On the Record: Robert Bruner
With Enron's top executives, Kenneth Lay and Jeffrey Skilling, on trial for conspiracy and fraud--and a third, Andrew Fastow, testifying against them--the nightmare of the biggest bankruptcy in history is back. So are the questions that have dogged business experts since Enron's collapse: What really happened at the energy giant--and what can be learned from its demise? In a popular case study of the company, Robert Bruner, dean of the Darden Graduate School of Business Administration at the University of Virginia, and his coauthor, Samuel Bodily, a professor of business administration, have tried to provide a few answers--arguing, surprisingly, for a longer view of Enron's rise and fall. Bruner spoke with Senior Editor Justin Ewers:
You met with Enron execs in 2000?
We interviewed Lay, Skilling, Fastow, and [former Enron President] Greg Whalley, among others. What we received was a fair amount of detail on what I would call the company line.
When Enron collapsed, did you feel betrayed?
No one can study the case of Enron without a deep sense of sadness for the fate of all the employees, the pensioners, the loss of liquidity in important markets, the destruction of one of the most innovative companies in the United States--and the loss of faith that these events spawned.
Still, you suggest Enron's demise was a mix of bad publicity and a rotten system. What went wrong?
At the core of Enron's collapse was what I'd call momentum thinking, which is the intense focus on delivering a steady percentage rate of increase in earnings per share, quarter by quarter, year after year. We can think of this almost as growth at any price. It resulted in a bet-the-farm kind of management of the company.
Could the company have saved itself?
The large debate is whether Enron was a fraud from the day it was founded in 1985. I would argue emphatically no. I would say Enron brought serious new value to the industries it serviced, particularly in the design of innovative contracts that offered its clients greater flexibility to hedge either price uncertainty or volume uncertainty or both. We as a society are better off because of the innovation and design of those contracts.
Do you think Skilling and Lay are guilty?
I'm going to let the courts settle that.
What were they like?
Jeff Skilling is a kinetic personality--very bright, highly articulate, highly energetic. His [ideas] will probably go on to stimulate further innovation in the way firms do business. He was a creation of his own enterprise--aggressive, forward thinking, an apostle of momentum.
And what about Ken Lay?
Ken Lay was avuncular, folksy, and more approachable but had a real toughness as well. He spoke with almost religious fervor about the deregulation of energy markets and how this was necessary to stimulate economic growth. He brought a very macro view of Enron's role and the role of energy markets.
Did you trust them?
They were plausible and winning personalities. Trust would be too strong a word. We heard what was a very energizing line. They could point to tangible accomplishments, processes currently underway that would lead to future accomplishments. Beneath all of this, of course, were practices, policies that put the firm at great risk.
This story appears in the May 15, 2006 print edition of U.S. News & World Report.