Topics: Enron, Kenneth Lay, Enron scandal Pages: 7 (1459 words) Published: June 20, 2014
1. After watching the movie, do you agree that Jeff Skilling and Ken Lay were the “smartest guys in the room” or would it depend on the room? I believe Ken Lay and Jeff Skilling were the smartest guys in the room. The idea of inflating the price of stock and manipulating their income by using potential profits, shutting down power plants and next generation ideas (on- demand with blockbuster) was smart. It actually did increase the revenues of Enron. I think their failure was not reinvesting the revenues into the ideas they actually had to make them come true. I think their failure to reinvest their profits led to the demise of Enron.

2. Skilling emphasized in his testimony before Congress that he was only acting in the interests of the shareholders. Do you agree? Why or why not? I disagree. Skilling was acting on the interest of himself and those in top management at Enron. They raised the price of the stock and cashed out leaving them with the profits and the Enron shareholders were left without anything. As the stock was falling many of the people in top management left Enron with gains in income.

3. Are there other people whose interests should Skilling also have been protecting? I think Skilling should have protected the interest of the people that Enron serviced (their employees, their consumers, the state of California). They should have been more concerned with providing a better product and service than trying to artificially inflate their stock price.

4. Ken Lay is said to have “wrapped himself in the cloak of moral rectitude.” Do you know other people who adopt this image? Name an example. In your view, does this kind of behavior merit more or less trust among such people? Why or why not? My pastors, deacons or some of my role models growing up all adopted this image. This behavior creates more trust as long as your actions back it up or at least appear to back it up. It’s definitely a way for people to feel close to you, trust you or relate to you.

5. What message does the movie deliver regarding regulation versus “free markets”? Do you think this message is appropriate?
The message that free markets invite corruption and that regulation is the best way to go to prevent corruption. I think free markets are the best way to grow companies and increase the value of the stock. I also do not believe that free markets create a vehicle for dishonesty in the corporation but rather the people in the corporation can create a culture of dishonesty.

Enron’s culture
6. One of the people interviewed in the movie states that there existed a “high school mythology” at Enron. What did she mean by that? Was that good or bad for Enron and its stakeholders? Everyone wants to be the most popular guy in the room. It was good because it helped to increase the stock price. However, the plan failed because the company was controlled by the stock traders “the inmates were running the asylum.” The stock traders did not have any regard for top management or stock holders.

7. According to the movie, Enron emphasized a “rank and yank” model of employee evaluation. Explain the model and discuss whether this is a reasonable approach for a successful organization.
The “rank and yank” was where they ranked their employees into categories of production. There was the top 10 percent, the middle 70 percent and the remaining bottom 20 percent. Every employee in the bottom 20 percent was fired. I think this approach is reasonable for top corporations to keep fresh and innovative ideas. General Electric (GE) employs this same model. Also, if GE produces a product that is not it top 2 of its category; then they will discontinue that product.

8. According to the movie, what was Jeff Skilling’s rationale for the use of the company’s unique application of mark to market accounting? Was Enron’s application of the mark-to-market method appropriate? How did the earnings reported under this approach compare to...
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