Thursday, March 16, 2006

Enron's long shadow fading slowly ...

"I don't think we wanted to show people what we were doing."
-- Andrew Fastow, Enron Corp.'s former chief financial officer, testifying in the Houston trial of his former bosses, ex-chief executive officer Jeffrey Skilling, and Kenneth Lay, former chairman. (Picture: Kenneth Lay)

Notwithstanding the current trial of Skilling and Lay, the long shadow of Enron is starting to fade in numerous ways. For instance, there definitely seems to be a move afoot to soften some of the "more onerous" sections of Sarbanes-Oxley. In other ways too, other corporations that became entangled in Enron's greedy web are recovering.

In Canada, CIBC, one of the five large Canadian banks, with a market capitalization of $24 Billion, saw it's value sliced by 15% this past summer as the bank (which long proclaimed its' innocence in abetting the Enron accounting schemes), agreed with regulators to a $2.4 Billion settlement, or almost 10% of its market value.

In addition, the CIBC board has been tied up with this issue, as has the new CEO, Gerry McCaugherty. The settlement allowed the bank to move forward, apparently to good success, as it recently announced quarterly earnings of $1.62 per share, which was far in excess of analysts estimates of $1.50. The share price has since recovered nicely as well, rebounding by 23% from the summer low, and is now tracking new highs.

Lost in the shuffle, now, were calls for former CEO John Hunkin to give back some of the bonuses earned over the "Enron period", since they were clearly fattened by profits earned by the Enron deals. Unfortunately, this is just another example of weak corporate governance - don't get me wrong, the banks have in more controls than just about any other sector, but when the CEO can gain like that without the board privately threatening Mr. Hunkin with a lawsuit, while bank and Enron shareholders suffer, there's something wrong and immoral with that.

Our hearts go out to all the investors who were swindled by Enron executives; let's hope they all get their due desserts.


The Confused Capitalist

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