The Smartest Guys in the Room by Bethany McLean

He was very bright and went to Harvard Business School, so he must have been good at his job. The company decided to hire Jeffrey Skilling as CEO of Enron Finance, because he seemed like the right man for the job. It had lost money for the past few years, and its stock price had plummeted to $1.50 per share from over $80 per share just two years earlier. Big Idea #2: Enron was fundamentally transformed when they found their visionary.Įnron was in a lot of trouble. However, as we know now, Enron’s culture of deceit ran deep in its roots. He told analysts on Wall Street that this downturn was an anomaly and would never happen again. However, Enron’s oil trading business had taken such a loss on high-risk bets by 1987 that the entire company was at risk of bankruptcy.īut Ken Lay was ready to act.

The stock market is quick to reward companies that are constantly profitable. They were manipulating their earnings by using the Enron Oil subdivision to speculate on oil prices and not produce or sell any oil.įurthermore, these business leaders would set up deals with fake companies that allowed for huge losses in order to offset these losses with other deals that earned equal amounts of profit.Įnron was trying to prove that it could make a profit. It had a loss of $14 million in the first year and its credit rating dropped to junk status in January 1987.Įnron was in trouble because of dishonest business practices. Unfortunately, Enron was not doing well financially by 1986. In fact, Ken Lay took over as CEO and renamed the company “Enron” only two years before filing for bankruptcy in 2001. Back in 1987, two years after it was founded, Enron already had debt problems similar to the ones they faced later on. Big Idea #1: Enron, a company whose decades of deceit ended in bankruptcy, nearly met the same fate just two years after incorporating.ĭoes it feel like history is repeating itself? It sure seemed that way when Enron, a huge energy company, filed for bankruptcy in 2001. You’ll also explore what went on behind closed doors at Enron, as well as how financial structures hid debts from creditors. In this article, you’ll learn about the people involved in the Enron scandal and how they were connected to it. How did a respected company make it to the top of its industry only to crumble into economic tragedy?

Its skyrocketing profits were followed by the largest bankruptcy case in US history. It is probably the most scandalous business story of our times. 1-Page Summary of The Smartest Guys in the Room OverviewĮnron Corporation, once the world’s largest energy company, has become synonymous with fraud and corruption.

The Smartest Guys in the Room by Bethany McLean