Kenneth Lay: Consumed by Greed

Kenneth Lay:

Consumed by Greed

Trey Pierce

UGS 302: Business and Ethics

Professor Cox

November 23, 2010

Over 50 years ago, the situational comedy, Leave it to Beaver, first aired in homes all across America. As entertaining as it was insightful, the series soon won the hearts and minds of millions across the nation. Many of the characters from this hit series remain pop culture icons to this day. Of these, there is possibly no greater remembered character than Edward Clark "Eddie" Haskell. Ask anyone from the baby boomer generation and they are sure to smile when you mention Eddie Haskell. As cunning as he was sinister, Eddie has in many ways become "a cultural reference, recognized as an archetype for insincere sycophants." Eddie was notorious for being exuberantly polite around parents and exceedingly mischievous when they were gone. This pattern of acting one way to charm parents and then acting another when only his friends were around is reminiscent of many "two-faced" individuals we may see every day. In fact, history is plagued with individuals who have used their charm to win the trust and support of others while carrying out unthinkable acts under their noses. Through his incredibly charismatic personality and quick smile, Ken Lay was able to deceive and manipulate the world into accepting Enron as the $80 billion company he made it out to be. Through his cunning, yet deceptive actions, this 21st century Eddie Haskell was able to pull off the greatest act of corporate fraud the world has ever seen.

While the story of how the once 7th largest American corporation exploded over 15 years and imploded in less than one is complex, so is the story of how Ken Lay came to be the sinister captain of this corporate titanic. In fact, to understand either story, one must understand both. However, whereas the story of Enron has a distinct beginning and end with concrete evidence and facts, the story of Ken Lay is quite ambiguous. While many found Ken Lay to be utterly despicable, those who were close to him would go on to say he was a "straight arrow - a Boy Scout, if you will - who lived by Christian-Judeo principles." How could this be? How could a man of such principles oversee the most unethical business in the United States? The simplest answer would be greed. The story of Ken Lay is the story of how greed can ruin even the most decent of men.

While Ken Lay may have been largely consumed by his greed, he most likely did not learn this behavior from his parents. Kenneth Lee "Ken" Lay was born on April 15, 1942 in Tyrone, Missouri, the second of three children of Omer and Ruth Lay. His father, Omer, began his career as a businessman selling tractors, tools, and chickens. However, a series of unfortunate events would cause Omer to file for bankruptcy when Lay was only six years old. Strapped for cash, Omer would turn to the church as he became a Baptist minister to provide for his family. Lay would help supplement the family's measly income by delivering papers, cutting grass, and bailing hay. All of this would undoubtedly instill the value of a dollar and the importance of work ethic in Lay from an early age. At the same time, it would also serve to ignite a deep desire to succeed.

To achieve success, Lay would set his sights on understanding the American economic system. Lay attended the University of Missouri (on a scholarship) from 1960-1965 obtaining both his B.A. and M.A. in economics. Following his graduation, Lay would begin his career as a corporate economist at Houston-based Humble Oil and Refining (which would later become part of Exxon Corporation). This was a pivotal position for Lay as he was able to see into the inner workings of the energy-trade economy. Among his many abilities, Lay seemed to exhibit a remarkable gift for seeing business opportunities and exploiting them. In fact, Lay would come to view himself as a visionary. While this may be disputable, Lay's visions would lead him to forever revolutionize the natural gas business in the United States.

Throughout the 1970's there was a gradual push towards satisfying energy needs by means other than oil. Due to its ability to be burned cleanly and obtained cheaply, natural gas was becoming a widely used substitute to energize and heat homes across America. However, extensive government regulation on trade and transportation of this naturally occurring fossil fuel kept this business from being very profitable. Lay saw an incredible opportunity in front of him. After receiving his Ph.D. from the University of Houston in 1970, Lay set out to deregulate the electricity market. Lay applied to the Navy's officer candidate school in Rhode Island and was accepted. After completion, he was enlisted to work as an economist at the Pentagon where he would begin building important political ties. Eventually, he would be asked to join on as technical assistant to Pinkney Walker of the Federal Power Commission under President Richard Nixon. Lay would eventually leave Washington to resume his corporate career. After a brief stent at Florida Gas Company, Lay moved to Houston in 1981 to assume the position of president and chief operating officer of Transco (a large pipeline company). It was here that Lay would first begin putting his new ideas into action.

Lay sought from the very beginning to create a company that was fundamentally a conduit between producers and consumers. This idea would be the driving force in the eventual creation of Enron. Essentially, Transco would set a price of gas based on future projected prices. This would protect both the producer and consumer from changes in the prices of oil while Transco would capitalize on the disparity between the set price and the actual price. This idea would revolutionize the trade of both gas and oil in America forever. Lay would join Houston Natural Gas and soon buy out Omaha-based Internorth Corporation. By 1986, Lay would assume position of chairman and chief executive officer of the newly formed Enron.

By the age of 44, Ken Lay had single-handedly brought himself from cutting grass in Missouri to managing one of the fastest growing energy-trading corporations in the U.S. By most anyone's standards, Lay was an incredible success story founded on the "American dream." Lay was an example of how hard work and determination can make this dream into a reality. Unfortunately, it is this same determination that would lead to his ultimate downfall. Lay would become so determined to continue succeeding that he would