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Enron Mail |
CEO Departure Puzzles Enron Investors
When Enron's President and CEO suddenly and unexpectedly announced he was leaving the company earlier this week, the stock got hammered due to the increased uncertainty. The exact reasons for the departure are puzzling and remain a mystery, and this is probably not the last chapter we'll hear in this story. By Paul Larson (TMF Parlay) August 17, 2001 The plot around Enron (NYSE: ENE) has thickened. On Tuesday evening, the commodities market maker's president and CEO, Jeffrey Skilling, said that he was leaving his posts for "personal reasons." Skilling had spent most of his career rising through the ranks at Enron and had manned the CEO post since February. Many saw Skilling as quite brash, sharp, egotistical, and one who brought more than his fair share of youthful energy to the "new-age" Enron. But now that Skilling has resigned, Chairman Kenneth Lay -- the man Skilling took the reins from -- will again act as president and CEO until a permanent replacement is found. Lay was Enron's CEO from 1985 until earlier this year, and he was largely behind the company's push to become the wholesale trading powerhouse it is today after years as a sleepy gas line operator. (For more on the energy industry, see our latest issue of The Motley Fool Select.) So why did Skilling bail? The first reason Skilling cited for his departure was the very vague "personal reasons." Both the company and Skilling denied the resignation was for health reasons of any kind, and the secrecy and resultant uncertainty has sent the stock diving, losing roughly $6 (or about 14%) of market value on extremely heavy volume in the two trading days since the announcement was made. The move is especially puzzling since the departure is hitting Skilling in the pocketbook -- hard. Since Skilling is leaving voluntarily, he will not receive a severance package that would have reportedly been worth more than $20 million in cash and stock had he been forcefully pushed out. Even if Skilling had been doing a terrible job at Enron, one would think he would stick around and wait for the axe to fall instead of leaving on his own, given that potential windfall. The departure is even more riddling when one considers a roughly $2 million loan outstanding that Enron has to Skilling. If Skilling had been canned, this loan would have been forgiven. More importantly, if Skilling had fulfilled his employment contract to the end of the year -- a mere four more months -- Skilling could have kept this $2 million free and clear. How many folks do you know who pass up $2 million for four months of work? Yet another oddity in this case is The Wall Street Journal's report that one of the reasons Skilling left was because of Enron's faltering share price. Ironically, the fashion in which he has left has been directly responsible for causing the shares to breach a new annual low. Many long-time Enron investors may remember when Skilling brashly called Enron's shares undervalued back in January, saying the stock should trade above $120. But since Skilling took the helm, the stock has done nothing but fall, losing over half its value in the past six months. Even though much of the stock's weakness had nothing to do with the company's operating performance, the pressure of not living up to that bullish projection was supposedly very difficult for Skilling. Still, the exact reasons for the sudden departure remain a mystery today. Both Skilling and the company deny there were any accounting problems or other improprieties behind the resignation, and both continue to speak quite positively about Enron. But for a company that has a reputation of strong management, this week's activities are highly out of character. Investors may be unsatisfied with the current state of affairs and information, but for the time being there's little to do but stay tuned.
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