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 / Fall 2005 / Issue 40(originally published by Booz & Company)


Dirty and Clean Laundry

The authors interviewed hundreds of employees and ex-employees, and immersed themselves in massive numbers of documents disgorged as a result of regulatory actions, bankruptcy proceedings, criminal indictments, and — at Disney — ongoing litigation.

The stories, which are stupefying but not exaggerated, show the people running these companies behaving in mean, spiteful, petty, selfish, and childish ways. Although the egregious practices at Enron and the jealous infighting at Disney have been ventilated in the press, the devil is always in the details. These books are worth reading just to get the full force of the brazenness and cupidity that were allowed to grow like weeds in the corporate garden. (Professor Bakan would say that these weeds are a natural growth.)

Andrew Fastow, the chief financial officer of Enron, set up off-the-books partnerships to do deals, primarily with Enron assets, hiding Enron’s debts and making money for himself and his friends. He took home more than $60 million before he got caught! Jeffrey Skilling, an alumnus of Harvard Business School and of McKinsey, who joined Enron in 1990, was the brains behind the transformation of Enron from a natural gas pipeline operator into a company free of physical assets that traded natural gas future contracts the way Wall Street bankers traded bonds. The idea: Stop making things, do smart deals, and securitize everything not nailed down. In short order, Enron traders saw themselves as Masters of the Universe, as portrayed in Tom Wolfe’s sendup of Wall Street, Bonfire of the Vanities.

Mr. Skilling once told a colleague: “I’ve thought about this a lot, and all that matters is money. You buy loyalty with money.”

The blunt and arrogant Mr. Skilling was a hero to colleagues such as Lou Pai, a Chinese-born Enron trader with a typical take-no-prisoners attitude who indulged to excess. Married and the father of two, he was a devotee of strip clubs, invoicing his expenses from the clubs to Enron for years before Mr. Skilling told him to stop. Mr. Pai carted out so much money from Enron that he was able to buy a 77,500-acre ranch in southern Colorado.

Readers are likely to feel the same revulsion at corporations when they read DisneyWar as they did reading the Enron books. Mr. Stewart, who was a lawyer at the white-shoe New York–based law firm of Cravath, Swaine & Moore before becoming a writer, has a lawyerly way of marshaling facts and stories to make his narrative come alive. This is not an Enron-like story, though. Disney has a reputation to protect, built over decades, that Enron never had. Its customers and the public at large see everything it does: movies, television, publishing, or theme parks. And Disney’s executives wrought destructive behaviors, which led not to the demise of the company, but rather to the ouster of the CEO, Mr. Eisner. Robert A. Iger, longtime head of the ABC network, which Disney owns, succeeds Mr. Eisner on October 1, 2005.

While chronicling Disney’s growth and its achievements, Mr. Stewart takes us behind the scenes to describe how Mr. Eisner presided over a business rife with nasty arguments, backstabbing, politicking, spying, turf quarrels, lying, and belittling of co-workers. Mr. Stewart exposes a host of other brawls that are staggering in their frequency and ferocity. After reading this book, one comes away with the impression there isn’t anyone Michael Eisner ever worked with to whom he did not first offer praise and promises, and, later, offense and insult. When Roy Disney, Walt’s nephew, and his lawyer, Stanley Gold, brought Mr. Eisner to Disney, Mr. Eisner told his benefactors: “You got me this job. If I ever lose your confidence, let me know. I’ll resign.” Twenty years later, they were at loggerheads. Mr. Eisner booted Mr. Gold and Mr. Disney off the board. The two men retaliated with a successful campaign to get rid of Mr. Eisner. At the 2004 annual meeting, Mr. Eisner received a devastating no-confidence vote from 43 percent of shareholders and 73 percent of employees.

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Corporate Behavior Resources: Works mentioned in this review

  1. Joel Bakan, The Corporation: The Pathological Pursuit of Profit and Power (Free Press, 2004), 240 pages, $25.00
  2. Kurt Eichenwald, Conspiracy of Fools: A True Story (Broadway Books, 2005), 768 pages, $26.00
  3. Steven Lydenberg, Corporations and the Public Interest: Guiding the Invisible Hand (Berrett-Koehler, 2005), 200 pages, $27.95
  4. Bethany McLean and Peter Elkind, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (Portfolio, 2003), 464 pages, $26.95
  5. James B. Stewart, DisneyWar (Simon & Schuster, 2005), 592 pages, $29.95
  6. Great Place to Work Institute Inc.: Click here.
  7. 2005 GE Corporate Citizenship Report: Click here.
  8. Nike Corporate Responsibility Report FY ’04: Click here.
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