September 26, 2005
Book Short: The Most Rapacious Guys in the Room
I just finished The Smartest Guys in the Room, by journalists Bethany McLean and Peter Elkind. This is the story of Enron, and what a tale it is! The book is a good quick business novel read. It reminded me a lot of Barbarians at the Gate, except that it made me far angrier. I’m not sure if that’s because I’m at a different place in my career now than I was 10 years ago and therefore have a different appreciation for what goes on in companies, or if the Enron guys were just far worse than anyone surrounding RJR Nabisco. But in any case, as my Grandpa Bill would have said, this one certainly raised my hackles.
Anyway, I can’t even get into the details without working myself into a frenzy about these crooks, but suffice to say there are lots of “what not to do” lessons in this book, starting with CEO Ken Lay’s wuss-like, disconnected approach to leading the company and ending with CFO Andy Fastow’s insane rationalizations for using the company as his own piggy bank. Anyway, I thought it would just be easier to just list out a few simple things to look for in your own company if you’re concerned you might be having some financial scandals within. You know you have a problem if…
– Your company has 3,000 off-balance sheet special purpose entities, including 800 in the Caymans
– Your CEO has waived your company code of ethics twice so that the CFO could negotiate deals for his own profit against the company
– Your President combatively calls an analyst an asshole on an earnings call when asked why the company couldn’t produce a balance sheet and cash flow statement with its income statement and earnings release
– Your staffers meet someone from your auditor and say “oh, you’re the guy that won’t let us do something”
– Your accounting department becomes viewed as a major profit center because of its treatment of revenue
It’s truly astonishing what these bozos thought they could get away with. Thank God they’re going to jail. Thanks to my colleague Patty Mah (a friend of the author) for this book.