Enron And The Natural Gas Industry - 2792 Words

Kenneth Lay, Enron’s founder, was born in 1942 in Tyrone, Missouri. During young adulthood, he moved to Houston, Texas. While living in Houston, he earned a PhD in Economics. He worked in the Pentagon for a short time, and also in Washington, D.C. under President Nixon’s administration. He founded Enron in July of 1985. (http://news.bbc.co.uk/hi/english/static/in_depth/business/2002/enron/timeline/1.stm) Enron started out as a pipeline company. Through strategic mergers and acquisitions, they controlled a large share of the infrastructure that moved natural gas from one place to another. Ken Lay started Enron because he felt there was great opportunity to make money in the natural gas industry. He believed†¦show more content†¦He couldn’t do this on his own. From early on, he enlisted the help of a man named Jeff Skilling. One of the first things Skilling did at Enron was create what he called, â€Å"The Gas Bank†. (McLean and Elkin d, pg. 35) Using this, Enron was able to buy long-term contracts for profit, and later, trade them like a commodity. Enron was the pioneer of natural gas contract trading. No other natural gas company did this before. It revolutionized the way Enron made money. Originally, Enron made money mostly from their pipelines. Now, they incorporated trading into their revenues. Jeff Skilling had insisted from the onset of their natural gas contract trading, that he run that part of the business and that they use mark to market accounting, rather than Enron’s traditional cost accounting. (McLean and Elkind, pg. 39) The trading part of Enron’s business was hugely successful, in the beginning. Traders and executives were given huge bonuses and stock options, based on their performance. With this newfound success, the culture at Enron slowly evolved. All new hires that entered Enron were evaluated based on their ability to generate profits. Characteristics like teamwo rk and loyalty were no longer important. If you were a team player, but didn’t make profits, you were fired. This culture created a dysfunctional and cutthroat atmosphere at Enron. This profit-oriented culture was evident when