares, but was told she had been locked out. Farmer was not permitted to sell her stock until November 26 and therefore lost hundreds of thousands of dollars.

"Instead of being rewarded for my hard work and loyalty," she added, "I am left with a lawsuit against my employer and those responsible."

Who does she blame? She leaves no doubt. "Enron executives let us down, the auditors let us down, Wall Street analysts let us down, and the companies lending the money to Enron let us down," Farmer told the London Guardian, "but at the end of the day, when the dust settles, who has the greatest pain and greatest losses? We do."

These Enron employees, and thousands more just like them, once felt intoxicated by the company's culture of success that led to a rapid rise in their personal portfolios. Enron seemed like the place to be; didn't the elite in the business world call it home? Yet none of them knew that despair and trouble waited right around the corner.

A STIMULATING PLACE TO BE

After Enron's house of cards began tumbling down, news reports about a diseased company culture started to flood the media. Astonishing stories about rapacious greed, over-the-top arrogance, brutal power plays, and "I want it now" impatience dominated the headlines. And we wondered, Why would anyone want to work there in the first place?

In regard to one set of folks, the answer seemed simple enough. For the highly intelligent addicted to a fast pace and lots of money, Enron felt like a stimulating place to be. In fact, for anyone who wanted to be where things were happening, Enron was the place.

Young MBA Brian Cruver desperately wanted an offer of employment from Enron. "Highly respected, bitterly admired-if you were craving the fast track, you dreamed of working at Enron," he wrote. Everything moved fast at Enron. You could often find bright, young, wealth-creating phenoms traveling on a supersonic Concorde if a corporate plane seemed too full or just too slow.

Yet Enron also attracted the virtuous, the trustworthy, and the straightforward. Thousands of ex-Enron employees can still hold their heads high. Why then did so many of these good, hardworking, and honest people stay at Enron and continue to do their best? Many would tell you they just could not believe that what they saw and knew was happening could kill the company. Most trusted Ken Lay; many still do. While few ever trusted Jeff Skilling, they did think he knew how to make money. Only too late did they discover that he just could not build anything to last.

WHY DID ENRON COLLAPSE?

Enron did not collapse because it failed to accept and even handsomely reward failure at the executive levels-in fact, it regularly handed out bountiful awards.

Enron did not collapse because it neglected to fairly compensate, gift, and entertain its board members-in fact, board members began to count on the company's largesse.

Enron did not collapse because it refused to contribute huge sums to politicians and political causes-in fact, it made large political contributions a habit.

Enron did not collapse because it amassed too few bright, B-school grads-in fact, it had loads of them.

So then, if Enron did not collapse because of any of these things, what did happen? Couldn't it find banks to loan it enough money? Couldn't it afford enough expert financial expertise to help construct complicated but legally acceptable ways to manage and fully disclose its debt? Couldn't its board of directors offer some sage advice or ask the right questions or analyze the critical data and reports to fulfill its fiduciary responsibilities?

Of course it could.

Then what? Perhaps Enron ran into trouble because it kept too many real assets-that is, things that are actually worth money-too long. In the old days, Enron had assets-pipelines, oil, gas properties, and power plants-worth cash money. The new B-schoolers, however, supported by other fresh-faced B-schoolers from very expensive business consulting firms, had helped the stodgy old asset-based company turn the corner. They taught Enron how to really leverage its assets to amass some meaningful debt and get really creative at Making Money, The New Way.

Skilling and his followers held the old in contempt. Why settle for single-digit rates of growth over decades? Why not liquidate, create new markets, and leave the old businesses in the broadband of their dust? (Cough.)

No. Enron did not collapse due to any of the factors just mentioned. In essence it blew itself to bits by making executive profit its solitary concern. In so doing it became the poster child for a capitalism run amok.

FINDING A NEW MANTRA

When the dust finally settles on this sad chapter of American history, the nation will have to find a new business mantra. To right the wrongs of Enron and protect against similar abuses in the future, it will take more than tougher corporate laws; it will take a change of heart.

As James the brother of Jesus said,

You know that as soon as the sun rises, pouring down its scorching heat, the flower withers. Its petals wilt and, before you know it, that beautiful face is a barren stem. Well, that's a picture of the 'prosperous life.' At the very moment everyone is looking on in admiration, it fades away to nothing.

When affluence and material prosperity become our all-consuming goal, greed takes the wheel and drives the whole speeding convoy over a cliff.

Thankfully, though, our very natural desire for abundance can also call out the best in us: a deep longing to work, create, improve upon, and order our world. Remember, it was God who at the very beginning instructed humankind to subdue the earth and all that is in it. And it is also God who promises that the time will come "for destroying those who destroy the earth."

The catastrophe of Enron shows that it is past time for America to examine the motives behind its unyielding quest for wealth. Our frenzy to accumulate money and power harms not only the poor of America and the rest of the world's underprivileged, but also the very ones who get trapped in a never-ending thirst for more.

As we'll see in the chapters that follow, it does not have to be this way. None of us have to wind up spending our days "drinking white wine and gin" in a neighborhood bar.

Thank God there is so much more to life than that.

(Continues...)