interesting article from motley fool ceo departure puzzles enron investors
when enron ' s president and ceo suddenly and unexpectedly announced he was
leaving the company earlier this week , the stock got hammered due to the
increased uncertainty . the exact reasons for the departure are puzzling and
remain a mystery , and this is probably not the last chapter we ' ll hear in
this story .
by paul larson ( tmf parlay )
august 17 , 2001
the plot around enron ( nyse : ene ) has thickened . on tuesday evening , the
commodities market maker ' s president and ceo , jeffrey skilling , said that
he was leaving his posts for " personal reasons . " skilling had spent most of
his career rising through the ranks at enron and had manned the ceo post
since february . many saw skilling as quite brash , sharp , egotistical , and
one who brought more than his fair share of youthful energy to the
" new - age " enron .
but now that skilling has resigned , chairman kenneth lay - - the man
skilling took the reins from - - will again act as president and ceo until a
permanent replacement is found . lay was enron ' s ceo from 1985 until earlier
this year , and he was largely behind the company ' s push to become the
wholesale trading powerhouse it is today after years as a sleepy gas line
operator . ( for more on the energy industry , see our latest issue of the
motley fool select . )
so why did skilling bail ?
the first reason skilling cited for his departure was the very vague
" personal reasons . " both the company and skilling denied the resignation
was for health reasons of any kind , and the secrecy and resultant
uncertainty has sent the stock diving , losing roughly $ 6 ( or about 14 % ) of
market value on extremely heavy volume in the two trading days since the
announcement was made .
the move is especially puzzling since the departure is hitting skilling in
the pocketbook - - hard . since skilling is leaving voluntarily , he will not
receive a severance package that would have reportedly been worth more than
$ 20 million in cash and stock had he been forcefully pushed out . even if
skilling had been doing a terrible job at enron , one would think he would
stick around and wait for the axe to fall instead of leaving on his own ,
given that potential windfall .
the departure is even more riddling when one considers a roughly $ 2 million
loan outstanding that enron has to skilling . if skilling had been canned ,
this loan would have been forgiven . more importantly , if skilling had
fulfilled his employment contract to the end of the year - - a mere four
more months - - skilling could have kept this $ 2 million free and clear . how
many folks do you know who pass up $ 2 million for four months of work ?
yet another oddity in this case is the wall street journal ' s report that
one of the reasons skilling left was because of enron ' s faltering share
price . ironically , the fashion in which he has left has been directly
responsible for causing the shares to breach a new annual low .
many long - time enron investors may remember when skilling brashly called
enron ' s shares undervalued back in january , saying the stock should trade
above $ 120 . but since skilling took the helm , the stock has done nothing
but fall , losing over half its value in the past six months . even though
much of the stock ' s weakness had nothing to do with the company ' s operating
performance , the pressure of not living up to that bullish projection was
supposedly very difficult for skilling .
still , the exact reasons for the sudden departure remain a mystery today .
both skilling and the company deny there were any accounting problems or
other improprieties behind the resignation , and both continue to speak
quite positively about enron . but for a company that has a reputation of
strong management , this week ' s activities are highly out of character .
investors may be unsatisfied with the current state of affairs and
information , but for the time being there ' s little to do but stay tuned .