Big Salaries, Big Loss

Wouldn’t it be great to have your first “real” job out of college where you get to have a say in major company initiatives and along with a lot of say, you also get a huge six figure salary? That would be the life wouldn’t it?

Top executives at major corporations typically make six to seven figures after all is said and done, and many times even upper management makes the nice figure salaries but to know that someone who can not even read a budget breakdown has the ability to make over 100,000 dollars. Working at Enron will give you those six figure salaries even if you over the course of the year loose the company more then a few millions.

In 2002 Forbes magazine published an article that laid out top executive salaries for the last five years, http://www.forbes.com/2002/03/22/0322enronpay.html. Where as in the 1990’s other top executives were only making 2.7 million Enron executives, before other monetary benefits, were taking home a salary of almost 3.1 million.

Big salaries and even bigger financial loss seemed to be a trend at Enron, especially when it came time for them to unveil their newest endeavor. Enron seemed to enjoy giving out big paychecks in return their employees would continually invest in corporate ventures that would end in even bigger losses financial for the company.

Enron made millions off of their broadband “hype” they publicized that they had signed a 20 year, exclusive agreement with Blockbuster, the American people like their brand names, and when you include a corporation such as Blockbuster you are setting yourself up to make millions just like Enron had wanted to do, and how would they make that money none other than mark to market accounting.

Enron said that there was a need for broadband and could apply mark to market account to make projections, luckily for Blockbuster, the deal was called off in March 2001, surprisingly just 9 months later, Enron filed for bankruptcy and that is when it all began to fall apart.

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4 Responses

  1. It’s an interesting point you bring up, one that has been brought up a lot recently since Obama introduced the salary limitations for executives at bailed out organizations.

    What is the relationship between capabilities, experience, and salaries? At Enron, such a relationship did not seem to exist, but in normal circumstances are companies able to buy the services of better qualified individuals if they are paid better? That debate seems like it is far from the end.

  2. Can you source better all the info on Blockbuster deal?

    Can you capture part of the Forbes table into your post?

  3. The six and seven digit salaries that so many people at Enron made still astounds me. What was even worse was that many of these people were ill-deserving, if at all. Nadir brought up something about Obama introducing salary limitations, and while I am not familiar with this, I would be interested to see how it would be put into effect. I believe that employees at Enron were being overpaid, so why not set a limitation? But how can you justify this limitation on say actors or athletes whose salaries continue to triumph those of business employees? While government limitations might seem like a probable solution, I believe that it is the job of the company to know what and when is too much, and clearly Enron did not know their mark.

  4. Well, I don’t know how the sport industry works here – but with publicly traded companies the ethical dilemma exists for sure, the company’s revenues are being disproportionately distributed.

    Obama’s planned compensation restrictions are not for all companies, but just for those that are being bailed out, this is to ensure that tax money is not used to make already rich (and quite possibly corrupt) people even richer.

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