Enron: Smartest Guy in the Room

Topics: Enron, Enron: The Smartest Guys in the Room, Kenneth Lay Pages: 5 (1802 words) Published: June 8, 2013
Enron: The Smartest Guys in the Room
I. Review of the documentary
Enron: The Smartest Guys in the Room is a documentary that was produced in 2005 as a reflection of the 2003, bestselling book with the same name. The documentary was written by Bethany Mclean and Peter Elkind. The film, produced by Alex Gibney is an explicit demonstration of how reputable corporations can tumble down because of illicit financial management. The film is about the Enron Company, which experienced enormous financial drains because of the scandals elicited by its top managerial team. Two years after the inception of the company, two traders engage in betting activities on the lucrative oil markets. This eventually leads to suspicious profits for the company, a phenomenon that raises eyebrows on the financial stand of the company. It is also discovered that Enron’s Chief Executive Officer is redirecting the company’s finances to different accounts. In demonstrating the poor financial management of Kenneth Lay, he encourages the traders to keep on making money for the company, yet he understood clearly that betting is a risky activity that could cause the company a lot of its assets. Lay finally realizes his mistakes when he sacks the traders because of wasting the company’s reserves through gambling. Their actions virtually damaged the image of Enron. When the facts about what happened to the company are exposed, Lay argues that he had no knowledge of the illicit financial endeavors. Jeffrey Skilling is brought in as the new CEO and immediately imposes his own principles about handling profits and projects. Skilling adopts a management practice that engages the company in projects without examining whether the projects have the capacity to be successful or not. This is indeed, a trait that has the capacity to taunt the image of the company in respect to the management of its assets and resources. In essence, this portrays Enron as a profit making company, even if it is not making any profit. The film also highlights on Skilling’s theory of grading employees and firing those who do not perform well, on an annual basis. In order to fulfill his endeavors for the company, Skilling appoints Clifford Baxter and Lou Pai, who heads the Enron Energy Services. Pai is an irresponsible executive who squanders money belonging to shareholders by visiting entertainment joints. Eventually, Pai resigns having cost Enron a loss of $1 billion. After selling his stock, he purchases a ranch in Colorado and becomes one of the largest landowners in the state. Despite the declining performance of Enron in the global scale, the company initiates a public relations campaign that displays itself as profitable and solid. With the short term successes that the company gets, it tries to captivate stock market analysts. Executives raise their stock prices and introduce the broadband technologies in order to distribute movies on demand, but the projects do not meet their expectations. After a series of financial irregularities, Jim Chanos and Bethany McLean expose the financial misappropriation and irregularities in stoke value. In response to the allegations, Skilling argues that McLean is unethical in his assertions. It is also found out that Andrew Fastow, one of Enron’s executives has been defrauding Enron of millions of dollars. Indeed, this is a documentary about the fall of a big corporation because of financial misappropriation (Gibney, A. and McLean, 2005). II. Analysis

In reference to the documentary, it is worth pointing out that the management of the company did not articulate its financial obligations in the most feasible way. Financial management is an integral aspect in the success of a company. A company’s management should ensure that proper procedures are followed in capitalizing on its assets in order to avoid loses in the future (Bhat, 2008 p. 65). The management team’s lapse in controlling its finances led to the downfall of the...
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