Enron: The Smartest Guys in the Room is a 2005 documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, a study of one of the largest business scandals in American history.
The film examines the collapse of the Enron Corporation, which resulted in criminal trials for several of the company's top executives; it also shows the involvement of the Enron traders in the California electricity crisis.
Interviews are conducted with former executives, stock analysts, reporters and the former Governor of California Gray Davis.
The film was nominated for Best Documentary Feature at the 78th Academy Awards.
As an analysis of corruption in corporations the film gives a realistic look at corporate culture and the inherent problems within. The movie presents two mechanisms for motivating a vastly immoral and profit-driven corporate culture; namely the vitality curve and the Milgram experiment.
The vitality curve is an idea of constant competition in the work place. Individuals are driven to out-perform each other wherever possible because the employees doing worst in a particular field will be fired. Enron constantly hired new staff because even with record profits it was firing people for making less than 1000 times what they were being paid. The atmosphere of the work place caused people to not only disregard the law, but also to act competitively in breaking the law.
The film features actual voice clips from Enron employees discussing the transfer of electricity from the state of California into nodes in other states where there was a surplus. California had signed legislation allowing for a free market in energy. As a response to this, Enron created a demand by causing blackouts across the state. Following this the price of electricity sky-rocketed, right in time for Enron to ship back the energy they took out of California back into California, making billions upon billons of dollars in profits. The controllers who were doing this discussed how much energy they had transferred knowing full well that it was going to blackout the cities in California.
The Milgram experiment was conducted to see how long an individual can take an order before they question that order. The test was set up so that a person is told that an individual will be shocked with electricity every time they push a button. The person is told to raise the voltage and push the button over and over until the person pushing the button decides to stop on moral grounds. On average a person would die three times over with the number of times the button was pushed.
With a goal derived from the pursuit of profit, Enron employees were constantly told to break laws or perform acts that could be considered immoral. Few Enron employees ever came forward to report the corruption. The factor that inevitably led to people coming forward was a "sinking ship" feeling, resulting in some of the Enron executives selling their shares while telling employees to keep their shares.
