COMMENT: Lost Lessons Of Childhood
Commentary by Mark Lacter
Play nice.
You wonder whether the mothers and fathers of those Enron traders implicated in the manipulation of electricity prices a sleight of hand that likely precipitated California’s power crisis ever taught their kids as much. Did they ever sit down with them to explain that it’s important to work hard and aim high, but that whatever they do, and however much money they make, there always are rules to abide by. That there’s always a difference between right and wrong.
As details emerge about how the Enron folks craftily developed trading strategies to maximize profit and leave the state in a lurch the difference between right and wrong is profoundly laid out for the world to see, for their parents and children to see.
Admittedly, it can sometimes seem like an ambiguous difference because right and wrong is often in the eye of the beholder. It is not, after all, a crime to purchase energy at a capped price of $250 per megawatt hour in California and then resell it to another state that has no price cap for $1,200. Some would call it a clever way of doing business taking advantage of the marketplace for your own benefit.
Even an Enron memo slyly suggested as much: “The strategy appears not to present any problems other than a public relations risk arising from the fact that such exports may have contributed to California’s declaration of a Stage 2 Emergency yesterday.”
Or that those cold-hearted words are now popping up in print (Memo to Enron goons: Never put in writing anything that you wouldn’t want to see in The New York Times).
This was no mere PR disaster, of course. The cost-benefit scorecard goes like this:
Californians faced rolling blackouts because the state’s power supply was depleted. Utilities paid exorbitant prices on the spot market. Sacramento was stuck with a $6 billion bill after purchasing power on behalf of insolvent utilities perhaps being added to a $20 billion deficit that will lead to massive spending cuts in everything from education to roadwork.
Enron, meanwhile, reported better-than-expected profits for the fourth quarter of 2000 just as the California power crisis was unfolding in part benefited from the wholesale energy sales and trading business. Enron executive Jeffrey Skilling noted at the time that California would turn out to help the company. “This sort of turmoil reminds people that managing energy is not an easy thing to do,” he said a glib-sounding remark in hindsight, but just what investors wanted to hear.
Be honest how many of those shareholders would have wanted Enron to alter its strategies had they known it was contributing to California’s woes? How many would be willing to see the value of their shares drop because Enron traders happened to be skirting the lines for the sake of higher profits? And in counting on Enron’s stock performance, did they really care or even understand where the profits came from?
As for those Enron traders: Did any of them reflect, even for a moment, that their gamesmanship was hurting people? Was the pressure for profits or perhaps the testosterone levels from the guy in the next cubicle simply too great? Or even if they considered their actions, was the game so complex and the rules so vague no one expected to get caught?
Play nice it really shouldn’t be that big a deal. Yet when power and money are on the line, childhood lessons somehow get lost in the shuffle.
Mark Lacter is editor of the Business Journal.
