Enron as a Porsche Turbo

"Enron" — the play on Broadway — closes today, running just a week in New York, although it had a longer run in London. I can't imagine how they ever made a play out of the Enron situation, and I guess I won't have the opportunity to find out — unless the show has a second life in the regional theater circuit.

Enron, the company, has been a big part of my life as the editor of a corporate governance journal — citations continually find their way into multiple articles since the energy firm's plunge into ignominious bankruptcy in 2001. Pretty much all one has to do is say the word Enron and you have a shorthand description for abject board leadership.

One author who did a particularly scathing examination of Enron's board is Leo Hindery. This was for his 2005 book, It Takes a CEO. Hindery is managing partner of InterMedia Partners LP, a private equity firm. He has a long and successful track record running companies in the communications field, such as AT&T Broadband. I had the pleasure of running an excerpt from his book in Directors & Boards.

As the final curtain comes down on "Enron," the play, here is a choice passage on Enron, the board, from Hindery's book:

"[The] directors could and should have done a whole lot better. Becoming a member of the board of a company like Enron, circa 1999, was a little like getting into the passenger seat of a Porsche Turbo: you know it goes fast. Knowing that, you keep an eye on the driver. If the driver starts taking the turns too fast, you tap him on the shoulder and make him slow down. If you don't, and the cops later pull you over, don't say you didn't see the scenery whizzing by. You did."

What an entertaining observation, no? It makes me wonder that if the play was as entertaining, perhaps it might have had a longer run. Maybe the producers should have called in Hindery as a script doctor.

Business Journalism, Boards, and a Called Bottom

When I first got into business news in the mid-1970s, this branch of journalism was a backwater in the mainstream media industry. (This is after getting a journalism degree from a top-ranked J School in which there was zero focus on business reporting.) As things turned out, I ended up taking a job with a start-up business trade newspaper, and have spent my whole career since putting out business publications.

When I was being recruited to be editor of Directors & Boards in the early 1980s, corporate governance wasn't even a term in the popular lexicon. Sure, there was a hubbub about foreign payoffs in the mid-'70s but that seemed largely confined to the pages of The Wall Street Journal with its tiny agate typeface at the time, which would be unreadable now (remember that?). So I turned this job down at first. I was then editing a weekly regional business magazine, writing about finance, marketing, management, strategy ... but not anything about corporate governance. In fact, in the two years that I was a senior editor for this weekly magazine I can't recall one story we ever published about a board of directors. Boards were in deep background, not even a pimple in a corporate profile. Putting out a quarterly journal on this arcane concept of corporate governance thus held zero appeal. But again, as things turned out (a story in itself), I eventually relented to the recruitment effort and took the job with Directors & Boards.

In the almost 35-year trajectory of my career in business journalism, the backwater was left far behind. Business news became a hot topic — think about M&A mania, the various bubbles and bubble-burstings, the scandals (Enron, anyone?), the rise of Wall Street banker-tycoons and celebrity CEOs, the global expansion, the hoi polloi becoming shareholders, et al., up to today's Great Recession. And in that time "corporate governance" now trips lightly off the tongue, and boards have moved front and center as an angle in breaking business news.

Well, things change again. That hotness is cooling off, as per this sobering commentary by David Carr, "Business Is a Beat Deflated," in the New York Times, and Fortune columnist Stanley Bing's musing on his Bing blog, "How To Save Business Journalism."

Those in the business beat are not immune from the Grim Reaper — the financial crisis, the cyclical advertising downturn, the secular transition from print to digital, the changing patterns of readership — that is killing off great swaths of print media and those who work in it.

But we may have put the bottom in. Just yesterday the death of Editor & Publisher was announced. This is the monthly journalism trade publication, now shutting down after 108 years in business.

Okay, I'm going out on a limb here. It's said that they don't ring a bell at tops and bottoms of the market. But I'm calling a bottom in the death plunge of the print media industry. There may be some more pain to come, but could there be any louder clang than the killshot to Editor & Publisher to signal a coming bounceback for the print media? I say no.

That means plenty more and hearty coverage of business — and boards — to come. There will be no return to behind-the-curtain status for directors, nor will corporate governance become again an arcane term in the business lexicon. The bottom is in.

[Illustration: "Evening News" by Francis Luis Mora (1874-1940), oil on canvas, displayed at the James A. Michener Art Museum, Doylestown, Pa.]

Stephen Cooper on Why CEOs Fail

Stephen Cooper has just parachuted into yet another troubled situation — Metro-Goldwyn-Mayer Inc., where he will be helping to lead a recovery of the film studio. This "turnaround guru," as the Wall Street Journal called him, has made several appearances in the pages of Directors & Boards, most notably as a cover story author in 2002 with his article,"Why CEOs Fail."

It appears from the initial reports of the ouster of MGM CEO Harry Sloan that the challenge ahead is a balance sheet one, trying to get out from under a mountain of debt piled on in an LBO five years ago. But in reviewing Cooper's article, in which he laid out what he termed "the six key factors that can lead a company into troubled waters," it's worth highlighting the one that, of all six, he reserves special mention:

"By far the single most critical factor responsible for CEO failure is management denial. It is not unusual in my business to receive a call midweek from a company that suddenly finds itself unable to meet Friday's payroll. How does this happen at large, multinational companies run by skilled people, who presumable have operating and financial controls in place?

"In my experience, surprises of that magnitude are fueled by an ongoing management mindset that leans on reactive excuse-making rather than proactive ferreting out of problems.

"Ironically, it can be a company's very success that lulls a CEO into complacency. And in complacency are sown the seeds of mistaking symptoms for causes, shunning bad news, and avoiding tough decisions."

Cooper was serving as interim CEO of Enron Corp., heading that historic salvage operation, when he wrote those words for us. MGM is no Enron, but it is yet again a prominent example of what Cooper says he has seen over and over in the many "meltdowns" he has worked on — "a combination of systemic flaws, strategic errors, and human failings ... exacerbated by weaknesses in current corporate governance practices."

I wish him well in the MGM revival, but something makes me think there won't be a lot of new lessons learned in this turnaround. He, and we, have seen this picture before. It's called "Why CEOs Fail."