ENRON SENIOR MANAGEMENT FILES REPAYMENT PLAN WITH BANKRUPTCY COURT TO MAXIMIZE VALUE TO EMPLOYEES

FOR IMMEDIATE RELEASE: Monday, April 1, 2002

Recent reports that Enron Senior Management sold off $1.1 Billion dollars of company shares, during a period when management decision to change 401k provisions prevented employees from selling shares, are balanced against the employees, "midlevel managers and others who invested in Enron stock via the energy trader's 401K savings plan (who) lost an estimated $1.3 billion" during the same time. The repayment plan is expected to make up the difference.

Said former Chief Financial Officer (CFO) Andrew Fastow, "I made about $30 Million off just one off-the-books partnership (LJM2) so I figure I can contribute half that to the repayment fund. That works out to about $750 for each of them, but I think it's the least I can do."

Former President and CEO Jeffrey Skilling was paid $10 Million in annual and long-term compensation in 2000, the last year for which the company proxy statement is currently available. When asked about his contribution to the repayment fund, Skilling commented "About a third of that was in restricted stock options, and we all know how our mis-management of the company has destroyed its stock price, so I really only made $6.5 Million. I don't see why I should be paid 130 times what our average employee earns, so I wanted to return some of it to the repayment fund."

Enron's top five officers were paid just under $50 Million in annual and long term compensation in 2000. Management Guide, John Reh, reports in his feature article CEOs Are Overpaid, that on average US CEOs were paid a salary 531 times that of the average hourly worker. The repayment plan announced today by Enron is seen as a first step in restoring some degree of equity between CEO salaries and those of their employees.

Manage This Issue
This press release is obviously a fake, an April Fools Day joke. That's too bad. Something like this could go a long way toward removing the growing animosity toward senior management.

Events like the Enron collapse make the news because of the money involved, and because there might be some political fallout. However, the real problem here is a handful of individuals who have lost sight of the partnership between senior management and the rest of the company. By enriching themselves to amazing degrees, while having no interest in, or care for, the people who made it possible is disgusting. Any CEO who thinks he or she deserves a salary hundreds of time that of an average worker in the same company is just as disgusting.

This is not a labor/management issue. This is an issue the affects every manager, director, or VP every bit as much as it does the assembly line worker or computer programmer. It is not a case of market forces pushing rates higher. It is a handful of people thinking they are better than everyone else and, therefore, "entitled". Enron executives just went more overboard in entitlements than some others, and they got caught.

Senior executives are paid too much. It has minimal effect on their performance. It has no quantifiable effect on the performance of their companies. "Pay for performance" at that level is a joke. The only measurable effect of these outlandish compensation packages is to drive an ever widening gap between senior management and the people they depend on to produce results.

It is up to us as Management Professionals to return some equity to compensation of upper management and the individual contributors while trust and respect between the two parties still can be salvaged. If we don't, worker motivation, and resultant innovation, will plummet and there will be more Enron-like disasters.

---
John Reh
Management Guide

Other Management Feature Articles