How
can a man so seemingly intelligent, well-educated and
experienced, religious, moral and law-abiding, kind, civic
and philanthropic with long training as a top corporate
manager preside over the greatest business fraud and debacle
in corporate history.
At
this point I need to inject a little or a lot of humility.
First, I’m giving opinions-hypothesis without rebuttal from
Ken Lay himself. I’ve had a number of interviews with Ken
for the period prior to his Enron career and I hope to
resume with him after the trial is over. And the things I
have today could be wrong in part or in whole but I can
promise is that my book will try to reach the right
decisions. That is my calling. The people - the
Foundations and individuals who are supporting me - who are
non-conflicted in this want the right story.
Second
on the theme of humility, for the next half-hour I urge you
not to think only - or even primarily of Ken Lay, Jeff
Skilling and Enron, but I urge you to think about patterns
of behavior - behavior that we have all fallen into but on a
much smaller scale and with less damaging consequences.
Only out of introspection can the Enron story truly be
intelligible for it involves slippery slopes and path
dependence and plain old bad habits that many of us fight
all the time.
12:05
Let me
begin with the Ken Lay that I knew. The Ken Lay I knew was
never blatantly dishonest. I’d say that anyone who knows
Ken well would say that too. Over the seven-year period
where I had a hand in putting together over a 100 speeches,
comments, Ken Lay never asked me to use a bad number. There
was never a moment where he winked and said “I think you
know this is not a good number but we have to have it in
there given where the corporation is”. That didn’t mean
that all the numbers were good. I used what Enron
departments gave me. But in the realms of numbers I knew
something about and the subjects and themes I knew something
about, there was no attempt at falsity on his part. I
feared bad numbers precisely because he did. I also
remember how deathly afraid Ken Lay was about Enron
employees violating the Foreign Corrupt Practices Act and
how at a management meeting, he made it very clear that if
anyone violated it, they would be fired, no ifs, ands, and
buts. So I had no doubt that the same applied to any hard,
fast, transparent government rule on legality and illegality
- at least in normal times. Of course we all know that in
desperate times, desperate people will do desperate
things. That is another question and to the extent it
applies to Ken Lay, others will decide.
Second, Ken Lay was a very kind, generous and fair person
even to a fault. He said YES way too much - failed to say
‘No’ way too much to friends, family and outsiders. As a
result, he spread himself thinner and thinner with the
passage of years and his focus on core issues became less
and less intense. I remember some of us working with Ken’s
wonderful assistant, Rosalee Fleming to try to come up with
a screening process where we could get more No’s. It was
certainly an action item in the corporate staff meetings.
But this was a weakness and some of it was personal and
innate. But some of it was part of his business model - a
Charm Offensive that I’ll describe in a minute.
Looking at Ken Lay’s pre-Enron life and careers is very
important for trying to interpret the present situation.
From
the first time he got on a tractor in rural Missouri, until
well into his Enron career, there is little to suggest
deviant behavior or even mischievousness. There were no
examples that I’ve found or any of the many investigative
journalists have found of Ken Lay putting gum in someone
else’s trombone or sugar in the tractor or anything like
that. The evidence suggests that he worked hard to contain
his temper and impatience and to project a fatherly figure
particularly as the years went on. But at the same time
when you look at a half-century of Ken Lay’s life, there was
no life influencing failure. It was success after
success. Certainly there were family failures and some of
that could be very important when judging Ken Lay’s ambition
or over ambition - even blind ambition. But as far as
setbacks personally, it was one success after another with
all the jobs he held as a small child - top student, top
leadership positions, distinguished doctoral dissertation,
great work at the Pentagon, the Federal Power Commission
Dept of the Interior, a fast track business career beginning
in 1974 at the Florida Gas Company and becoming a Chief
Operating Officer (COO) at Transco at age 39.
Slide
from Transco -
He
says something very interesting here… The best people are
those who understand the situation thoroughly and take
action. The most dangerous are those who don’t take the
time to understand but take action anyway. I make it a
point to understand the system, learn the results from past
experience and consider the opinions of others. And Ken Lay
certainly had some good bosses. Selby Sullivan at Florida
Gas and Jack Bowen at Transco and Ken even told Jack after
Ken left Transco for Enron: “It’s easier to be Chairman than
it is to work for the Chairman” which was something I
thought was always very interesting. But by 1984, Ken Lay
was certainly one of the great men of the industry. This is
a clip from the New York Times from late 1984 where Ken is
portrayed as transforming a whole industry. And Ken Lay
went on to be Mr. Houston in the 1990’s. And all this is to
suggest that it was one success after another. There were
no failures. And he had a high and growing confidence.
17:48
Now,
the other thing to keep in the back of your mind is that
none of his prior career necessarily implies that Ken Lay
was a truly great, nuts and bolts, number-oriented
businessman - someone who you would necessarily want to run
a business throughout a business cycle. For Ken Lay,
economist Ken Lay, the dreamer Ken Lay was most interested
in the big picture in Washington DC. When Ken Lay became
boss of Florida Gas Company, Selby Sullivan, his predecessor
had to choose between three people. He chose Ken Lay over
the two others but he said that Ken Lay was not necessarily
the best businessman of the three. Ken was chosen because
the major asset of the company was a federally regulated
pipeline. Ken had great skills in Washington and in
making a public utility regulated asset the best it could
be. Ken was a great people person. He seemed to hire great
people and as far as Selby Sullivan could tell he was a very
good delegater. Ken could also tell a great story to Wall
Street. But again, Ken was not chosen because he was the
best numbers person who could lead a company through bad
times and good.
There
is a third trait I think that’s very important about Ken Lay
and it became more pronounced as his career went on. It was
captured best in a statement made to me by Ken Lay’s friend
and business advisor Irwin Stelzer who once said, and this
was during the Enron boom “Ken was the only person he had
every met who was always in spin mode”. Now for a salesman
or corporate booster or an advertising man, that is
certainly not a bad quality, but as head of a company, if an
individual begins to prefer his visions to reality, it is
the beginning of philosophical fraud. And in retrospect,
Ken Lay was apparently addicted to ideas of where he wanted
the company to be in some ways that might not have been
healthy.
19:58
It’s
very important to understand the unique qualities of Ken Lay
- great intelligence, extraordinary energy, superb people
skills and an open door policy. Sharon Watkins should not
have been afraid to meet him - and that she was tells me
that she didn’t know him at all. It was easy to talk to Ken
about problems. And Ken had extra extraordinary ambition.
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