The Lessons Enron Taught
1985, was the year that Enron was born. The company was devised of two corporations that merged Houston Natural Gas and InterNorth. As a result of the merger Enron acquired huge liabilities and also lost exclusive rights to its pipelines because of deregulation . The company at this time was in survival mode and needed to earn profits. McKinsey & Co. was hired by then CEO, Kenneth Lay, to assist the business. Jeffrey Skilling was sent by McKinsey to assist Enron. This is when he developed the idea of creating a gas bank :
Enron would buy gas from a network of suppliers and sell
it to a network of consumers, contractually guaranteeing both
the supply and the price, charging fees for the transactions
and assuming the associated risk . The company would inter-
mediate between short-tern and long-term buyers and sellers
of natural gas. To guarantee
the supply Enron provided financing
to third party oil and gas producers .
The concept of the "gas bank" was a huge success. Kenneth Lay was very impressed by Mr. Skilling and later hired him to run a division called Enron finance corp. In an attempt to duplicate the success of gas wholesales in the United States Mr. Skilling opened an office in London, which was also successful . Enron also wanted to trade electricity, so that consumers would one day be able to pick their electricity provider, however this idea never came to fruition.
Although Enron suffered a hard fall the business concepts that the corporation followed were revolutionary. The idea in its most basic form was as follows :
1. Each division or sect is given a particular task or function.
2. There are general ...