Media Review - Enron: The Smartest Guys in the Room

My Greencine queue is flush with documentaries from the last 18 months or so I haven't seen yet, but I caught this one over the weekend with friends. I haven't read the book on which it was based, but sampled a good bit of the journalism about the scandal as it was unfolding. I did learn a few things from this doc, but I'm not sure they were very useful things.

Movies like Enron can be successful because they elicit the reaction from the audience that the filmmakers intended to create, and on that criteria this movie is pretty successful. If you didn't already have a low opinion of Ken Lay, Jeff Skilling, Andy Fastow and Enron's corporate culture, you will afterward. A documentary can also succeed by providing information about a subject you hadn't heard before, and few are likely to have known everything about the development and collapse of Enron the movie presents.

Docs can also give viewers a broader or deeper perspective on some subject than you can get elsewhere, and here's where I think Alex Gibney (writer/director and also writer of the nonfiction film The Trials of Henry Kissinger, a largely successful treatment of Christopher Hitchen's similarly titled book) falls short. Some of the people I saw it with thought that Enron failed to provide enough illustration of the substantive harms wrought by the company, and the film would probably have been more successful in the first goal above had Gibney done that. I would have preferred more substance on the question of what made the Enron scandal (and several other, equally startling corporate failures like WorldCom and Tyco) not just possible, but likely.

This kind of response risks criticizing a film for not telling you what you already know/believe. I wasn't too enthusiastic about the torrent of agitprop nonfiction films last year partly because I don't want to be stuck in an echo chamber. Still, I got the impression from Enron that its makers did not think that Enron's perverse corporate culture and disasterous trajectory were merely the result of the personality flaws of its executives. In fact, Gibney raises unreflective faith in markets (and the unrestrained exuberance for deregulation) several times early in the film as a contributing factor to Enron's identity, but doesn't explore the subject. I would compound that factor with the significant problems of corporate governance diagnosed in the last decade, but corporate governance isn't really dealt with at all in Enron. I don't think Gibney wanted to blame Enron only on Lay and Skilling's villainy, it's just that villainy has a powerful hold on the imagination.

Lay and Skilling do make compelling figures, as villains often do, but I'm not comfortable casting them as such. Both are facing criminal charges, but I wouldn't bet the farm that either of them, especially Lay, will get any serious punishment. Andy Fastow, who has already pleaded out and is doing time (as is his wife) was the white collar equivalent of a hood: the guy the crime boss tells to go out and take other people's money. It's easy to pinch the hood, less so to get the boss. Of course, Fastow is now a government witness, but his testimony will possibly be of questionable value given his plea deal and general unscrupulousness.

But there are other reasons I think Lay and Skilling might walk and why I'm reluctant to cast them as crooks whose deviant arrogance and greed made Enron into the disaster it was. The "ideology" of deregulation referred to in Enron, particularly by reliable talking head and former Nixon strategist Kevin Phillips, and the simplification of corporate responsibilities in recent decades can make Lay and Skilling's actions seem not merely defensible, but virtuous. Also, belief in "market extremism" (as Phillips has called it) and the reduction of management evaluation to stock price measure are sincerely held, even now, by many people. Where others see fraud and self-enrichment, people like Lay and Skilling see risk and reward, the spine of free enterprise.

I'm not saying that we shouldn't disapprove of Lay and Skilling because they didn't see themselves as bad guys, but if a large and respectable segment of elite opinion holds that market forces inexorably drive companies to produce value and that the only duty of managers is to increase stock price, it's not criminally irrational for them to believe it too. As Thomas Frank points out in One Market Under God, the idea that markets are equivalent to, or perhaps more important than, democracy isn't confined to elites anymore. Decades of effort by believers in "market populism" have led many people outside of the boardrooms and country clubs to equate consumer choice and market freedom with democracy.

Moreover, these attitudes are reflected to some extent in corporate law. I imagine that civil suits against Lay and Skilling will run into trouble, particularly in Texas, because shareholders will have to argue that Lay and Skilling were actually harming them despite the fact that their efforts, at least in the short run, were dedicated to inflating the value of those assets. I couldn't help but notice the irony in how Enron built its supercorporation status by perfecting the production of performance indicators, rather than value, a problem typically associated with the Soviet Union and other centralized economies.

It seems to me that the more pernicious effects of separated ownership and control, with the consequent "weak owners/strong managers" phenomenon, combined with substantial elimination of the public responsibilities of corporations and executive compensation policies that turn managers into insider-institutional investors contribute substantially to situations like Enron and WorldCom. However, watching Enron doen't come close to preparing someone to evaluate whether the Sarbanes-Oxley Act, the primary congressional response to the Enron collapse, will do anything to help the situation.

Maybe I wanted to watch a different movie, like The Corporation, which looks more like what I'm talking about. I haven't seen that yet, partly because of my aversion to agitprop and I see Chomsky in the cast list (but Peter Drucker as well, who is fascinating.) Still, it seems like a close look at the Enron case might have yielded some insights that a general look at corporations wouldn't. I enjoyed watching Enron, but I left it a little disappointed. Maybe I should have expected a movie subtitled "The Smartest Guys in the Room" to focus primarily on the personal qualities that led to Enron, the company and the scandal, rather than the legal/institutional causes.