The Smartest Guys In The Room, by Bethany Mclean and Peter Elkind, is a look into the Enron scandal which occurred in October 2001, giving the world a glimpse into the toxicity existent in the corporate world. The book itself is an effort encapsulating several hundreds of interviews, performance reviews, e-mails, etc., to give a realistic and holistic look into the scandal and the malice-infused work-culture/ethic-related concept Enron was perpetuating with its business models and ideals. It is articulated and compiled in such a way that Businessweek allegedly announced that it was the best take on the scandal to date, making it a must-read for those who want greater insight into the debacle itself.
However, this article will contain a more in-depth analysis of which individuals played a massive role in Enron and how they contributed to Enron's ever-growing toxic Work Culture. Granted, the book contains information that significantly exposes the scandal to a degree where it loses its mysteriousness. However, this article's purpose is not to merely talk about the book but to explore the possible themes and in doing so, gauge the author's intent and thus, measure to what extent did the scandal affect the way people look at the corporate world and what are the behaviors classified as 'toxic' in work culture.
Deceit & Bankruptcy Go Hand-In-Hand
Considering the magnitude of the company, Enron is more or less considered one of the more deceitful companies due to years of fraudulent business practices. Furthermore, the company kept racking up debts until its demise in 2001.
The book was most likely trying to illustrate how not stopping these business practices made Enron one of the biggest debt-defaulters in corporate history. Moreover, the book reflects and makes that connection between 2001 and 1987. In 1987, two years after the company was founded, Enron's credit rating had reached junk status. Also, in 1986 - it was reported that Enron had a loss of over $14 million. Imagine constantly indulging in deceitful practices that form a type of work culture. Wouldn't that impact the money made and the mental attitudes of the employees working in the company. To add to the aforementioned, Enron, or more precisely, its subdivision - Enron oil - was primarily engaging in business practices such as speculating prices and manipulating income/earnings gotten by the company and oil traders. The Enron Oil subdivision was probably why the company reached a stage of bankruptcy anyway.
Enron and, more importantly, Ken Lay (the former CEO) continued to make a steadily growing profit to show Wall Street and other companies to raise its stock market value. However, they managed all this through nefarious ways, for example, High-risk bets leading to bankruptcy, fake contracts & fictitious losses, etc.
Jeffry Skilling - King Of Misfits In Enron
Jeffry Skilling joined Enron in 1990 as the CEO of the Enron Finance subdivision and was known for his unorthodox measure for what a recruit should have to hire him/her. Moreover, he helped Enron rise from its 1987 failure and became a successful company. This man is one of the main contributors to the book's overarching theme: a toxic corporate work culture. Firstly, Skilling turned Enron into a Gas Bank - establishing a relationship with both gas producers and customers. Then, he effectively put in place mark-to-market accounting to gain the attention of Wall Street Speculators.
This was one of the most effective ways of raising stock prices. Additionally, Skilling managed to forge a business climate accommodating only towards brains and cunning, which were especially respected/rewarded even more so than professional managers and hands-on knowledge regarding a particular field. In fact, he often recruited what he liked to refer to as "guys with spikes," which means that whether an executive boasting a high IQ was preferred more than an individual who had studied in the field. What Skilling was looking for the most was out-of-box thinking. Ideas stimulated and helped further his business models. Thus, by only hiring brilliant and flexible individuals, Skilling inexplicably created a workplace full of egomaniacs, sly/cunning people, and social misfits. However, around the 1990s, when Skilling became the COO of the company, he centered the company's primary business operations around trading and cutting deals.
The Influence of Rebecca Mark
Rebecca Mark, the head of the subdivision known as Enron Development, made deals that had no realistic revenue-generating possibilities. This ultimately resulted in her making several deals with various nations, such as the 95 million dollar deal she had signed with the Dominican Republic, out of which Enron only received a return of 3.5 million dollars. While Skilling was busy creating a work space filled with cutthroat individuals, Rebecca was busy publicizing and making Enron more popular in the corporate world.
Andrew Fastow & Enron's Toxic Workplace Mentality
While the book made it no secret that Enron was especially rewarding for those who worked with a profit-seeking mindset, individuals such as Andrew Fastow represent the lawlessness existent in companies. Andrew was the CFO since 1998 and headed a fund known as LJM. His dual positions gave him authority to negotiate with himself only, essentially deciding the fate of the company. Furthermore, he made 10s of millions of dollars all by himself without alerting the company or external authorities such as the police.
Apart from the various key individuals who played a major role in the formation and business operations in the company. It has to be the continuous default in payments and the careless and tactless attitudes of individuals which aided in the company's downfall. It was Skilling who started a toxic work-culture fuelled workplace. The book explicitly details the lengths to which this company went to hide its accounting details, forming the book's core theme - harmful and malicious workplaces motivated purely by monetary and profitable notions.