Advertisement

6 Members of Enron’s Board Quit

Share
TIMES STAFF WRITER

Enron Corp. said Tuesday that six of its 14 directors are resigning as the company attempts to restructure itself.

The bankrupt energy trader also declared what many investors already assumed: that its once-towering stock has been rendered worthless, even though it still trades for about 34 cents a share.

The directors’ resignations come in the wake of blistering criticism of Enron’s board. An internal company report said the board’s lack of oversight and poor understanding of the company’s financial dealings contributed to Enron’s collapse.

Advertisement

The resignations, effective in 30 days, were announced in a filing with the Securities and Exchange Commission after a board meeting at the offices of the company’s New York law firm. The document was vaguely worded, and analysts said it’s unclear whether the resignations were voluntary or requested by Enron’s creditors.

Board members frequently resign during bankruptcy proceedings, choosing to step down rather than be involved in the restructuring process, experts said. “People don’t want to be on the boards of bankrupt companies,” said Kenneth N. Klee, a bankruptcy expert at UCLA law school. “They want to be on boards of profitable companies with high prestige, where they don’t have high legal exposure.”

But one source said portions of the Enron board meeting Tuesday were heated, and that the final wording of the SEC filing was carefully negotiated.

Three of the six departing directors live overseas: Ronnie C. Chan, 52, chairman of Hong Kong real estate firm Hang Lung Group; Paulo V. Ferraz Pereira, 47, executive vice president of Brazil’s Grupo Bozano banking firm; and Lord John Wakeham, 69, former secretary of state for energy in Britain.

The other three directors who are leaving have been on the board since 1985: John H. Duncan, 74, a private investor; Robert Jaedicke, 73, an accounting professor and former dean of Stanford University’s Graduate School of Business; and Charles A. LeMaistre, 78, former head of the University of Texas’ Anderson Cancer Center.

Though the board for now will be composed of eight directors, Enron said in its filing that it will “search aggressively” for a new chairman and new board members.

Advertisement

“Enron today is a very different company than before the bankruptcy and it has different needs in its board of directors,” said W. Neil Eggleston, a lawyer representing non-employee directors.

Remaining board members are Robert A. Belfer, 66, former chairman of Belco Oil & Gas; Norman P. Blake Jr., 60, chairman of Comdisco Inc.; Wendy Lee Gramm, 57, former chairman of the U.S. Commodity Futures Trading Commission; John Mendelsohn, current president of the Anderson Cancer Center; William C. Powers, dean of the University of Texas School of Law; Frank Savage, 63, head of Savage Holdings; Raymond S. Troubh, a financial consultant; and Herbert S. Winokur Jr., 58, head of financial firm Capricorn Holdings.

Troubh was added to the board in November, shortly before Enron’s bankruptcy filing, to head a special litigation committee.

Non-employee Enron directors each have been paid $50,000 in service fees annually, plus $1,250 for each board meeting attended. The directors were required to defer 50% of their base annual service fee into an Enron stock plan.

In its filing Tuesday, Enron also said it believes that “the existing equity of the company has and will have no value,” based on the firm’s estimates of assets and liabilities. Under the law, common shareholders are last in line in a bankruptcy. They often lose their entire stake.

Enron’s stock was delisted by the New York Stock Exchange in January. It now trades in the so-called pink-sheet market. The closing price Tuesday--before the company made its announcement--was 33.7 cents a share.

Advertisement

In other news Tuesday, the Labor Department said it will replace the Enron officials in charge of the company’s three retirement plans with an independent monitor, whose salary will be paid by the company. “The workers in these plans have suffered enough,” said Labor Secretary Elaine Chao.

The agreement, which may be subject to approval by the bankruptcy court, requires Enron to pay fees for three years, up to a maximum of $1.5 million per year, plus expenses.

Advertisement