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Feature

Kenneth L. Lay

Kenneth L. Lay, Corporate Director

A remembrance: When the Enron chairman joined the board of i2 Technologies in 2000, it was a bridging of the Old and New Economies.

Ed. Note: This article is a condensed version of a profile of Kenneth Lay that appeared in Directors & Boards in the Winter 2001 edition. Written by Martin Porter, then the journal’s associate editor, the article spotlighted Lay’s role as a corporate board member. Lay died of heart failure on July 5, only weeks after being convicted of fraud and conspiracy in the collapse of the company that he built into an energy giant during the 1980s and ’90s.

Only two weeks before his inauguration day, George W. Bush met with leaders of mostly Blue Chip, high-technology companies to discuss ways to revive the New Economy sector. Among the high-profile executives in attendance at the two-day economic workshop was longtime friend Kenneth L. Lay, chairman of Enron Corp.

“Enron today is a pretty good mix of New Economy and Old Economy businesses,” Lay tells Directors & Boards. He notes that Enron began its major embrace of high-technology in the late ’80s, when it established its wholesale energy marketing and trading networking businesses.

Important Window
Lay’s board service offers a window on how technology is transforming the business landscape. He has been a director at Compaq Computer Corp. since 1987. His newest directorship at i2 Technologies Inc., an innovative developer of B2B and e-commerce supply chain management software, “will provide another good window to look into technology and software development,” he says. He is also a director of investment firm Trust Co. of the West and pharmaceuticals giant Eli Lilly & Co. He joined the board of i2 in October 2000.

Dallas-based i2, with revenues topping $1 billion, is a partner with and customer of Enron: Enron manages i2's global Internet bandwidth needs, and i2 provides many of its services to Enron, including providing software for EnronOnline, an Internet site launched in 1999 linking buyers and sellers of commodities. One of the largest sites of its kind, EnronOnline manages nearly $2.5 billion in trades daily.

Founded in 1988 by its chairman and CEO Sanjiv Sidhu, i2 is fast becoming recognized as a leading e-commerce software developer. While i2 is not yet a household name, its clients include a premier roster of companies such as 3M, Dell Computer, U.S. Steel, Frito-Lay, and automakers Ford Motor and Volkswagen.

Sidhu says that although he and his company have worked closely over the years with many top international companies, he has always envisioned that one day Lay would become a director at i2. Sidhu says he had been considering adding a new director to its five-member board since the beginning of 2000, and wanted someone "with an outstanding track record of leadership, an outstanding track record of growth, and someone who demonstrated value creation for his company's shareholders." Lay, whom he has known for two years, "fit the bill entirely," he says.

A Personal Visit
Sidhu flew from Dallas to meet with Lay personally at his Houston office with an offer to join i2's board. He described their meeting as “very positive,” and that Lay "was initially very interested in the company and its direction," but wanted first do his due diligence because, as a Compaq director, he was already on the board of a technology company.

As Lay explains, "It took several months for me to decide on Sanjiv's offer. About the last thing I needed was more outside activities." But, he says, "I finally decided it would be an exciting opportunity to learn more about this up-and coming technology company." He describes i2's management as being "very intellectually based,” adding, "It may not be quite as flashy as some companies, and it may not even have as strong capabilities as other companies do in areas such as marketing, but it's a company of great substance and depth."

Joining i2's board, says Lay, reminds him of the time he became a director of Compaq, the world's No. 1 seller of computers, in 1987. "Compaq at the time was probably even a newer company than i2 is today," he says. Like Compaq, he adds, “i2 has a successful business model, is growing very rapidly, and has really talented senior officers and technology people. For a 12-year-old company, i2 has had a very good history, and continues to do well in a volatile market, in part because of their very high-value solutions." Indeed, with record fourth-quarter 2000 sales of more than $370 million, i2 topped Wall Street's expectations.

A Key Director
Kenneth Roman, chairman of Compaq’s corporate governance committee, well remembers Ken Lay’s addition to the Compaq board. Roman recalls that the computer company’s chairman, Benjamin Rosen, asked him to meet with Lay to discuss joining Compaq’s board. Says Roman, "Lay was one of the key directors Ben wanted me to meet with, simply because he clearly valued Ken's management opinion and the way in which he had successfully run Enron.” As one of the original Compaq directors, Lay “has helped Compaq become the most widely recognized computer company it is today,” adds Roman.

Roman says i2 will certainly benefit with Lay's addition to its board, based on his own past experience working with Lay as a Compaq director. "Ken is a very good listener," says Roman. "When he hears everybody, he weighs in with a very balanced and thoughtful comment. More often than not, his views prevail."

In commenting on his and Lay’s pre-Internet business upbringing, Roman says with a laugh, "Neither Ken nor I try to compete with any of the techies at Compaq. Clearly, what Ken will bring to i2's board is his judgment on management issues. He's not going to come in and tell them how to run their technology. Rather, he's going to ask the board and management questions like, 'Do you have the right people? Do you have the right strategy in place? Do you have right game plan to achieve your strategic objectives? Do you have sufficient resources? And, what's your timing to accomplish your goals?' It's Ken's strength to get to the bottom of these questions, not second-guessing their technology."

Into New Markets
Now that his friend George Bush has won the White House, Lay can devote less time to fundraising and more time paving the way for Enron’s entrance into new markets. Minutes from leaving for a business trip to Tokyo when he spoke with Directors & Boards, he was excited about the opportunities that lie in the Far East. Enron, with some help from i2, he explains, had already launched EnronOnline in Japan, and was becoming more involved in the country's electricity market. "Japan will be a very large market for us over time. It's the second-largest energy market in the world, their energy is very expensive, and given our experience in North America and Europe, there will be a lot of opportunities for us to transfer our capabilities."