Kenneth Lay

C.E.O Enron
1984 2004

Group Members:

Asad Khalid

Muhammad Ameen Abdullah

Muhammad Bilal Sarwar

Lays Profile

Born in Missouri in 1942 and died of a heart attack in Colorado in 2006.

Son of Omer Lay (a store owner, salesman,) and Ruth Reese (a farmer);

Childhood was one of adult responsibilities, worked driving tractors and plowing fields
,

basic economics class by Pinkney Walker caught his imagination, and he decided to
major in the subject ending up with bachelor and master degrees in the subject.

As a good student, Lay earned a scholarship to the University of Missouri

However, all his expenses would not be paid for he took out loans and worked painting
houses.

Cont.

After graduation, for a couple of years Lay worked for Humble Oil,(1965-68) meanwhile
taking part-time courses to work on his doctorate.

From 1968-69, he worked in U.S Navy; on navy procurement.

During this period he married his college sweetheart Judith Diane Ayers and had two
children, Mark in 1968 and Elizabeth in 1971.

19691973, lecturer and assistant professor, George Washington University.

19711972, commissioner's assistant; Federal Power Commission,

Cont.

19741976 , Florida Gas Company, vice president, president 19741976

19791981, The Continental Group, executive vice president.

19811984, Transco Energy Company, president and COO;

19841985, Houston Natural Gas Corporation,, CEO and chairman;

19851986, HNG/InterNorth, chairman and CEO; Enron

19862002, chairman and CEO; 1997, president, Enron.

Cont.

By 1990 Lay seemed to have all he wanted.

He was paid almost $400,000 per year; he owned expensive homes and
could afford most of life's luxuries;

But he was obsessed with earning ever more money and buying ever more
luxuries and this thing made him greedy in one way.

In business he became a role model for chief executives, and his opinions
on the future world economy and world politics were widely sought.

Although his achievements were envied by many, he was such a nice man
that few resented him.

ENRON

Enron Corporation was an American energy, commodities, and services company

founded in 1985 by Kenneth Lay.

Result of a merger between Houston Natural Gas and InterNorth, 20,000 employees.

One of the world's major electricity, natural gas, communications and pulp and
paper companies.

In 1986, Kenneth Lay was appointed chairman and chief executive officer of Enron.

Revenues amounting to $111b in 2000.

Its reported financial condition was sustained by institutionalized, systematic, and

creatively planned accounting fraud, known since as the Enron scandal.

Enron Scandal

Enron scandal (2001), eventually led to the bankruptcy of the Enron Corporation.

Largest bankruptcy reorganization in American history at that time. (63.4 bn dollor)

De facto dissolution of Arthur Andersen, one of the five largest audit and
accountancy partnerships in the world.

With the use of accounting loopholes, special purpose entities, and poor financial
reporting, they were able to hide billions of dollars in debt from failed deals and
projects.

Chief Financial Officer Andrew Fastow was also part of it.

On August 15, 2001, the Enron accountant Sherron Watkins gave Lay a memo detailing
the crimes of corporate officers, hoping he would fix the problems. He promised to
protect her and actually did when Fastow tried to seize her computer and fire her

Enron Scandal cont...

Lay was selling his stock rapidly, perhaps to feed his appetite for luxuries,
perhaps to escape Enron's impending doom;

but in September 2001 he urged employees to buy more Enron stock and to urge
their families and friends to do so.

In October he admitted publicly that Enron was "missing" $1.2 billion.

On December 2, 2001, Enron declared bankruptcy.

Ranked seventh on the Fortune 500 list, the $70 billion company could not pay its
bills and was over $30 billion in debt, $17 billion of which was accounted for by
phony partnerships.

Enron's investors lost $67 billion. All of the company's 21,000 employees
worldwide lost their pensions, life savings which were invested in Enron stock;

Enron Scandal cont...

In February 2002 Watkins told a Congressional committee that Lay had been duped by
Fastow and others and had not participated in the duplicitous bookkeeping.

Enron stock dropped to $0.26 per share.

Although some businessmen despised him, Lay remained a member of Houston's

social elite, and people still listened to what he had to say.

In July 2004 Lay was indicted by a federal grand jury on 11 counts including wire
fraud, securities fraud, and making false statements to banks.

Lay pleaded not guilty to the eleven criminal charges, and claimed that he was misled
by those around him.

Enron Scandal Cont.

He attributed the main cause for the company's demise to Fastow.

Lay was convicted of all six counts of securities and wire fraud for which
he had been tried,

He was subject to a maximum total sentence of 45 years in prison.

However, before sentencing was scheduled, Lay died on July 5, 2006.

At the time of his death, the SEC had been seeking more than $90 million
from Lay in addition to civil fines.

Organizational Culture

Enrons leadership used its charisma to craft a strong organizational culture

which was both an extraordinary corporate and managerial success.

Employees were told, If you are smart, anything could be accomplished.

According to Sherron Watkins(VC-Corporate Development), Enrons

unspoken message was, Make the numbers, make the numbers, make the
numbersif you steal, if you cheat, just dont get caught. If you do, beg
for a second chance, and youll get one.

it was not uncommon for Enron employees to work 80 hours a week to

help management seal a deal.

Organizational Culture

Achievement of goals was lavishly rewarded and a 25-year old-employee could receive a
$5 million bonus.

Rewards based on numbers - Enron retained only those employees who achieved targeted
profits.

It was an aggressive, Darwinian, fear-based, punitive rank or yank culture that fired
15% of employees each year.

Enrons corporate culture fueled aggressive, risk-taking behavior in the office.

Enrons compensation plan seemed oriented toward enriching executives rather than
generating profits for shareholders.

Personality

Radiated so much charisma that he induced blind obedience in his

followers. (Khurana, 2002)

Overdeveloped, charisma is a quality that can lead to the dark side of

leadership.

Skilled in communicating his compelling vision.

You should not be a slave to rules

Dominant style of leadership.

Personality

Kenneth Lay transformational leader supporter of free market

Near bankruptcy, Kenneth sold his shares and asked people to buy
more.

Used company resources, using company jets for personal use.

He had a company plane's interior repainted during a layover because

he didn't like the color.

Personality The Other Side?

Early career Ambitious leader.

He united local businessmen with his skills.

He helped the African American and the arts community, insisting that a
world-class city needed equal opportunity and edgy refinement to attract
business.

Introduced a non-smoking(inside) culture at Enron.

He was a good judge of character.

References

http://baltimorepostexaminer.com/the-smartest-guys-in-the-roommanagement-lessons-from-enrons-leaders/2012/12/22

https://en.wikipedia.org/wiki/Enron_scandal

http://www.investopedia.com/updates/enron-scandal-summary/

https://en.wikipedia.org/wiki/Kenneth_Lay

http://www.biography.com/people/kenneth-lay-234611

http://www.wsj.com/articles/SB1019768690419253640