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Technology Stocks : Intel Corporation (INTC)
INTC 37.28-0.6%Dec 16 3:59 PM EST
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To: The Duke of URL© who wrote (165436)5/28/2002 10:40:49 AM
From: GVTucker  Read Replies (1) of 186894
 
Duke of URL, RE: This really has nothing to do with employee stock bonus programs.

Well, it did, but only indirectly.

The lion's share of Ken Lay's compensation was in stock options. He had a vested interest in a high Enron stock price. While one way to make your stock price rise (and thus the options more valuable) is to run your business well, that isn't nearly as reliable as falsifying earnings in a way to make Wall Street think that your company is the greatest thing since sliced bread. This doesn't work nearly as well in the long run as just running the business well, but in the short run it works even better. After all, you need to keep publishing those false earnings just long enough in order to exercise those options and sell the stock. Once the house of cards falls, you've still got your cash. Lay just made a couple of mistakes: 1. He bought his own BS, i.e. he didn't think he was building a house of cards, he thought he was a genius. And 2. The Enron execs misjudged the outrage by the general public against them. Lay and Company were so clueless that they didn't realize that people would be highly irritated that they pocketed several hundred million in cash while the company put thousands out of work and caused billions of dollars to disintegrate.
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