============= Page 1 of 90 ============= It It Wt 114 Wk. TA IL V; rMa 'Ri -9: env 0 Final .Results Enron Management Conimittee Comments September 6, 2001 1i 0 0 EXH063-00357 ENRON EMPLOYEE SURVEY LAY IT ON THE LINE GOVERNMENT EXHIBIT 4126 Crim. No. H-04-25 (S-2) ============= Page 2 of 90 ============= Management Andy Fastow Dave Delainey Greg Whalley Janet Dietrich Jeff Shankman Jim Fallon John Lavorato John Sherriff Ken Lay Kevin Hannon Louise Kitchen Mark Frevert Mark Haedicke Mark Koenig Mike McConnel Rick Causey Stan Horton Steve Kean Ray Bowen Michael Brown Jim Derrick Ben Glisan Jim Hughes Jeff McMahon a m v Comments 0 2 4 6 4r 1 1 1 2 `~ c 2 251 12 `` 3 1 ~.s 2 2 c 1 a 7 2 0 0 0 '~ 0 0 r 0 0 EC2 000046236 EXH063-00358 ============= Page 3 of 90 ============= Andy Fastow Response 1) The historic compensation for commercial management and origination encouraged taking undue risks while at the same time allowing them the ability to approve their own transactions. This was truly a self serving environment with no accountability. Many of these managers have leftifired from Enron. (but much wealthier at Enron's current employees and shareholders loss). The centralized Risk Assesment and Control process was and Is still a joke compared to other financial institutions with similar risk profiles. Senior Management held /holds this group out to Wall Street as an empowered separate control function. It is still not empowered or separate from the Influence of the commercial side of the Company. If you go back to 1998, and part of 2000 RAC was not able to turn a deal down nor was it given the appropriate time to even review a transaction. Fair value accounting and aggressive mark-to-market treatment has put Enron in the position its in today(E.l. assets, merchant portfolio, EES problems). Enron should separate and further empower RAC's Impact on transactions. If RAC turns a deal down it should not go through an ENE Office of the Chairman for approval. It should go to a broader management committee for approval. Again, If executive management can not say no to a transaction for what ever reasons (Immediate earnings needs, then the process is self serving). I believe If you address this area coupled with the Incentive compensation of the company, you will make inroads in establishing credibility with Wall Street and the financial institutions. They are knowledgable of our problems more than we think. 2)1 believe Internal empolyee morale and the PRC are directly linked. The PRC process has been a negative particularly when mid year feedback is given on August 31(this year) and year-end PRC starts In November. Last year my Mid year review was two weeks after my year end PRC review process started. What a Joke. I also believe there is a class/benefit issue of commercial-commercial support that exslsts. Front line commercial winners receive the benefit of supporting personal and systems that provide a franchise to transact around. There needs to be balance in recognising who creates value for Enron. Moving people around is healthy but what has occurred over the last 2 years is a big negative. We have lost slot of good people and lost credibility on campus. 3) 1 still do not understand what sr. management and the baord was thinking when allowed Andy Fastow to establish UM. Do we think we are beyond approach? This was clearly a conflict of interest) I'm concerned that the Board, Sr. Management and Andy did not think this was a conflict, anticipate the disclosures and resulting fall out. This was another example of Enron's self serving environment 4 )At some point Enron will need to focus on quality earnings and not 125 transactions or aggressive long dated commodity deals which we hold all the controls on. This type of activity should not be encouraged. It should be an extreme event. 5) if Enron is going to Invest capital in companies or buy companies it should be done with experienced Investment people with years of real successful experience. Not in experienced people that have never made an investment or run a company before. Also hold them accountable and compensate them when the value is realized. 6) This organization has no idea on cost cutting or the concept of prudent spending. We talk about it but do little about It. Unless of course we need to terminate an entire company or group. Healthy operating groups are not challenged to be efficient or cost focused. Offsites, daily catered breakfast, redundant groups, moves, remodeling the list can go on and on. Every dollar we save from excessive spending can go to the bottom line! +i I don't think we have really had a forum for employees to share their Ideas with management on different topics- like the committees we had atone time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this lately. I don't think we really embrace the vision and values at Enron - we talk a great gains, but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promotp people to high levels within Enron who treat others like trash. Several of them are on the management comnittee- Whalley, Kitchen, Koenig (& Rieker), Lavorato, Shankman. It really sends a loud and clear signal to the rest of us, it is not that the aforementioned aren't extremly smart, talented and great for this company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and it makes it very hard to work for this company and defend us to ThIt"1rr;s•, Sept rnbrr R6, 28 C2 000046237 Page I of 88 EXH063-00359 ============= Page 4 of 90 ============= Andy Fastow Response others. I think we play too much In the gray areas. I don't think we are wrong In the California situation, but It certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. 1 question Fastow and the LJM deal. I realize that it is legal, but I think It walks at- ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. I think we need to take a look at the way iR has handled our stock price drop. I don't think our'logistics company" message has worked AT ALL. None of us even understand it, so I don't know how anyone else can not customers, not analysts, not the media. We really have some good guys here at Enron too- Frevert, Sherriff, Kean, McConnell, Horton... they work hart and follow the vision and values. I think the issue is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead In this company. A U i 7 I T ursd0r, September 06. 2001 ' EC2 000046238 Aag, EXH063-00360 ============= Page 5 of 90 ============= I Dave Delainey Response .fir .. r fir"^~i +..r~wrrr t• Compensation needs to be linked to longer term performance where appropriate (originators get some of _ origination up front, but the bulk of It based on the performance of the transaction they originated over a couple years) - I Need at least a rudimentary risk system built and functional for all new businesses. Make sure there Is a real check and balance (EES had a risk group on paper before Delainey, but due to management make-up of I origination skills, It was not functional) inside morale and outside confidence will easily follow if other Improvements happen. I i Of my many years of service at Enron, 2001 has been the most challenging and disappointing. After the announcement of the new vision and reorganization, the EES organization was held hostage for over six months while management decided how to deploy this'new organization. All past history and good ideas and work are regarded as "the spawn of the devil child". I want to state that I know that Dave Delainey has the right idea for the company, but the execution of his vision has been tortuous and inhumane. Rather than determining in March that we needed to make reductions and taking immediate action, management hid behind the PRC system and dismissed employees for performance. The. PRC was nothing but a good old boy system at it's worst. It was nothing more than a rubber stamp of the I perception of our abilities by the new organization.. My review stated nothing of my feedback or accomplishments but rather made vague statements that provided neither guidance nor objectives. It appears that the people who have nothing better to do than showcase themselves to their management succeeded I while those who actually kept their heads down and worked were pushed into the lower categories. I believe in meritocracy but it should be based upon actual results not someone's perception of personalities. Senior management, specifrcaSy Even Hughes, has been extremely unprofessional and insensitive to the major I changes that have occurred. Evan stood up in a meeting of over eighty people and said verbatim: "If you don't like It, leave." I do not believe that this reflects Enron's vision or values. In January 2001,1 was one of Enron's biggest cheerleaders. I could not say enough positive words about our vision, our employees and my job. In August 2001, I am contemplating how high the stock has to go before I can exit. This change in attitude saddens me, In light of our published "values" respect is one of the major challenges our management team should concentrate on. While I did not select the disparity between commercial and non-commercial as a top 5 challenge, some of our lower level commercial managers (Director thru VP)could utilize a bit of humility. Those who have excelled and are excellent role models include Mark Frevert, Dave Delalney, Mike McConnell I and Janet Dietrich. Our employee benefits implementors could use improvement, it's difficult to get the right answers at the right time when one needs to make changes outside of open enrollment. dr After seven years at Enron, I am saddened to share that I have been contemplating leaving Enron after the hellish EES reorganization. Enronians were treated with little to no respect during the redeployment/reorganization process. While I strongly agree with Dave IDelainey's vision for the future. I believe that the treatment peopl have received has been unacceptable and counter to the Vision and Values Enron proudly displays in the lobby. The morale here is at an all time low and it's become an incredibly depressing place to work. I My hope is that Ken and the new management team will rescue us from the abyss. Save us! L, C2 000046239 9 77iunday, Sepfemher 06. 2001 Page 3 01 88 EXH063-00361 ============= Page 6 of 90 ============= r r r I I I r r r r Greg Whalley Response 1. I think Jeff Skilling's biggest problem was That, despite all the media blitz, he was not a charismatic leader, like Ken Lay, Lee iacocca, Herb Kellerman. Enron used to have VERY charirnatic leaders that the employees loved like Ron Burns and Rich Kinder. There are no longer leaders of that ilk here in Enron. External customers would hear Ron Burns speak at industry functions and call to say "I want to work for that manl" Jeff Skilling could not engage that charisma with the media or with the employees. Greg Whalley is even worse. I've worked with that man for six years. He is mean-spirited and hateful to employees. I have seen him be mean just for sheer enjoyment. He has no charisma, In fact, outside pears have commented on his nastiness to customers and employees alike. I think you're moving in the wrong direction by selecting him. Furthermore, something must be done about PRC. It does nothing but demoralize and produce the aggressive, nasty environment that makes most employees leave. First, it undermines the first line manager, who may feel the employee Is doing a great job. Second, while it may produce the competitiveness that Enron strives to gain, it also produces an aggressive, back stabbing, unconstructive environment that Is too difficult for most people to exist in. (In short, only the nasty survive() Finally, I work In risk management. I have seen VP's and trading directors make up a number, call down to the risk managers and say, this is what I want to report today. Move the curves to make it that way. I have seen directors tell traders to move curves In outmonths to generate income that the traders did not believe was real. I have seen traders leave Enron because Enron tampered with the "ethics" of the curves, and I have seen the trading directors deride traders who tried to stand up to his ethics. I have seen trading directors instruct book personnel to boost volumes on long term deals that aren't there to generate quarter earnings, only to have to reduce those actuals later down the road. It's unethical, and as a stock holder, I can understand industry skepticism. 1. Stop rewarding people for doing HORRIBLE deals (Pal-EES,Rice-Broadband, Whalley-Metals, Sutton- Dabhol, Mark-Azurix, etc.), and spread that compensation around the company to lower level employees, 2. Be more straight forward with our earnings to the analyst community. 3. Give the pipeline group some credit for what they've built, maintained and grown through the years. .0 t believe the biggest problem we have at Enron -- and one of the top reasons why morale is so low -- is the lack of values in our management. I think Ken Lay lives the values, but I don't see the same commitment in other management members. For example, some of the worst abusers of our values are on the Culture Committee -- like Beth Tilney and Dennis Vegas. How can we trust management when the very people that are positioned to live our values are the worst offenders? I have to also say that Greg Whalley scares me for the company. While I'll give it to him that he's brilliant, I can understand why the stock went down after that announcement. I am, however, thrilled to have Ken back at the helm again. • First, I think selecting Greg Whalley as a replacement is a terrible mistake. He's a mean-spirited, foul-mouthed man. Enron employees hate working with him and I can't imagine that he would Improve Enron's reputation of being overly-aggressive. In fact, he Is the poster-boy for all the bad things said about Enron. This needs to be rethought I know he Is a brilliant man - he just is not a leader. He had no personal. charisma that inspires leadership. Second, the PRC needs to be eliminated. There HAS to be a better way to award bonuses that demoralizing employees and undermining first line managers. PRC just creates a hostile, mean-spirited environment by overly-aggressive em loyees who step on nice, ethical people. (it's alot like the elevators. Aggressive people will walk up from the black and step in front of people who'd been waiting a long time. Most polite people don't object but they end upstanding in the lobby. It's symbolic of what the PRC Is like. Are the aggressors that push past everyone better workers and deserving of more bonus money?) Like President Bush said, "We need a kinder and gentler Enroo". People no longer want to work here because of the aggressive, hostile environment and the only people who stay (and thrive in this environment) are mean-spirited people. • Some people in senior management positions may be good at the deal, but have little leadership ability (e.g., Jim Fallon, Greg Whalley, Kevin Hannon) while the true leaders go unnoticed (e.g., Stan Horton, Rob Walls, rnvln,1n Sepirntherms, 21)01 EC2 000046240 Page 4, f,qs ' EXH063-00362 ============= Page 7 of 90 ============= Greg Whalley Response Mary Joyce). . - . . . I don't think we have really had a forum for employees to share their ideas with management on different topics- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this lately. I don't think we really embrace the vision and values at Enron - we talk a great game. but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others tike trash. Several of them are on the management committee- Whalley, Kitchen, Koenig (& Rieker), Lavorato, Shankman. It really sends a loud and clear signal to the rest of us. It is not that the aforementioned aren't extremly smart, talented and great for this company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and it makes it very hard to work for this company and defend us to others. I think we play too much in the gray areas. I don't think we are wrong in the California situation, but it certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the UM deal. I realize that it is lull, but I think it walks an ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. I think we need to take a took at the way IR has handled our stock price drop. I don't think our "logistics company" message has worked AT ALL. None of us even understand it, so I don't know how anyone else can- not customers, not analysts, not the media. We realty have some good guys here at Enron too- Frevert, Sherriff, Kean, McConnell, Horton... they work hard and follow the vision and values. I think the Issue Is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead In this company. EC2 000046241- Thr+rs'l(tr, September Th. IDAI Page 3 of 88 EXH063-00363 ============= Page 8 of 90 ============= .t r i w N i i r i r i i r r i i r Janet Dietrich Response 0 In light of our published "values" respect is one of the major challenges out management team should. concentrate on. While I did not select the disparity between commercial and non-commercial as a top 5 challenge, some of our lower level commercial managers (Director thru VP)could utilize a bit of humility. Those who have excelled and are excellent rote models Include Mark Freverl, Dave Detatney, Mike McConnell and Janet Dietrich. Our employee benefits implementors could use improvement, it's difficult to get the right answers at the right time when one needs to make changes outside of open enrollment. Ti mrphr, repfer, ar, 06.2001 EC2 000046242 Pays6of88 EXH063-00364 ============= Page 9 of 90 ============= Jeff Shankman Rcspass~ t) 1 don't think we have really had a forum for t mployees'to share their ideas with management on different toplcs- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and . asking people to serve on committees to enhance change. We haven't done much of this lately. I don't think we really embrace the vision and values at Enron - we talk a great game, but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others lIke trash. Several of them are on the management committee- Whalley. Kitchen, Koenig (& Rleker), Lavorato, Shankman. It really sends a loud and clear signal to the rest of us. It is not that the aforementioned aren't extremly smart, talented and great for this company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and It makes it very hard to work forthis company and defend us to others. I think we play too much in the gray areas. I don't think we are wrong in the California situation, but it certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the LJM deal. I realize that it is legal, butt think it walks an ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. I think we need to take a look at the way IR has handled our stock price drop. I don't think our "logistics company" message has worked AT ALL None of us even understand it, so I don't know how anyone else can- not customers, not analysts, not the media. We really have some good guys here at Enron too- Frevert, Sherriff, Kean, McConnell,,Norton... they work hard and follow the vision and values. I think the issue is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead in this company. LrC2 000046243 Tlrnrsdm•, Sepreinher 04. 21101 PaRe 7 of RR EXH063-00365 ============= Page 10 of 90 ============= .L_ - - I Jim Fallon • Some people in senior management positions maybe good at the deal, but have little leadership ability (e.g., Jim Fallon, Greg Whalley, Kevin Hannon) while the true leaders go unnoticed (e.g., Stan Horton, Rob Walls, Mary Joyce). r F•C2 000046244 7-11undr!r. sepren hey na. 200? ============= Page 11 of 90 ============= John Lavorato Resnnnse t am currently In redeployment and have felt like I have been able to get an interesting view of the company currently, having had discussions at all levels of the the company and most every major group. What I will lay out is the current view of Enron which was assembled over the last month. The conclusion I came to may be obvious to many, but was a learning experience for me. The discussions were had under the auspices of looking for a senior origination position for a person with a 17 year background in the gas power business from the trading and finance side. All I have talked with feel that we are a very different company than we were two years ago (which was when I started at Azurix). The thought right or wrong is that the orginal core group that made Enron what it Is is today made their money and have left one way or another. The new group is very bright, but currently doesn't have the strategic capabilities that others had before them and there has been a large gap left by Jeff leaving. Related to skill sets it is felt that trading Is very much the earnings driver for the company albeit traditional and strucuctured trades, and no one can equal our market information. Although for this reason, in Enron North America originators have had to take a distant back seat to the traders based an the relative earnings each has made and will make this year which is supported by Kithcen and Lavorato and isn't surprising based on their trading backgrounds. If you want to do origination the groups to look at are EES and EOM, and the need for origination still exists although it is hard to compete with the big profits trading is making on a corporate wide basis. We also preach being entre/intrapreneurial and taking risk, but the time from for how much risk one can take doing that has shrunk to the length between PRC reviews e.g. 6 months. The message Is If you don't have a long history with the company, but like building businesses stick to startups you can make money for within months or you are at risk. In PRC reviews the more _senior you get it is all about dollars brought in and all else has minimal impact. It reminds me of my Marine Corps day when the success of the mission (e.g. MTM value obtained) was all that matter and casualties sufferred along the way were expected. I don't feel that any of this is necessarily bad, but rather is the state of where we are today compiled from one persons perspective. I very much feel that Enron Is a great place to work for those who thrive in the environment we have established, and I expect to be In a new group within the next few weeks. I am optimistic about the companies future and our ability to overcome'this down period. In general it appears we have gotten a little more Darwinistlc at least in the front office over the past few years, and therefore if that was the intention then we should embbrace it and recruit accordingly. If not then change will come by design or by default. Either way I think we are all happy to have Mr. Lay back. I would be happy to expand further if helpful David Pruner 713-646.8329. I don't think we have really had a forum for employees to share their ideas with management an different topics- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this'tatey. i don't think we really embrace the vision and values at Enron - we talk a great game, but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others like trash. Several of them are on the management committee- Whalley, Kitchen, Koenig (& Rieker), Lavorato, Shankman. It really sends a loud and clear signal to the rest of us. it Is not that the aforementioned aren't extremly smart, talented and great for this company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and it makes it very hard to work for this company and defend us to others. I think we play too much in the gray areas. I don't think we are wrong In the California situation, but it certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our neqds. - I question Faslaw and the UM deal. I realize that it is legal, but I think it walks an ethical line when out CFO personally profits from an Enron deal Ike that. It warrants external attention. I think we need to take a look at the way IR has handled our stock price drop. I don't think our "logistics company" message has worked AT ALL. None of us even understand it, so I don't know how anyone else can- not customers, not analysts, not the media. We really have some good guys here at Enron too- Frevert, Sherriff, Kean, McConnell, Horton... they work hard and follow the vision and ,slues. EC2 00004624.5 Thw s.Say. Srprs!m1Mr i $, 21M, Pave 9 n/88 EXH063-00367 ============= Page 12 of 90 ============= John Lavorato Rcs arse i think the issue Is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead in this company. i Tharril .r. September 06,1001 EG2 000046246 Page 10 of.% EXH063-00368 ============= Page 13 of 90 ============= I John Sherriff Response I don't think we have really had a forum for employees to share their Ideas with management on different topics- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this lately. 1 1 I don't think we really embrace the vision and values et Enron - we talk a great game, but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others like trash. Several of them are on the I management committee- Whalley, Kitchen, Koenig (& Rieker), Lavorato. Shankman. It really sends a loud and clear signal to the rest of us. It is not that the aforementioned aren't extremly smart, talented and great for this company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he I continues to promote people who do. I think this says something to everyone about how differently this company wilt be run following his departure. I also question many of our business ethics and it makes It very hard to work for this company and defend us to others. I think we play too much in the gray areas. I don't think we are wrong In the California situation, but it certainly makes me wonder what t don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the UM deal. I realize that it Is legal, but I think It walks an ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. i think we need to take a look at the way IR has handled our stock price drop. • I don't think our "logistics company" message has worked AT ALL. None of us even understand It, so I don't know how anyone else can- not customers, not analysts, not the media. We really have some good guys here at Enron too- Frevert, -Sherriff, Kean, McConnell, Horton.. they work hard and follow the vision and values. I think the Issue is that If we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead in this company.  4 2 things I don't like about Enron 1. There is a lack of 'doers.' From my view the company is full of talkers and salesmen - these are Important, but we are overrun with them. 2. John Sherriff talks about being both 'loose' and 'tight' to allow flexibility and yet retain control. I don't see enough of the fight. Systems and procedures are not bad things when applied appropriately. I I r I r -CZ 000046241 I ThnrriMr, September IM 21101 rage 11 of RR EXH063-00369 ============= Page 14 of 90 ============= r Ken Lay Res olt~ , sue.. - .~  u I rrr~.~~r rrr. ~~~~r~wirl/rr,~r1 u~r~+r~wr~  i I am very please that Mr. Lay is back. I came from a Big 5 environment where evaluations were also key to the organization for promotion, compensation and work assignment reasons. I participated In our evaluation committees every year and also was part of an executive team involved in the redesign of the program. Following are class where I clearly believe that our system was superior: - We also had a 1 to 5 rating; however, our bell curve did not require forced rankings for 4 and 5. The thought was that underperformers would be coached out so they should not be included in the bell curve. Many of Enron's 4's are good performers that just got forced into that rating because we had to meet the curve. - Also, we had 2 different bell curves at my former company, I for managers and above and the other for staff below that level; the thought was that for managers and above we would expect more 1's and 2's as they had generally been with the company awhile and had developed into very strong performers (others had been weeded out along the way) - The other system also had skill sets laid out for each level In the organization broken out by 5 main areas (communication, technical, Industry expertise, people development, and client service). For each of the 5 main areas, there were a number of skill sets that the employee had to acquire before helshe could advance. Using this system, we were able to help coach people on what skills they needed to advance to the next level. - Enron's system goes through full evaluation twice a year however there doesn't appear to be any value add from the mid year review; my former company's mid year review was used to identify poor performers and help get them back on track and to identify superstars to help ensure they were given the opportunities needed to get promoted to the next level by year end (this process Is a lot less time consuming but does have the value add because we were not as Interested in rating each invidual at mid year) - the "class system" (commercial vs commercial support) makes the PRC function less meaningful because even those in commercial support who are closest to the commercial group fare best in the PRC - finally, I was discouraged by the most recent PRC process because after the process was over I heard that the VPs in our group had met prior to any of the PRC meetings and preranked everyone in their 3 groups; there was even a spreadsheet that one of my peers had that showed where everyone fell out; why go through having all the meetings if there are going to be prerankings? 0 Over the past year or so, I have had much less autonomy in performing my work and feel that management and peers are attempting to micromanage the work that I have been doing, successfully and more or less without much oversight, for 14 years. It wastes resources, lime and money, when I have to explain to a half dozen people why we should do things I used to just be able to do, and I don't see that it has helped the process. And while I have been pressed to communicate my activities to our group and to others outside the group, it seems to be a one-way street. Those asking for the Information are not sharing any with me! And on the subject of communication, one thing that makes it very difficult for me to share information (l am in government affairs) is the impossible task of keeping up with the commercial folks, who they are and who supports them. There are no notices when folks change responsibilities and no org chart to see who might be interested in events In -a certain region or on a certain utility system. I have to put tags on all my smalls "please send to others who might be interested" because I have no way of keeping track of who they might be. I would check the staffing levels in government affairs. I think the recent movement to less autonomy is a result of having perhaps too many people deployed with not enough to keep them all busy. There seems to be more and more overlap of responsibilities, with confusion and Internal politics becoming more prevalent. And we should review our use of outside resources.in this group, and reward folks who find ways to accomplish things without heavy retiance on outside counsel and experts. And in gov alfairs~ we seem to have a hard time setting priorities. One day, a particular state may be taken off the list of slates we are active in, ahd the next day I will gel an urgent phone call asking what is happening there because we have some big project we want to do there. We need much better coordination in deploying our resources and setting our priorities and goals. It is very hard to respond to requests for information about states that we have stopped following, or to jump back Into the fray in a state we had abandoned. Decisionmakers tend to discount your position if they don't think you are a long-term player in that arena. Finally, on the PRC, I have seen this system destroy morale, my own and that of my colleagues, even when a Thur Blur, Seplrarln'r 06.21)01 EC2 000046248 Page 12 bj EXH063-00370 ============= Page 15 of 90 ============= Ken Lay Response fairly decent review is given. I think we all welcome feedback, the problem Is the forced ranking of people- against one another. Particularly in gov affairs, your ranking is often the result of how "sexy" and visible the projects you are working on are. Not everyone can be involved In California, and those who were working on other assignments that are more mundane seemed to suffer for lack of visibility or blowing their own horns. Some of us are attorneys, others more like lobbyists and others "number crunchers." Our skill sets and assignments are so different that comparing us and ranking us against one another is meaningless. Keep reviewing us but lose the forced rankings. We have also seen promotions of folks who are not team players, and the message we dearly have received is that self promotion is effective, team playing is not 1. Upper management within my business unit is constantly changing their mind on how they want to have information presented. Because of this, my group spends a tot of valuable time "rearranging" the same old information instead of analyzing data and Improving processes. 2. One way to increase Internal cost savings would be to plan better for costly employee moves. I know of several groups who have moved three or four time within the last six months. If a little more thought were put into these changes, we could probably reduce the number of times employees move and save a lot of money on churns. 3. Glad Mr. Lay is back!! +al0 Enron has lost It's spirit. That comes from the heartbeat of the employees. The employess are confused and frustrated. They work hard and then are crushed by a true casting system with the PRC process which Is not a true evaluation of their work product. It can't be when you are not comparing like job responsibilities and duties. Enron computer systems are fragmented. There is too much emphasis put on find your answers on line. What happened to people talking to each other? There is no consistency in policy and procedures. There is a mentality that you must work late hours and weekends to be perceived as doing a good job. Managers and Supervisors are confused about giving good feedback to their employees prior to PRC. The reality is that employees can be doing good work and right on target with what they are supposed to be doing but when they are compared to other departments and different job responsibilities the become lower ranked. Performance Management is important and a necessity. Here at Enron It creates conflict, jealousy, distrust and a host of other work environment issues. Someone with really big arms needs to reach out all around Enron and bring It back home to a good place to work with values and integrity in tact. Realignment of incentives (noted above as my #1 concern) The tremendous pressure to generate earnings has created a culture that rewards commercial people for dosing deals where immediate earnings can be marked. Once the Income is taken there is little incentive for the commercial people to diligently stay with the transaction through successful execution. We have seen many examples of this In the international asset portfolio as well as our domestic investment portfolio. We have also seen examples of this in the commodity side of the business where income has been marked without appropriate followup to execute proper contracts. The solution is to change the compensation structure to pay commercial people the majority of their bonus upon successful execution or monetization of the transaction not just closing the transaction and taking a MTM write. up. ~i 1. A number of years ago, I remember you (Mr. Lay) addressed, at an all employee meeting, the criticism of the "oil Industry" of our use of Mark-to-Market accounting. I was very Impressed with your answer, you said that there were three important points: (a) we are not an oil company. (b) other industries use M-to-M accounting, so we are not atone, and most importantly (c) there is very little risk because our average contract M-to-M'ed is only 18 months duration. Being a PHD In Economics I am sure that you are aware that the EES 10, 15 year, or more, contracts (hat were M-to-Wed are a huge risk for Enron and that sort of accounting needs to stop with respect to all future long-term contracts. M-to-M accounting is fine for short-term trading contracts but results in an inappropriate risk for both the long-term power sales contracts and EES deals. 2. I applaud the diversity of your selections for the office of the chairman. But you need to also add someone with a true technical background. Enron was about to become a Harvard MBA playground. A May/June 1995 Journal of Management in Engineering article: HARVARD HINDSIGHT stated the following: "...people with...MBAs have a penchant for hot, high-paying bareers that ...turn Into the next Investment Titanic, They rushed into investment banking in the mid-80s & pharmaceuticals in the early 90's. Both... soon suffered l bureder. September 06. 211,71 EC2 000046249 AfRe 13 „~ EXH063-00371 ============= Page 16 of 90 ============= Ken Lay r r 0 r I I r r I Response declines. Industries... winning the high-priced bidding war for todays Harvard MBA should be viewed with caution. At the top of this fist, attracting 30.9% of Harvard MBA 1993 graduates is management consulting. Entertainment and media are also in the midst of MBA hiring spikes. Thus, if tradition holds true, those sectors will begin to decline... It was also reported that the fewer MBA holders attracted to an industry, the better its performance. Computer systems, for example, have seen a decline in MBA hMng matched with an.increase in return (well, remember this was a 1995 article and no one prevent business cycles). The energy sector hit a high when their MBA hiring bottomed out." 3. 1 am sure that you (Mr. Lay) and the Enron Board know that Enron senior management compensation In a number of circumstances has been far beyond the contribution of that senior management to the earnings growth of Enron. Even though Skilling brought a lot to Enron, he was a classic example of a person promoted beyond their level of competance as his personality was clearly not suited to CEO or Chairman (where stockholder interests are important). I have never seen a brighter more destructive personality. We do not resent your compensation Mr. Lay, nor even Skilling's past compensation. We assume that neither of you got Individual project bonuses. But L. Pal, J. Sutton, Rebecca Mark. Ken. Rice, and others received compensation in 2000 that far exceeded any earnings directly attributable to their performance. It has been a huge embarrassment to see' persons like those being hugely compensated due to position and/or for bringing In bad deals. Some received huge bonuses for their ability to hide the facts from upper Management and the Board until it was too late. That is the principle reason that we have $bilt#ons In international, assets invested in projects that are returning 0%. Too many upper management people have been working for too many years within Enron for their huge personal project bonus and, therefore, not working for the good of Enron's earnings. The compensation of the Enron's business unit leaders must be based on solid contributions to earnings growth (and not greater than that earnings growth for example L. Pat), not risky, one-off M-to-Wed contracts. Business unit leaders should not get project a bonus. 4. Mr. Lay, you certainly must be aware that the current accounting practices make asset ownership worse over time. If not, you need to look into it because returns.on assets get worse over time if they are not allowed to normally depreciate. There has been too much bending over backward to create quarterly earnings while sacrificing longer-term earnings. I am sure that you recognize that a balance of trading and quality assets will regain our credibility with the analysts. Achieving quarterly earnings targets, with one-off asset sales was not as big an Issue with the analysts when we were constantly developing new assets to replace them. Clearly Kinder Morgan demonstrates with their 11% return on KMI equity that you can get good returns with good assets, if we could get there (11%) with assets and add trading earnings on top of that, we could blow the competition out of the water. Have you and Rich Kinder talked about merging and then being co-chairmen for a year. That would be the quickest fix I can imagine for our credibility with the analysts. 5. Mr. Lay, you need to modify the compensation of traders. I know someone who has done trades with Enron. When It came time for the trade to be rolled over or expire, that person would have been happy to roll over the deal but the trader let it expire. The new deal was worse for Enron, when asked why the trader did that, the answer was, I get compensated for new deals not maximizing the benefit to Enron. 6. You must be aware. of the devastating impact that a 1S% forced ranking system has on moral. In addition to the 15% devastated by their mid-term rating of 5, there has to be at (east another 15% who feel that but for the grace of god I would have been ranked a 5, what does that do to their moral. Yes, we need to get ride of some persons but the arbitrary and capricious method of ranking 2 or 3 aetual performers a 5 to meet the quota is the craziest scheme I have ever hard. Walk-the-talk about the quality of the employees that we have here at Enron and take quick decisive action to change this system before It is too late. Ah, Mr. Lay, you have many challenges, but I know that you are up to It. You are wall on the road to diversity of Enron's upper management (experiencelbeckground) which wIll help you open communicbtion, improve integrity, enhance respect and bring us back to excellence. This can be the best of 4ompanies and the most cannibalistic of companies... it a titanic-sized airplane that attempts rapid course changes and movements at every hourly weather report. The pilots,(managers) ARE then THE "lifeline" to everyone, and they simply have not even attempted to advise their "valuable" (consensus - inside and outside Enron is really'VERY EXPENDABLE") employees of ,a course change. etc. So,... the corporate reality is that the injured and dying "passengers" are "collateral damamge". Lipservice or ambivolence ("aid" by HR) may be "aired" (ONLY), and the "healthy soldiers" are ordered to stay focused on the "war" - no time for other team members - there is a WAR ON[ And, the "Enron Army" is further established with our glorification of "The Weakest Link" PRC model reaching new heights yearly. • rankly, it #s to a new level of Tibundnr, September (h.. 2(101 EC2 000046250 page 14 Of-To EXH063-00372 ============= Page 17 of 90 ============= Ken Lay Response company sickness that "The Devil's Advocate" would admire... The clock Is ticking here... We're en example of'" ruthlessness:.. The new term out "Enron: Heartless Possibilities" is eamef and out! I think you'd get about 70-85% agreement on the above analogy. Personally,... we're hoping this really is "Return of the Jedi" that people are calling Ken's return (vs. Empire Strikes Back - under $kilifng)... We not truly need to hear it vs. spend wasted time discussing which class action suit was listed in the Chronicle this month regarding Enron's PRC injustices (and should we consider it - or be forced to think about it based on today's PRC fear management result)... I'll finish by saying that rye never been at a company where so many peolple worked so hard and felt equally devalued... i Its not fair to not receive a mark or a bonus, after you have jumped thru all the hoops and someone else has taken credit for your work. 41 As background, my name is John Carlson and I work for EES In the Midwest Region out of Kansas City. In short, I feel I am not being given a fair opportunity in regards to education assistance and tuition reimbursement. I was recently accepted to the University of Chicago part-time MBA program (same exact curriculum as the full-time programs except we have two classes every Saturday). I chose the weekend program so it would not affect my work at Enron, to hopefully add more value to my work at Enron, and because I live In Kansas City and have to travel to Chicago. To clarify, this is NOT an accelerated or executive MBA program. This is the standard MBA that the University of Chicago offers. Senior management has since denied my request for reimbursement. Here are some of my concerns: 1. EES policy states that "immediate supervisor. In conjunction with Human Resources, is responsible for approving course application and ensuring compliance with this policy." I, however, was told I had to have senior management approval for tuition reimbursement. 2. EES policy states that programs for reimbursement "must either qualify an employee for present duties or prepare an employee for future placement within the company". As one reason for denial, I was told the MBA is not a prerequisite for the next two levels of promotion above my current level. I am not pursuing this degree to further my current position, but rather to open other avenues within Enron and add more value to Enron. 3. Given Enron's track record for having one of the best talent pools in corporate America I was surprised and very disappointed with the decision not to help. I think EES and Enron, given the opportunity, would want to help a current, high-performing, employee improve their business skills, leadership potential, and job performance. I would appreciate anything you can do to help out with this and am willing to discuss this further. Thank you for your time and consideration. Sincerely, John Carlson 816-880-3571 jcarison@enron.com 0 1. Figure out how VP level people can help the company - there are a lot of us and many of us have turnaround experience. 2. The external view of Enron has to change. The last six months of Skilling have damaged severely the previous 15 years of Ken Lay. 3. Please don't recreate the "mutual admiration society" mentality that pervaded a significant majority of the group of senior execs that recently cashed out at $80 a sharem and left the rest of us holding the bag. T6ur%d, , Sepsr nher 06. 21101 EC2 000046251 rajre 15 "f •' EXH063-00373 ============= Page 18 of 90 ============= Ken Lay Response i I Love working for Enron but t feet that the direction that EES has taken is not good as compared to our past model. I've worked In this Industry for 10+ years and EES's original business model on bundled deals in my opinion was un-beetabte. I feel that we could have done a better job as a company controling Internal cost But since we've changed models and broken up development and construction I feet that we have lost our advantage and direction. I have no confidence In EES executive managment and the course they have chosen. I'm concerned since we have been re-aligned into EFS we will no longer be the leader In Energy Services related EAM arena. Staff morale is low due to slashing of peers even though we know it was necessary. I have accepted a position with EFS and the benefits for managment such as myself and my partners is significantly less such as: no options, pension plan In lieu of savings plan, out of pocket insurance cost are higher, no vision plan etc. It is a variety of things that has attacked morale. Our construction arm of EES has been moved to EFS and that did not sit well with staff and peers, many of us feel it was a step down. I do however work with some of the most dynamic people that I have ever worked with in my 20+ years of work experience, I'm afraid that we will lose some of these key players to the competition due to the direction of EES's present and recently changed business model. I feel that if the old model was fine tuned and internal cost and procedures refined there is not a competitor out there that could touch or beat ust We need to evaluate the direction of the EES ship. At the field level there is so much demand for what we do, if we combine commodity with construction and services it is unbeatable. yes construction does not carry the higher margins but it is a necessary element In our offering to client request. ,~ The accounting department needs slot of help. They never answer the phone, no matter who You call and they never call you back.. The xms system has realty got some problems. We have been having so many problems with entering an expense report and one or two months later, It still isn't payed because the system just lets It sit there, Every Invoice we send to accounting takes way to long to get put into the system and then get processed, which in turn, our vendors are not getting payed for months. This causes major problems and as a result, our employees are getting their cell phones turned off and their Amex. payments are being turned In late with fees. Our end is taken care of right when we receive the bills (they are immedlatly turned in). Can something be done to take care of any of these situations? t would like to mimte, voutunteer activity here in California to that of Houston. This is difficult because there Is no community relation staff here that I am aware of. I currently have an Idea to refurbish a Girl Scout Camp In the San Bernardino Mountains as part of the grant program and to physically implement some of the repairs as Enron Involved. Since Safety was transferred to EFS, the Impression I currently hold is that safety has taken a step back. I do not know the policy of EFS and whether this policy is any different than the previous EES safety. Is there a national safety meeting scheduled for the safety group like last year? We do conceptual work for Enron depicting a proposed central plant or co-gan plant at various locations and never receeve any feedback as to the outcome of the proposal, Feedback is important from EES to assist in future conceptual designs. I agree with Ken when he said that Enron needs to get back to "vision and values". I feel respect for each other has gone way down. The Sr. Admins seem to me either to be under to much stress or they have just gotten all rude, abrupt and down right disrespectful, mainly the ones in Houston when they call here In Portland. Power trips are getting old and do not help anyone. 1. Rumour has it there are lay-offs planned for December. Is that still true now that you are back er are we going to use PRC's to get rid of people again. 2. 1 find It surprising that 45% of Enron is considered a 4 or 5. 1 thought Enron was to hire the best. Is HR `"Tong 20 - 25% of the time? 3. it you need to decrease the w~ rk force, lay people off rather than use PRC. That would have more integrity. The stock price can't get too much worse. 4. Support functions are expected to'do what ever it takes' to get a project done. 'That is fine once in a while. but we try to have lives too, it would be nice if we were given a day off here and there for all the nights and weekends we have spent here. - EC2 000046252 +rcduv. Se~iremhcr 06. /Pore.. !R n/ 00 EXH063-00374 ============= Page 19 of 90 ============= A t - Ken Lay __ _ n..nrr.r"urr. r  r~~ 1. We are very strong at developing new markets. However, in my view, we are very weak in the fundamentals - the blocking and tackling of business. We are a deal shop and value getting a deal done. Littk value is placed on the execution and follow-up. Fundamental economic flaws in transactions are often ignored or not realized because of the emphasis on getting the deal done. 2. We must develop a deep bench of senior executives. These executives must be schooled in public appearance. They must be sensitive to the overall nature of business and the political implications. Outside of Ken Lay, right now, it appears that we have senior executives that are seasoned traders who have very little appreciation for things outside of live besides trading. They do not appear to be a well read bunch - i.e., no appreciation for history, economics, politics, etc. Further, outside of Ken Lay, our senior executives have limited "presence." The preception of their character and leadership Is lacking. In addition to Ken Lay, we near to develop leaders that are well respected because of their character, leadership abilities, public Image, etc. The employee morale has suffered because of such a huge drop In stock price. I'm glad to see Mr. Lay put bringing up the stock price back up. As employees we're looking down the road at retirement. Thanks for coming back and bringing integrity back to the top job. * 1. Little or no respect given to people who did not pass through the Associate program. 2. Less value is given tc p'pte with business experience and more value is put on expertise in financial modeling. 3. Great technical people are promoted Into management positions and these in most instances are bad managers. Have a different grwth plan for these p'ple other than management. 4. Enron has a lot of young management with no diversified experience. 5. I think Enron has had great successes In getting to the top but in order to stay on the top it may need to change some of its tactics. What gets you to the top is not what necessarily keeps you there. We need to learn from the Watmarts or GEs who have been there for a long time. 6. Diversity at all levels all the way through management, not just'tokens'here and there. Diversity meaning white, black. Asian, young. old, married, not married etc. 7. Support people are not rewarded, only commercial even though the support are the ones in most cases who clean up the mess the commercials made and which earned them huge bonuses and promotions. 8. Comparing commercials with support in the PRC whereas the two have different emphasis. One is on making money the other is on containing costs or controlling risk. * Mr. Lay: I'm so glad you're back!!! It warms my heart to know that you will be there for us. Thanks to Linda as well. She Is a great lady. $ Another Issue: Examine departmental promotion criteria and practices-exactly what criteria is being used to promote certain individuals as opposed to others. What are the practices/criteria/conditions? Is it longevity, i.e., an employee has been in service for numerous years & now they are entitled to move to a new job level? Is it judgment- based criteria? Is it on performance as It Is being touted?....How Important Is innovation and creativity?... .Management has often times stated during a PRC process session ....... perception is reality", yet when promotions have occurred ... the'majority'of the employees remain perplexed as to what criteria/accomplishment (those) promoted employees actually attained/fulfilled. Would not even some small part of the reasons as to "why" that promotion was granted (or a ranking of one given)-be 'apparent' to those promoted employees and those receiving a rank of one as well as to their cc-workers In addition to management? ( even some of those receiving promotions or rankings of one, though thrilled, have independently & honestly expressed that they had no clear idea as to the exact reason )...As for the others not promoted..(or ranked below a one) & who would just simply like to know in order to perhaps use those "metrics" for their own future goal setting, asking why? or what? .... is met by management with "an air of no justification needed..." I ws once told ....promotion coming.... keep up the hard work ...meet this next goal being set for you.......& that could just ...... and I quote...."consider that your banana on a string." Such a statement brings many thoughts to mind... Including ringing true to tales of times of not so long ago-however. after a statement like that who would have ever guessed....that the string would get even longer & that the "banana" even further from reach? I do not know whether this is occurring across Enron as a whole but if one small part ...is a reflection of the "whole"....then this needs to be looked Into & addressed. Additional comments (re) The PRC process. A 380 degree process should also involve an employee's ability to 17n,ndar. September 116.20111 EC2 000046253 Page 1 " EXH063-00375 ============= Page 20 of 90 ============= Ken Lay I I I I 11 I Response access or secure privileges to view/hear "source-identified comments" as submitted during the employee's review. An employee is being required to select their list of reviewers (by name) ...why then is any feedback from that group then kept "anonymous" during the employee's review, Asking the origins of statements made during reviews is not an option but should be. Anonymous comments are not acceptable in most every format imaginable including this one-so why should an employee be expected to accept anonymous comments during a review. Yes, I know ...I know.....& it is understood the overall HR reasons and concerns for revealing such.., but as for keeping with the concept of...open and honest feedback... perhaps It might help if comments submitted during reviews can be subject to "source identification" upon the request of an employee. Also, "mutual reviews" should take place not just amongst Immediate learn members but across departments where necessary. For instance, If Person A selects Person 8 as a reviewer then Person 8 by default is reviewed likewise by Person A. This Is extremely Important in cases where they have worked closely on a project together. Should there be any justifiable reasons why Person B would elect (or be allowed) to not select (in like turn) Person A to review them especially when they have worked closely together? Throughout the corporate world these types of surveys have been known as "Sensing Sessions". Most often taken to get a better feel of the workplace environment with no resulting resolution to items addressed. Perhaps because (as expressed) the reponse represents only one response amongst many &. as a result, its significance Is undervalued. And they, also. do come with assurances of respondent confidentiality granted... but somehow though are revealed ...is that okay? ...Most often times not.... but sometimes to effectively see the direction in which to go-you have to turn on a few lights...& only then can the actual revelation of that that occurs in the darkness be seen. In conclusion, there is much that should be reviewed. I would also like to think that this will be read not by some consultancy firm.. .and turned Into a statistician's dream and a'lay' person's nightmare. Do I believe that Enron has a vision that expects & sets a direction that encourages the opportunity for management to fully utilize the talents and skills of its employees and encourages,risk-taking, creativity and innovatlon....Yest... Yet, somewhere along the way It begins to fall short. Why? I don't know why, but... '...the reaching hands through blinking screen, ...in counted numbers many. With hope deferred and just a word, to each other we give reassurance. 0 Enron senior management must provide oversight of business units to prevent the looting of the company as has happened with Broadband and EES's.1-u Pi and Ken Rice should have been fired long ago and managers need to be held to the same standards as the rest of the company who are actually providing value. Bonus's aren't being paid to the people on the front lines actually making deals and bringing In value because idiots like these who lose millions get huge bonus's and promotions. 0 We need to get a handle on growth. We are growing faster than we can change. Soon we will start to decline because of overextension and burnout The Infrastructure is under extreme stress. Although work is being done in this area, what is needed is not patches but an overall redesign of systems and hardware. Capacity planning is not being taken seriously. 0 Keep these kinds of 'back to basics' activities going ...it's great to be energetic and entrepeneurial and successful--it's also great to be 'nice'..I don't think the groups of concepts are mutually exclusive. I was first attracted to working for Enron 11 years ago when i heard about Enron and Ken Lay donating bicycles to the 'street pollce'--l thought it sounded 'nice' that an up and coming, exciting company could spend time thinking about the community It shared. In fact, at thattime. (had a fairly successful private law practice. Based on that bicycle event, I decided, if the opportunity presented Itself, the only company I would go td work for in house was Enron. When I started in 1990, Enron proved to be even 'nicer than I could have Imagined-AND energetic, successful, 'nnovalive, etc... As time went on.,there seemed to be a palpable exchange of the latter descriptors (energetic,~etc) at the sacrifice of being 'nice'---in fact, I believe In 1997. the scales tipped completely opposite-'nice' was all but gone.) was extremely fortunate to have been offered an exPat assignment at that time: perfect timing, as I was becoming completely disenchanted with what seemed to me to be a radical declination of values-and the business leaders demonstrating the declination were being rewarded mote and more.. I felt Enron had turned completely upsidedown and had lost any sense of balance. Upon returning to the US in 1999, it seemed some of the harshness had at least leveled off, yet extreme arrogance and cockyness continued to prevail. If there is a single good thing about the crumbling of Azurix and the broadband business, Thursdor. Sr. ffrmhrr 116, 211101 1 EC2 000046254 P119t, IS 1108 EXH063-00376 ============= Page 21 of 90 ============= Ken Lay Response it's that we started taking a few steps in the direction of humility-these business missteps forced a few spoonfuls of human frailty-to be added.to the 'niceness'side of the scale. In the past 2 weeks, Tve actually had momentary flashbacks of some of the'kinder, caring' Enron I became so completely and passionately dedicated to I i years ago. I completely attribute this to Ken Lay and his clear and personal dedication to integrity and all of our other values. Enron is still strong, exciting, energetic , successful and all of these great things---it will be stronger, more exciting, more energetic, and more successful overall when it reintroduces a balanced emphasis, Internally and externally, on Integrity, ail of our values, -and generally being nicer. 4 Upper level management needs to be held to the same perfomance standards as lower level management. It is sinful that Ken Rice and Lou Pal milked the company for so long. • Enron is a terrific company and I enjoy working here. I do however think that we have gotten a little bit arrogant over the past couple of years,and need to get down to the basics of making good business decisions as opposed to the self-serving needs of some highly paid executives, (and I'm not referring to you Mr. Lay.) • t have noticed a substantial increase in morale even with the stock being down at an all time low. I sense this is because of Ken Lay taking the helm again. My staff are looking for top management to show clear examples of ethical behaviour, fairness and diversity and supporting the original values that Enron used to set forth. • Much of IT upper management does not appear competent. They need to run the IT department as a business. Decisions need to be made economically. We simply cannot build what the business wants simply because some high up buisness executive request something. If it takes one million dollars to build some software that will be obsolete In three years and two admin. can handle the same task with no additional benefits to the business, it does not make economic sense to do this project. Just this year IT management finally started capturing project costs. How can you make decisions on valueing projects without having an accurate accounting of costs. The fact that it has taken this long to begin capturing cost Information should show their competency. IT management should be promoted and compensated based on what they deliver on time and budget. Only then will you have accurate accounting and realistic project estimates. They should not be promoted based on who they know or who they are able to get along with. There is a vast amount of money being wasted in IT on projects that because of poor management will end up costing three times (or more) as much as they are worth. The IT department will finally be viewled professionally when management finally CANCELS a project because It has cost more that it is worth or redeploys the management of a project to get competent people in place. This is not happening since management cannot politically afford to let a high exposure project fail. Since they are not held accountable on costs, they can spend three times what the project is worth just to get it done. The business also needs tb become much more involved in ITs projects and demand value for the money being spent and appropriated to them. • I think that Mr. Lay was correct in saying things have gone down hill at Enron as far as "RICE" is concerned. Communication is rhy biggest Issue. I have not been with the company that long, but my family has, and I always thought that communication was very important here. It does not seem to be the case anymore. I believe that is something that really needs to be worked on. I am not concerned with the higher offices, but the managers and directors that do not communicate with their employees. 1 think that is critical and It is not being done well at all. • Employee comments and suggestion site gives Enron employees no excuses. If Enron employees want to be the best, or number one Mr. Lay. Each employee should prove itt The web site gives Enron employees no room to complain. • PRC: While S belie that a ranking system is appropriate, a "forced" ranking Is notjeasonable and does not achieve appropriate'results because it often results in individuals being forced into categories in which they truly do not belong, thereby giving them inappropriate feedback and ultimately resulting In morale issues among all employees. Executive Leadership: 1 really appreciate Mr. Lay's decision to do the right thing for the company after Mr. Skilling's recent and untimely departure. Thank youl T hnr -,f,w, S~•psesnhrr 06, 2,101 EC2 0001)46255 J'n9i• 19 of 83 EXH063-00377 ============= Page 22 of 90 ============= Ken Lay Response _ I think that Enrans innovativeness is outstanding and is one of things tht I fake best about working here. However, J think we have.taken it to far, things like xcelerate and just how much Enron focuses on everyone being creative and what not is taking our focus away from the REAL ways that Enron makes money. I do agree that Enron being innovative has been good as it has gotten us a lot of attention and produced a lot of cashflow, but I don't think it should be a major focus of our business. Just my opinion. • I believe that the employee morale has deteriorated considerably since I first came to Enron in 1997. The first year and a half of my employment I just loved coming to work. I was fortunate enough to work for a El and was under the management and leadership of two incredible VP's. There was respect among all in the group and everyone was super busy. Everyone in the department and within Enron appeared happy with their jobs. You would walk around Enron and employees would openly comment on how proud they were to work for such a great company. I had never seen such company loyalty In all of my 20 plus year career. I soon became one of those many loyal and dedicated employees. However, In my view Enron start to go down hill after the re-org of July 1999 and all the other re-orgs that have followed. From the 4 different re-orgs that I have survived I have witness the following: management level VPs treat their employees with total disrespect; supervisors or other co-workers trying to destroy the reputation of well respected, dedicated employees with strong work ethics just to make themselves took better, arrogrant employees that think of themselves to be indispensable and pretend to be productive, yet spend most of their time "cruising" off the expense of others work product and performance; people in management or supervisors roles that do not have a clue what it is to be a good manager - not only knowing their role but the treatment of the people that work for them: employees being recommend for promotions or put in supervisory roles that are undeserving of such positons. Further the many re-orgy and "redeployments" at Enron have created a very "back stabbing" atmosphere, along with building envy and jealousy among co-workers in the work place. The redeployment issue has become a joke - it #s like playing musical chairs, when the music stops you better have land In a chair. r think that It would be best to be upfront about the supurios redployment and have one major lay off. Enron would be doing the employee a big favor as well as to the company. I also think that Enron needs to re-examine the people they have In, management, not just high level management, but across the board. Some really need management training. Enron's motto of respect, Integrity, communication and execellence has totally gone out of the window. In all fairness. Skllling had some business Innovations and raised our earnings yet he lacked the ability to connect with the employees and communicate with the public, In my view, Mr. Lay is a great example of what a COB, President. CEO, COO, VP, Manager should be. I think that it was demonstrated at the employee meeting when Mr. Lay received a standing ovation from the employees. In my view Mr. Lay is a true leader, a well rounded business man, and he Is a Communicator - a people person. He has my respect, as welt as the respect of many other Enron employees. I think that one of the things Mr. Lay believes in is that that the employees make the company. Its not only about making money and having innovative ideas, etc., its about respect, creating a positive productive work environment. I think that Mr. Lay is definitely on the right track. He has demonstrated this in taking Immediate action. Hopefully Mr. Lay will restore what has been lost, and make Enron- once again the best company to work for. I hope that Mr. Lay will address the PRC issue immediately, and hopefully there will be fair changes made to the process. As for the stock, I have faith that by middle of next year It will regain its true value. Ten months ago, I was redeployed from ECB, 3 weeks later, one of my ex bosses fortunately recommended me to a SVP in ESA. I was offered a position as well as a promotion. Since then I have been working for a great SVP in EGAS-SA. He Is a smart, has a strong work ethic, is a fair and objective Individual, a great manager, respected by his entire team. He has a great group of people working for him - all very hard working, highly dedicated and respectful individuals. He has restored my faith that there are still good VPs at Enron. The only problem now is the future of EGAS. All I can say is that we are working our hardest to improve our earnings, etc. I only hope that If Enron does not foresee a future for EGAS-SA. that it will provide positions for many of those hard woricing EGAS-SA employees who have been putting so much effort and dedication in their jobs. I am very impressed with the EGAS-SA group. Despite some of the negative encounters and observations I enco ntered from July 1999 to September 2000, my loyalty to Enron has not walvered. I will certainly do my part n helping Enron regain its position in being the best company to work. I know that with Mr. Lay back in the helm that we will come out of the dark and that his successor will reflect Mr. Lays values and future vieions of Enron. • There Is a view, both outside and inside, that Enron has some magic ability to "Enronize" markets and reshape them effortlessly. Indeed EOL has been a very rapid success but it would be worth pausing to consider how 77uindny, Seprrrnhw 116. 20(ir EC2 000046256 Pale 20 of 8:s EXH063-00378 ============= Page 23 of 90 ============= I Ken Lay r Rexnnusc I long it has taken for other markets to fully comrnodltlze. Not everything can be accomplished quickly. For example, in my team we are trying to trade with a commodity new to Enron (and arguably very different to the traditional energy commodities). I was asked to put together a PowerPoint slide Indicating that we would "Enronize" this commodity. This was done without any serious consideration of the nature of our commodity or I Nthe steps we would take to realize this outcome. Enron PR Is very good but I think sometimes we risk falling into the trap of believing our own publicity too much. Hence a bit of humility would be a good idea. i 1. Constant reorganizations without any apparent or disclosed goal are a drain on time, budget, and other scarce resources. They result in lost time and productivity due to constant rumors, distractions, and the need to reestablish relationships and lines of communication that are constantly being broken as responsiblities are changed and moved from one person and/or group to others. Once in place, experience and knowledge is lost resulting in little to no progress on important issues and constantly reinventing the wheel as the new group Identifies the problem and tries to reinitiate solutions already tried and rejected or abandoned rather than making real progress. Further, the constant reorganizations result in the'need to continuosly monitor processes to ensure that they are not broken by incomplete knowledge transfers to new persons. Also, the high turnover from burn out and frustration Is resulting in the same problems. 2. While quality of life is stressed and advertised, those who live it are penalized in the PRC process and work loads mean choosing between making your boss and customers happy or making your spouse happy with little room for both. * • The Integrity of management needs to improve; The attitude of short-term gains without regard for future consequences needs to be addressed; We need to rely less on accounting trickery and more on solid operations to meet our earnings and cash flow targets; M The PRC process needs to be fixed - we are turning our employees into self-serving people who rush to take credit for things and spend enormous efforts blaming other for failures. The PRC process gives no credit for people doing their every-day jobs that are esential to Enron running smoothly. PRC meetings are very negative. Each manager takes about 2 minutes presenting hislher employees. The remaining time Is taken up with bringing to light every negative aspect of other managers'emptoyees In en effort to satisfy the required distribution. # 1 work In EES. I have not worked with a more unethical, ruthless group in my career. Every time I see a deal close, l am confident that the customer was taken advantage of.  Although people here are smart, agressive and working towards making deals close. I am never at ease that I will have a job tomorrow. There is no direction and we are thrown into different structures every three months. We are telling customers that we want to be in the retail business of energy outsourcing, but our actions clearly show how we are only interested in commodity. We are telling customers we are interested in doing DSM type projects and once the deal closes we drag our feet to never do projects. Our competition will eventually get us. 0 Please take a good look at management They're so busy trying to create their own kingdom that they seldom make time to great anyone, much less new hires that this is left up to the Admins., which it okay but management need to realize that they are the leaders and a representation of Enron as we Admins. are a representation of our g(oups, esp. of our leaders. Management In general are very "as a matter of fact". We need classes/seminars' mandated far supervisors and above regarding their management skits as they are giving Enron an awful reputation. Ken, it is sad that Enron is no longer "the company to work". People actually FEAR working at Enron, that's just not right. I'm in a group where 10 + employees have left to work outside of Enron all because of management's inability to "manage" what you've built - they're bringing your company down Ken. Please address this Issue. Our group, URM, recently got hammered in the PRC review process because the group lost money. The thing Thnrxdar, sirrrn,her 06.20111 EC2 000046257 PaRe 2L of 88 EXH063-00379 ============= Page 24 of 90 ============= Ken Lay Response is, the deals we lost money on were signed before 90% of us even got here. I have heard the low rankings were to encourage people to leave. This may make business sense, but it is completely lacking in respect and integrity since the rankings are supposed to give the employee a gauge of how they performed, not be used as a cheap downsizing tool. This may be naive of me, but I want to work somewhere that is honest with their employees. To further the theme of the lack of respect we were moved from EES to EWS about a month ago (could be more), and our new VP has STILL not spoken to us. This Is INEXCUSABLE. He may be busy, but we are busting our butts for him and he has not even had the decency to acknowledge us - much less give us a vision. The morale in this group is very low, and without major change, there will likely be an exodus of people. I am not alone when I say this Is the most poorly managed group I have ever been around. I don't know if the rest of Enron is like this, but N It is, I want out. i We've lost our way. Some of our executive leaders have forgotten what got them to where they are. Call it youth, inexperience or just plain arrogance; we have moved some of our talent too quickly too far. They lack the decipline and maturity to lead a world class organization such as Enron. Much of this has been taken care of with the recent executive exits but we have more to address. We need leaders that believe In people not just themselves. The company is full of such leaders, but somewhere along the way we lost our way...we became brash. We need leaders who inspire, care and bring out the collective best In our people. Thank you for asking for my views. • Overall. I think Enron, and especially my group, (Jenny Rub's group) is doing exceptionally well. There are too many bright people here at Enron that love this place (and you Ken...)for Enron to fall. Now if there was a thing that I could do, it would be to get rid of all the slackers that don't work as hard as I do. I swear there Is a LOT of lollygaggin' goin' on. But that would probably exist in every company. * Until I posted out into my new position, i tho't Enron stunk as a company that didn't at all walk the talk of Values and Visions. I had a horrible situation with a department that was completely dysfuntional and it started at the top with the Managing Director. I even enlisted the help of HR and they were as intimidated as everyone else. 1 nearly lost my job over going to HR. I hung in there because I wanted to work for a company that could give me a solid opportunity to prepare for my retirement and i was proud to say I worked at Enron with only the'best." Now, I'm in a terrific place with terrific bosses and coworkers. Not perfect, but so much better. I no longer have chest pains. My former experience sent me Into therapy and the use of antidepressants. Our Values and Visions need to be enforced. I received a very good review with no signifanct problems from my current supervisors. The open concept of work stations is quite frankly, not a good idea for all departments. I think that more tho't should go into determing that employees in some departments need more space, quieter space, private space. It is way too distracting. No offense Mr. Lay, but would you really like to sit in an open stadium and try to have phone conversations or compose documents, letters, presentations in an area the size of a table top with very little room for ties or desktop necessities. The open concept leads to inefficiency in many areas. The PRC is absolutely dreadful. I understand that we need some type of measurement to weed out the employees who are not up to par, but twice ayear. We spend way too much time on the process. Also to force rank individuals is hateful. You loose really good employees that way. Also, the process truly does not work in many situations. If a, supervisor is out to get someone fired, he has total end complete power of the person, whether or not the person in question received good feedback from others. Many times I've seen supervisors completely disregard any feedback from others while reviewing the person in question entirely on their own. Not at all fair. United Way - if you would offer the employees an additional day oft if they contribute to the United Way everyone would. We do it In our department and we are always 100%. We have too many website and too many ids and passwords: Can't we discover a way to reduce these to T1$11Ar ,. Teprernbrr 06, 2091 EC2 000046258 Page 22 of 88 EXH063-00380 ============= Page 25 of 90 ============= Ken Lay Ac!sna~,, ~ ,~,~ make gathering information mare efficient? I have about 15 passwords and Ids at this time., This company has so many awards, plaques, trips, etc. for people in management positions. What about the ones that are supporting Sit of these managers. They like recognition as well. We all make Enron great If I didn't get my mail efficiently, or my copies completed or my phone answered friendly, my performance would suffer. Let's develop something for the support staff to strive toward. Thank you for this opportunity to "vent" I'm very pleased that you ace once again at the helm. Enron truly needs you as we have slipped dreadly from grace. * Mr. Lay I am a employs with florida gas transmission company for 23 years out of my 23 year with this pipeline company I do not know of any blacks that has ban hire with this company In my region In the last 20 years I feel like this sure be a concern to the company becouse is a concern to me by being one of the black employs on this pipeline. thank you for giveing me this time to express my feeling. i 1) Throw out the forced rankings in the PRC. If someone is doing an adequate job they shouldn't been penalized because of forced rankings. It is also a deterent to hiring and a demoralizer. 2) The company (Executives) are communicating. Managers need to communicate better with their staff. My boss promoted one of my employees without telling me. He also has her report to him, also without telling me. He never communicates details about deals we need to know. He couldn't even tell me how I could Improve my performance. I am not even sure he knows what I do on a more detailed level. I don't even think HR can do anything about it. I could give unsolicited feedback in the PRC, but I have no faith that his boss would handle it properly. 3) More IT help at a reasonable price. There are several'good projects going on or that should go on, but Ira ..not In the budget" to have them done or there is not enough personnel. "My" programmer may be working on multiple projects at once and it's taken two years to get two of my projects nearing completion. I have several more ideas but not enough IT to get them done. * Primary issue at this point concerns messages being sent by management to employees through evaluation process. Rankings often do not align with messages delivered, leaving individuals at a loss concerning what actions need to be taken to improve their position within the company. If you want to reward or penalize behaviour, make sure the individuals understand WHAT Is being rewarded or penalized. * In the past few months the morale has gone from upbeat by the employees to a snarling mass. There is no room in some areas to move, let alone work, the noise level is hideous and without the ability to focus, mistakes are made and, as we all know, mistakes are costly. The IBIJYIT system Is a joke. Approvals are being sent to people that have nothing to do with payments, and this delays the payments. I have heard that Enron can not get a check.to the vendors on time so everyone is now using the wire system, It seems that the Enron Treasury department can work faster than ISUYiT...This issue needs to addressed before the public starts complaining that we can not pay out bills and Enron becomes a credit risk,... The PRC system is okay in some ways, however to get dumped into a group of others because they are also "clerks", "Specialists" or whatever grade to be rated is an insult. There are people in this building that are here for 8 hours a day and they work maybe one. However. fey are rated the same as the person that is here from 6 am to 10 pm and works all those hours. Also. people are reviewing others that know nothing of all their job duties. They may only interact in certain situations. Since Ken left and Jeff took ojer the position the morale and ethics in slot of areas have gone to pot. I am hopeful that with Ken back the-situation will correct itself and people will take pride in being an Fnron employee and that the "outside" wilt see again how great Enron is. The PRC process needs to be corrected. A fundamental issue affecting everyone's view of the situation is that for any one employee to win another must lose. We all agree with a need to judge performance on a regular basis, but It would be so much patter if all of the categories on the PRC l3rocess were taken into account In the ` uraflgl•, StrteurJ> While my tenure with Enron has been relatively short, I came to this company with extensive experience in leading and managing the personnel and assets of large organizations. Consequently, although I would be the first to admit that my comments should be appreciated in that light, t can say unabashedly that thirty years in the military, commanding units with as much as 3500 personnel at one time, does offer me a unique and somewhat informed perspective an what I think is Enron's trenchant weakness -- the quality of management practiced by its leaders. We can debate the virtues of the pros and cons of this Issue ad nauseum. Nevertheless, if, as I suspect, you hear a consistank theme of employee morale being at issue, or concern about where the company is headed, or questions aboutlmanagement communications, then these need to be taken as red flags warning us that there is a problem at tl~e core of this organization's leadership. And, if anything reinforces this, I would call attention to the almost two minute standing ovation that Mr. Lay received at the last All-Employees meeting. That wasn't contrived nor was it uncalled for. It came as a result of what I would offer is a crisis of confidence in the leadership and management of the company - - something that is not solely the fault of Mr. Skilling (although as the senior executive of this company the buck certainty stopped with him). And, if left unchecked, this crisis will fester and its deleterious effects will have both internal as wells as external hnnrrlnr..c yprember 0,. 2001 EC2 000046300 Page 64 of d~4 EXH063-00422 ============= Page 67 of 90 ============= Ken Lay Response consequences beyond the bounds of the market value of our stock. This confidence has to be restored quickly and, interestingly enough, some of the remedies are not all that copmplex - - candidly, this survey is a step In the right direction - - as long as it is used and not perceived as a bandaid to display the "obligatory" show of concern. It continues with the selection of right-minded executives to take the company forward after Mr. Lay retires (selections which have already occurred hence somewhat questioning the efficacy of this survey). You see, there appears to be a fundamental flaw in the selction criteria for the corporations and subsidiary companies leadership. Success in very narrowly focused venues (trading, sates) would seem to be mistaken for ability to run large organizations - - hence the selection of people who, while earning vast sums of money for this company, may not really have the basis or personality to run large organizations and orchestrate the actions of many employees over a diverse spectrum or requirements. In fact, one could argue that the type of people who have been successful as traders and/or sales types, are the antithesis of what good leader/managers are all about. The latter knowing how to mobilize the talents and energies of many people and use others to maintain the company's momentum while staying focused on a myriad of issues and sustaining ail of our efforts towarsd the long term vision put In place. It's this type of leader/manager that somehow, of late, Is not being nurtured and culled from the pack to lead us forward. Rather, we appear bent on selecting those who have garnered success in a mostly individualistic endeavor where teamwok and motivating others may not be the recipe for success. If this Is too harsh and a generalization, then understand that it is unfettered by any emotional baggage (i am happy with my immediate employment circumstance and superiors)and based exclusively on many many years of leadership under the stressful circumstance of combat and within the context of many different leadership environments above me. Furhtermore, I came to Enron because it exhuded the qualities and virues I didn't think I could possibly find anywhere than in the military. Until this last January it continued to be that way. However, the change since then is almost palpable and it will need to dramatic and forceful leadership to change It if that Is the company's Intent. Frankly, l really believe your sounding of the situation doesn't go far enough. Would ferevntiy recommend you take a sensing of what key customers (especially retail customers) think as well as middle management. I do not wish to be rude or disrespectful, however, if this process doesn't drill down into the deep-seeded Issues barely scratched on the surface by this survey, and, if left to the sole interpretation of the current executive leadership, It will never have the complete airing it needs. In closing would just add that something that clearly is absent in the whole equation Is a leader/manager development program. Some say that leadership can't be trained. Others insist that there are skills that can be taught. I believe it's a little of both. But I can tell you that It is neither serendipitous nor purely mechanical. But it is something that is thought out and it is a nurturing process that requires employees being groomed and developed early on in their employment at Enron. EMPLOYEE MORALEIWORK ENVIRONMENT I don't need an office with a great view of downtown Houston to feel wanted, but I do need a working environment that wifi help me produce in a way that is expected of me. I work in ETS engineering and we are being forced to work as a "paperless" society. Moreover, our workstations are being drastically reduced in area while the same level of production, efficiency and accuracy is being expected from us. The upper management people who are making these decisions (sounds like people with IT or Trader backgrounds) obviously have no idea how engineers must function to do their job. The effective message is that the price of real estate Is more valuable to Enron than our product or the morale of our people. They ask, "Why retain books, binders and drawings with data when you can call it up on the net?" This logic must be fostered by lack of understanding. HUMAN RESOURCES If Enron wants to save considerable resources, try deleting about 90% of HR. These people passive, not proactive. They rarely ar of much help in almost every situation I or others have experienced. They offer no help whatsoever when someone calls about employment (they say go to our web page I)or when an employee is redeployed. Regardless what IiR people or Mr. Lay may say, redeployed employees are on their own. That does little to boost employee morale Dear Mr. Lay, Today is my last day of working for Enron. I am going to back school next month. I was a summer intern in Enron in 1998. 1 decided to come back to work for Enron because I really enjoyed my working relationship with my boss and co-workers 4iuring the summer. I felt respected for not only my skills but also my Ideas. Thnrsdur, Sep:enmher 06. 2001 CC2 000046301 Page 6{ of .78 EXH063-00423 ============= Page 68 of 90 ============= Ken Lay Response  But things have been changed since I came back from school in 1999. I was promised by the HR department to get a sponsorship of Green Card. But that promise was denied since I became a permanent Enron employee in I1999. Celeste Roberts told I have to wait for three years in Enron in order to get a sponsorship. I felt Enron cheated me. But I still stayed with Enron because I believed Enron stiq had something I appreciated. Things were getting worse. My current supervisor never shows me any respect. I never felt I was respected but I like a tool for working. I am a CPA graduated from UT-Austin. I developed very solid finance and accounting skills but I felt my potential and skills are not recognized. My supervisor thinks the person who can make her happy is the good employee. I don't like politics and that is the reason she does not have a favorite opinion on I me. But eventuetiy I still had to be judged and represent by her in the stupid PRC system. I did not get a fair PRC review since I started working for her. My morale sank to the lowest point in my life. That is the real reason why I decided to leave Enron. I could have found another rotation and leave the group but all the unpleasant experiences make me feel upset and disappointed. Comparing to Enron of 3 years ago when I was a summer intern. I found Enron has changed a lot Respect has only become some slogan instead of the really spirit. If all the employees keep leaving Enron, how can Enron maintain Its expertise and stability? Like the A&A program's PRC system, all the analysts and Associates have to fight to death in order to excel each other. Why we have to go through such a brutal war to success. Where is the respect? I felt I am a gladiator who has to kill his peers to survive. I have great respect for your leadership. I hope you are going to save Enron one more time. I don't know I whether my voice can reach you or not but I do hope Enron keeps moving forward. I want to see the company really become a world leading company, 0 We must do something to restore much of our stock valuel t I realize that $90. may have inflated, but $35. will I lead us to being absorbed into another Company, which probably won't be beneficial to the employees as a whole. It may not be the most palatable game in town, but Enron Mgmt. is going to have to start treating the investment analysts a little better, so we can negate some of our negative publicity. it's too bad that this Is necessary, rather than just being able to "make money" and call it good, but it seems like those who don't bow to the "Street', come out the worse for the wear. Something needs to be done about the PRC system, especially in ETS. Having to rank people, even though H.R. won't call it forced ranking, Is completely unproductive in a Division with a high average years of service like ETS. The PRC system Is too labor intensive and produces very fittle except confusion, hard feelings and extra expense. I for one, am very glad to see you (Ken Lay) back at the helm!! There are very few of us who do not have full faith In you to return OUR COMPANY to a position of respect, profitabilty and prosperity. I was appalled by the statement Jeff Skilling made regarding Enron and pornography. I read it in one of the internal publications and I can't believe that It was Included. I cannot imagine Mr. Lay ever making a statement like that. I am very relieved that Mr. Lay is once again CEO of Enron. * Several points should be made: (a) The so-called mangers at Enron have rarely managed. They have usually been traders or developers or others who were very hood at what they do individually, but leadership is rarely their forte. Someone at Enron has to make sure that people at all levels are taken care of (and Human Resources has done a miserable job of that to date). (2) The PRC is counterproductive. Sitting in PRC review meetings is an exercise In defensiveness, destructiveness and humiliation when It should be a celebration of what is good about the employees of the company and an analysis of how to make those who are less driven, less skilled or less capable more productive members df the Enron community. __ Tkursdrn•. SgNernher fire, 2001 EC2 000046302 Prt,$C , r f R Y M EXH063-00424 ============= Page 69 of 90 ============= Ken Lay RLsponse (3) There are many of us who have known for years that certain members of the executive team were driven more by self-interest than company concern. It is good to see some of them leaving the fold. i We talk a lot about R.I.C.E. (respect, integrity, communication and excellence) and 1 see all Of that in Ken Lay. However, there exist many areas in the company where staff ideas are not really welcomed, changes are made in people's lives without even asking for their input. Change is good but management should involve (ask for input) from all levels before making sweeping changes that may or may not be the best thing for Enron but they are the best thing for management. • The back office infrastructure has been totally Ignored and this will continue to cause heartburn for a long time unless steps are taken to fix the problems, 0 This may sound crazy but when I heard that Ken Lay was leaving I was so sad it was like losing a Father, after asking around and talking with others they felt the same way. During our all employee meeting as t sit there observing all the tears that came to peoples eyes when Mr. Lay announced he was backlit I do want to thank the redeployment team effort and I thank God and the people I mentioned above but if it wasn`t for Stan Horton and H.R. I may not be here today. I think there could be some improvements to redeployment. 0 t truly believe the fundamental success of Enron is based on the talent of our people. This is mainly accomplished by having the right leadership at all levels focused on coaching and motivating their staff. I have been at Enron for over 5 years and have held close to my heart the Vision and Values of this company. Im currently a Director and manage a large team. I have witnessed leaders at higher levels not portraying the Vision and Values of this company, this hurts Enron more than any single item. Happy motivated people work harder, its not rocket science. All of our management should be held accountable for adhering to Enron's Vision and Value system. Ken's return has been instrumental in the morale of myself and my team. People truly believe in his character. Even as CEO he treats everyone equally. I have personally witnessed Mr. Lay on the elevators talking to folks as if he knows them personally, this is awesome. Imagine if all of our top leaders portrayed this type of behavior. + Question: There was an article in the Aug 17 Wall Street Journal about five Hollywood studios (Sony, Warner Bros, Universal, Paramount and MGM) forming a joint venture to deliver feature films an demand to consumers via the internet. I can't find the specific article announcing Enron Broadband's termination of agreement with Blockbuster Video (which would have delivered movies over the EBS network). However, I seem to remember Ken Rice saying something to the effect that EBS didn't want to work with a distributor such as-Blockbuster, but rather, Intended to work directly with the movie studios. Seeing that these five major studios are joining together to provide a product that Rice seemed to be referring to, I was wondering whether EBS was involved at alt In these talks? Also, are we still pursuing the direction (of working with the studios that Rice referred to, amongst other strategies? Issues to be addressed: EES Customers are receiving SHUT OFF NOTICES at an alarming rate. Recommend a root cause analysis be done to determine why this continues to happen. Probable causes: I Customer wants EES to play bill that is not covered in contract. Incomplete TPAs resulting from de-DASR/re-DASR fiasco earlier in year. Customers not set up in billing sysem. Customer 'missing bills' issues not readily addressed by CSC or EES Bulling Management Bills are now past- due and start shut off notices. 20/20 Double Discount Effect - CSC taking 20% rebate on amount Invoiced by Utility (SCE & PGE) not knowing 20% rebate was already taken into consideration in invoice. These under-pays will also trigger past-due & Shut off notices. - - - Thnrr,A{r. Teplember 04, 2001 EC2 000046303 Page 67nf,4d EXH063-00425 ============= Page 70 of 90 ============= Ken Lay Response Payables Due Date Issue. When entering due date for past due and/or shut off notice payments Into SAP, payment due date being entered is the date of the shut off and APs disburses funds based upon this already past-due date which compounds the problem. ED[ Lag issue. Add in an atledged delay (2 days) of EOt payments in August (due to an IT virus), and you will have created hundreds of shut off notices. Long term resolution of this Is necessary. 0 1 believe this survey will uncover tremendous discontent with the PRC process. Performance review is necessary and important to a company and to employees - both the reviews from superiors/peers is vital, as well as self-assessment. However, this PRC process In particular engenders a battle mentality, and I believe may very well be the cause of losing top performers rather than 'deadwood.' The arbitriness of fitting within the scale to best serve your group's overall rating needs, and the capriciousness of having people review you and/or block your ability to'score weir who have NO familiarity with your skills, performance, OR job responsibilities, is counterintuitive to getting the best from employees over the course of the year. Its all about positioning rather than client service and innovativeness. And this, coupled with a very poor external image at this time, is causing the quick disintigratlon of employee morale. The current leadership (in Ken Lay) Is certainly able to turn things around, and I am optimistic that it will, & We are so blessed to have you back Mr. Lay. 0 My credibility and reputation of integrity and service is at many times jeopardized with my customers in the marketplace. Previous to Enron I promised and delivered professional services to customers. I was known for my Integrity in service delivery. Now, with Enron, in Instances where I am merely attempting to deliver what we promised in a contract my efforts are thwarted by lack of internal resources that are overwhelmed, or broken promises to deliver. It seems like I am a shield or a front to make customers believe there Is someone servicing there account. Without Enron's support their shield will fall and someone will have to stand tall not just before the customer, but possibly the customer's legal couch as well. i 1. Reevaluate the Associate/Analyst program - It is so poorly managed. The Associate class of 2000 submitted to Billy Lemons our comments about the program. These should be viewed by upper management (including Ken Lay) and taken seriously. 2. Salaries should be level with our competitors (rumor has it that El Paso and others pay more) i Unfortunately, over that past year employees have lost the sense that Enron operated as a meritocracy. Nothing can erode the morale of a company than this type of malaise. The movements and maneuvers at the higher levels were viewed with scepticism given that there often was no corresponding reference to an initiative or endeavor that the particular individual was responsible for. Secondly, the disparity in the amounts of money that many were making did not reconcile very well with what others earned. The integrity of the bonus plan and PRC process is under attack. To your average employee the critical component appears to be who you know or who you work for and not how well one performs their job. Finally, there is a glaring underrepresentation of women and people of color in upper level management. I am suprised that Enron has not been taken to task for this earlier given their high profile. A serious, commited and sustained should be undertaken by you and the Board immediately to rectify this imbalance. The individuals should have a commerc platform to quantify their contributions to the company and managers should be rewarded for promoting a h d grooming for leadership individuals from these underrepresented groups. 0 Mr. Lay, It used to be that we wanted to get our name out and known to the public, but somehow we went backwards. How about supporting something at Yellowstone National Park to get our name recognized by the millions of people that pass thru the park. You know there are alot of both Americans and foreign visitors from all walks of life. the exposure would represent us as being not only enviromentally friendly, but also reputable and on the move once again. Alot of employees have more than just their jobs at stake with this company, many have their retirement Thursdin. September nf. 2001 E C2 000046304 Page 68 of.4R EXH063-00426 ============= Page 71 of 90 ============= Ken Lay Response dreams. Make believers out of us once again. 0 The person who follows Ken Lay as CEO must have most of his personal attributes (caring, people-oriented, great manager of people, visionary, personal Integrity, community and civic minded, great communicator), in addition to his strong business capabilities. We want to hear the good and the bad news from this survey and what Ken and the management committee wilt do fix the problems. The Pulse results were not communicated to employees well at all, and there was no follow-up or follow-through on the proposed solutions to Identified problems that happened to be identified. If you take the time to ask us, then tell us and then do what you say you will do. I liked the format of this survey. It went right to the core of what is brewing under the surface !at our company. a Listen to your people and take care of those who want to grow within the company. For example I worked full time and went to school full time. I graduated, received my engineering degree, and thought I can contribute even more to Enron. Didn't happen. Yea, Mr. Lay read my email and forwarded It on to Cindy Olsen, but there was no follow up and frankly it becomes tiresome. What am I doing to take care of this? Unfortunately, I'm looking for a job outside of Enron. Hopefully someone else will appreciate my skills and what I can bring to the table. i Dear Ken Lay, You sought'honest feedback," "confdentlallty", "responsive action steps," and "two-way communication." I share the following commentary because I still believe that you personally hold Enron's vision and values seriously. I am holding on to the edge of the tier, so to speak, about the negative Issues I have seen In Enron. If what I say will sound like something from a bitter employee or a troublemaker, I have not succeeded in communicating with you about my issues with Enron. Please understand that I feel I am making a big risk by disclosing my concerns in this medium even though "confidentially" Is assured. There are things that I like very much about Enron and I carry a lot of hope in you personally in giving Enron closer attention to its long-ignored problems and ultimately a healthier work environment. I admire strongly and share the visions and goals of Enron- and want to see them In practice In this company. I hope you can communicate your thoughts and reaction with me directly soon. Sincerely, Hector Alvier 1) Human Resources have very serious problems. In my two-years in Enron, I became increasingly disappointed with how little integrity and respect this area of Enron carried with me and other employees. Not only have worked with HR but also have worked in HR as part of a year-long rotation. I observed irresponsibility in hiR handling personal and corporate Information, resulting in perhaps politically convenient but nevertheless unsatisfactory excuses. An example of Irresponsibility and suspicion was the recent discovery of my highly confidential employee file on the desk of a non-Enron person. which was somewhat unsatisfactorily excused as a courier mistake when I asked for an explanation. Another example of neglect was the failure to manage the human resource budget and identify variances in an out-of-control spending process primarily due to poor communications between management when I worked in my rotation (HR Analysis and Reporting). In contrast to supervisors ]'bad in other Enron companies, my directors in HR were, with all due respect, political machines, not problem solvers. They appeared to come across as thinking and acting It was more prudent to play a blame game or a to war than to resolve or communicate serious business problems with the executives or with their Enron counterparties. Their conduct and lack of team commitment and Involvement In our work shocked and ultimately hugely disappointed me In 2000. I have tried repeatedly to communicate directly and indirectly with them in different levels with very little success and instead I felt punished for pointing that out honestly and trying to communicate. Far from being a simple case of personality conflict or unfortunate or accidental misunderstandings, the problem was sourced in people who took Enron's values and visions very cynically. Subsequently, I documented and wrote down specific grievances about this experience among others, and since they involved violations of the company's policy and values and visions, 1 submitted these concerns to Enron Fair Employment. I requested a written response to my 4-page paper involving specific 7hur+ulm•..Sepsruibvr 06. 2001 - ^ - EC2 000046305 Page 69 if 38 EXH063-00427 ============= Page 72 of 90 ============= Ken Lay response complaints and Issues - I was refused and given a very empty explanation in a one-hour verbal meeting. Rick Johnson, the person who refused a written explanation went further and admonished me what I believed were urgent and Involved serious communication problems for reasonable accommodations critical for my job. The fair employment director did not show acknowledgement of my concerns. 2) In the summer of 2000, after my internship, Celeste Roberts, the director of the Analyst & Associate program made a very clear promise that I would be a full-time associate when I came Into the program but failed to live up to it. I have o hearing problem, but I heard her very clearly and specifically an her assurance with a revised offer. I followed through several phone conversations and emaits with her staff (i.e. Shelly Jones when Celeste Roberts was "unable" to return my calls for at least 3 months and did not get an indication of any contradiction to that promise until December 2000 when, with shocking disappointment, I received a revised offer as analyst, not associate. Given a almost a literally last minute notice and not much alternative to wait out and look for another more fair alternative, I trusted the program in good faith that they rightly placed me and in what they gave me as a carrot of soon-to-be promotion. My chances in Enron has been damaged because of my work In "commercial support" .work In HR -despite its requirement to Enron in analytical ability, the program did not esteem my role as important or critical as the "commercial" roles by other analysts and associates. My good faith has been deteriorated after seeing how promotion opportunities have been closed to me (out of procedural changes) and making side-by-side work and background comparisons to associates and analysts that made the program quite inconsistent with what they said In public. Bottom fine, the program failed to rive to its expectations in regard to promotion and mentorship and communicated misleading signals and distrust with me and other analysts. Later on, I have heard similar attractive but broken promises Celeste Roberts made with other analysts and associates. The last time I heard from her, she still maintained that she never made such promises; this greatly disappoints me to why Enron would put someone with low integrity In such an important position in the first place -- especially when these concerns were made known a while ago when she held the job. Although she Is out of the program (and Enron?) and there seems to be more honest management on behalf of Billy Lemmons, the damage has been done. Instead of a cover-up or a convenient "let's move on* attitude, there should be some investigation in the conduct of the previous leadership of the Analyst Associate program. If there was, it should be revealed to the recipients of the program. I would appreciate some acknowledgement and justice in this problem. 3) increase diversity and affirmative action in the direction of people with disabilities, I have tried to be a mover in ibis, but, while the spirit and words are there, I have faced some friction and apathy. I have received very positive lip service but not enough action (actually, nothing at all). My vision may be a high can, but one of Enron's goals is to Improve diversity - and this is a good area to improve diversity and find a lot of untapped talent. I keep hoping that this will move in a faster direction In which I could play a bigger role. 4) The PRC process is not a 180 degree process between management and employees. It is very unidirectional, going from supervisor to employee. There Is also very insufficient communication about how the process should be and Is done. The PRC committee appears to be pulled by many ropes and pulleys by a few over many and is not understood by many. The PRC is also a highly political process - hugely advertised by key people who carry very conflicting views about process - producing a lot of anxiety and conflict for most employees. Please understand that i am a BIG believer in meritocracy and in employee performance systems - and the theory behind the PRC Is very attractive to me. However, in practice, the PRC so far seems to have pushed us in the other direction. Sometimes, something can be worse than nothing -but we need something better than what we have now In the PRC. Despite good things advertised by key individuals, I have heard and seen very little that indicates a fair and objective PRC process. Perhaps I ask for the Impossible, but when PRC is communicated as a healthy system and contradicts my experience, it only produces a cynical result. 5)1 did not understand really why Jeff Skilling resigned after 6 months on the CEO job. A short-term drop in the stock price in an adverse market environment does not justify his resignation, t understand there could be 'personal reasons" to his resign tlon, but I don't understand why it should be so private for a man so public in =nron. I respect his decision th ugh and have good faith for his unexplained reasons, but it left me a slightly tinny taste in my mouth. I was a little surprised how some employees were glad to see him go. i) I understood there were Issues of "respect" and "Integrity" in Enron brought up when you (Ken Lay) spoke in he all employee meeting. What did they involve specifically? Were they issues like the ones I brought up? 'Vhat "responsive actions steps" wilt be taken? In the spirit of "two-way communication," will there be a esponse specifically to my commentary, issues, and questions? 'though EES has recently started to speak of the importance of the customer, focus on meeting our 40". Ne'PhInther 116, 2001 ]iC.2 j 000046306 Pn".. "4 ,..' . EXH063-00428 ============= Page 73 of 90 ============= 'en Lay '2snnnnse contractual obligations has not received much attention in recent months. Recent change seems to have taken on the feel of change for changes sake, not because their is a specific goal In mind. 0 1 am making a suggestion which I think will be very good for all of us and it is simple. • Have an environment in the workplace where the unwritten code Is to "constantly train and Improve one another on the job". I can elaborate on this, but it" take a very long elaboration. First, the benefits. Everyone will have a chance to be knowleagable in the work place, thereby eliminating only a few people knowing everything. It eliminates crab mentality where only a few people will know all the skills and use it as job security. What If that person gets sick, what if that person leaves the company. if all knowledge and skills are spread out and shared, thect all of us will know what to do and making everyone Important. This atmosphere should start from the top management. The Idea of helping one another should be emphasized by upper management The ideal way is drip system of training. Like the drip system of farm irrigation. A pipe has holes directly on top of a plant and when water flows in, there will be a constant drop of water. A little at a time. It is better than pouring a tot of water once a day. Case in point. If an employee has some things to learn, he can read and study for It, but It takes time. If he thinks a co-worker knows the answer, he can just go to that person and ask. The other worker should help by explaining and sharing his knowledge. This might be just a few minutes. They could always do the knowledge transfer anytime, everyday. It must be a mutual learning process for everyone. Everyone will know something, either big or small. rt This Is so simple, but in every company you go, there is that environment of non-sharing and the saying "you're on your own". If we want to be ahead of other companies and become number one...l believe we should have this practice. This will also help In the PRS. Instead of seeing more people in the low level, It will minimize this problem. Also, why wait for six months before you try to improve an employee when he can be given training on a daily, drip system type training in a non formal, flexible manner. Another perspective...why is there a "Special Forces" In the Military? Why is it that the "Marines and Airborne" are always saying they are the best Simply because, they are constantly training and improving. They got knowledge transfers from people who have more experience. They won't say to the new recruit that "They have to go to war and get experience". No...they are being taught almost on a daily basis about combat based on real-life experiences. In AmE..ican War History. In World War It the Japanese have taken the lands occupied by America and Britain In Asia, simply because they are more experienced with previous combats In China end Manchuria. Also because all their knowledge In combat was shared to new recruits. Again it happened in Vietnam. Where America sent troops who have little or no experience. During the Gulf War, it is different because the soldiers sent there are "well trained" and the outcome is a real victory for us. If we want to be number one...then we should build up one another and make the chain link stronger than ever. Many companies are say. q that they are empowering their people...only in words,not in actions. The whole world will look lrp to us In envy when we say "we at Enron Is making sure everyone will be a better person In life and at work." and then we can truly be number one. 1) 1 have been with EES for almost 3 years and I would tike to continue working with EES !.like the idea that even though we are a large company, we still have an opportunity to make a difference. 2) As a professional, I have a difficult time when an Executive leader Thurcdrtr, Septeinb¢r 06, 20111 ! EC2 400046307 Page 71 of.18 EXH063-00429 ============= Page 74 of 90 ============= ?m Lay nattxe gets up in front of his department and says that if they want to leave then they should leave the company and he would help. He based this on the fact that he understood that the job they were originally hired to do was now different. This was just after half of the Svc. Mgmt. dept. had been redeployed. This is not what I expect from a Leader at Enron. At Enron you expect your role to change, you expect to be challenged in different ways. I do Not expect a leader to say this. The personnel asked themselves If this was said because more redeployments were coming and he wanted them to leave. This is Not the motivation our employees need. Mr. Lay, I have Tremendous respect for you and the Enron organization. I hope to be able to continue making a difference and living the values that you stress at Enron. However. I feel we are going to lose good people when we have this type of management. Thank You for allowing me to voice my opinion. I think that each person who Is not In a true commercial role should be considered valuable to the overall objectives of the corporation, and should be treated fairly in the PRC process, although they have no margin targets.per se. Many times In the past I think individuals were highly compensated for taking risks that ultimately dragged down Enron's stock performance or business viability, which was a serious mistake that senior management appears to have missed. Many of those Individuals are no longer with Enron, and have taken their fat packages with them. IT's time Enron became a place where you can trust your neighbor, you can be judged based on a job well done with objectives metlexceeded, and not solely on whether you closed a deal at ANY cost. This, in my view, is the core dilemma of Enron, how to treat its people fairly within PRC while encouraging sustainable growth within the various buslensses. Mr. Lay, I'm glad you're back. Can we please build something that wilt last? I am concerned about what seems to be an overly short-term and "unfocused" focus of our company. From getting rid of personnel who were focused on monitoringlanalyzing the future and our competition (e.g the Mgr., Competitive Intelligence and Future Foresight for EES) to endlessly re-org$nizing, re-deploying and having bunches of people in the lobby for the new-hire orientation, it just seems like we're treading water and churning staff. Further, It seems that since everyone thinks he/she won't be around/doing the same job in six months time. they don't take ownership of decisions and others are left to live with and/or fix the consequences. In the big world of city attitudes, striking the balance between pay and work is crucial - people don't stay in their jobs just because they like the work and their colleagues.... everyone will move for money and security. In a weakening market this balance will become more difficult to achieve, for both employer and employee. If Enron wants to be the next 'bank', the split between 'commercial' and'support will require lots of attention - or the support professionals will be deeply unsatisfied - as today's professional support teams provide heaps of guidance and Ideas to the commercial originators. I am disappointed that all the founding executives such as Jeff Skilling, Ken Rice, Cliff Baxter, John Echols, Kevin Hannon has left the company. It seems as they lost their Inspiration and drive by working long hours and weakened travel and what else? These gentleman were an asset to Enron and I enjoyed working with them and contributing to a team effort. The PRC needs serious review. It may function at the MONP level but, not at the lower levels. The salary and titles are not consistent among t e business units. I am experiencing this issue and having been trying to resolve for a year. The unbaiancte affects my compsentation and bonus and earning potential, coupled with the stock price, it has not been a financial stellar year. 1. SAP and downstream processing. Our SAP install and design was one of the very best I have heard of. We developed a single enterprise system for all of Enron with a flexible design in a minimum amount of time and at less cost than most large SAP installations. Our support of SAP? is terrible, There has been no knowledge transfer to our Enron employees or 4r dur. September 06, 2110/ - Puuc 72 of 88 EC2 000046308 EXH063-00430 ============= Page 75 of 90 ============= Ken Lay Response super users. In fact, most of our Enron talent has left the company either due to frustration or Inability to be effective In carrying out the design and application of the system. This was not our original plan. It was to keep our super-users and their expertise for the benefit of Enron. At this time, two plus years after initial go-live, there are still no user groups defining the future and current priorities of system enhancement - no user involvement what-so-ever. No system communications of any type from ISC except for system outages. Our support is too heavy on the external, expensive analyst side and made up of people who do not understand our business, nor our requirement to change things fast. Most of our top level Enron people who were involved In tha project have abandoned in disgust, the enthusiasm displayed with a successful Implementation, turned to frustration. There are major training, data monitoring, and support issues that need to be fixed NOW. We have people entering data who have no knowledge of what they are entering - just trying to make system work. Reporting and data accuracy coming out is consequentially unreliable. We need to upgrade to current SAP version before too much Enron enhancement is applied to SAP design thus making it much more difficult to upgrade generically. Entering data correctly should become part of performance and monitored. iPayft - there is nothing wrong with SAP or it's processes. It is the caliber of people entering Invoices. They are uneducated, untrained. Cannot make decisions regarding tax, commodity judgement etc. They simply punch numbers. This will not work at Enron. We need knowledeble people paying our invoices. They have to know It the Company is correct, if the tax rate is correct for the delivery location, what the final destination was for the materials, etc. The system will process data as entered, it cannot make those decisions, only the human mind can ask questions. Can Source Net process invoices faster - perhaps yes, but if tax liability is wrong, and OL information is wrong and accountants spend hours journaling amounts to correct accounts, and we have greater liability for tax audits, did we really buy cost savings? Also, the time it takes to process an invoice is much greater and involves may more people handling the document Enron requires many paths for invoice processing. Contract invoices must be checked for rates, time sheet verification, approval of work done. Use tax is not getting correctly processed when included in the contract amount. Retainage processing is a major Issue. Purchase Order invoices must be matched to the receipt and PO. We are skirting our normal matching procedures In many cases just to get an invoice paid. We have duplicate payments. We have many more people tied to their computer and desk top for invoice approval. Many of our managers are working In the field, and this type of work requirement is time consuming and unproductive. Most of all, we havevendors that are not getting paid according to terms because of our internal processes. This is really causing havoc for Enron In the business relationship area. We should have tried iPayit in a small trial environment rather than trusting all Invoice processing to an external company. Our former AP clerics In retrospect had many years of working with Enron AP processing and could catch blatant errors in most instances. iPayit processors cannot do this .... and the assembly line processing feature will miss most of the thought processes that are required to catch this type of error. Computerization Is great, but as always, the data-is only as good and correct as, the employee that enters It. Enron because of it's diversity in business processes has many, many tax issus. Some of our business are exempt due to resale, some due to export, some commodities are exempt due to usage. A good AP clerk will know our different business and recognize some of the processing requirements for each business type. To succeed, SourceNet must commit to high level training of their people on both base tax processing, Vertex data handling and requirements, SAP data requirements, etc....and to paying those people well enough to keep that expertise. The cost savings gained in AP processing will be spent in expanded general accounting babysitting and error correcting, tax department expansion, internal and tax audit expansion etc. Let's look at the whole picture before making these snap decisions on what is best for Enron AP processing. Sometimes what seems good on the surface is not really what is best for us as a whole, 2. Change and re-orgaqization are required at Enron. but they should only be for the better. 'We should plan a little more and not makel such hasty decisions. We should include some of the employee experts in our decisions - more of a team effort to design the change. Our management tends to.come from outside Enron and they are not always familiar with our historical knowledge and make some of the same mistakes that were made before. No lessons learned. Hasty, uninformed judgement calls. 3. We put a good deal of effort into our Analyst program and mentoring program, but I have seen very little training or encouragement for middle and bottom level management and supervisors In the last few years. These are the people who make the top decisions work, the ones in the trenches. They are also a valuable Tintrsttm•. Seryurinber 116. 21)11 EC2 000046309 Page 73 of88 EXH063-00431 ============= Page 76 of 90 ============= Ken Lay !U Ouse asset to Enron, and therefore worth some equity investment. On site training would be most cost effective and schedule beneficial. It would also help us have happier employees due to better management skills. Perhaps If we spent more equity dollars on our current employees, we would not have to rely on Arthur Andersen, Coopers, McKenzie etc. for our top managers and could rely more on Enron employees who also have some of the business knowledge and lessons learned experience. 4. We develop expertise and then tend to cast It aside. Example: We had a top knotch international procurement group at EECC with expertise in international procurement, expediting and logistics. With the reorganization, the skills developed in this group are left under utilized while we develop new procurement skills in the ETS group with under-experienced people, in the EES group with Ineffective procurement practices. With iBuyit, we allow anyone to become a Buyer - no professional procurement training required. We have Global Sourcing involved, but very little professional communication from that group to all the professional "Buyers" at Enron. No interaction between all the Procurement departments at Enron. SAP makes a tot of procurement functionality previously unavailable because of system constraints available. We are under- utilizing our investment. We are still using system same way as on go-live date. We should be involved In expanding usage of SAP to give us better information for cash flow, commodity expenditure etc. Correctly used, the system can provide multitudes of information to planners, project management etc. Procurement Is a big area - a professional area - that could save Enron lots of dollars. In this day and age, we would do better to have expert commodity buyers -we are as close as an e-mail or WEB request away - to handle any kind of large purchase for Enron. Expert procurement personnel have knowledge of material availability, new product development, best sources etc. Instead, we tend to farm the procurement function out to job site personnel, contract buyers,and others who are not true professionals and usually have other, more important work to do. Most think of 'buying" as a "pick up the phone and call Joe" requirement, it truly Is not. It requires much experience to negotiate Terms and Conditions, Payment terms, progress payments, bonus- penalty, correct material handling etc. With the level of communication effectiveness that exists at Enron, we do not need the procurement function spread all over many positions. Many of our professional Purchasing Agents are Engineers, or have some type of field experience. They work with engineers and project developers as team members and in many cases have saved project costs and caught errors in equipment design or requirements. These people are skilled in vendor negotiations, price neglotiatton, contract language, commercial code requirements, and can help us avoid unnecessary litigation. They are professionals, just like our traders, tax accounts etc. With our expanding international involvement, it should be a requirement to have an experienced, top notch procurement group to handle our material requirements for our global business requirements. iBuyit is a great idea for everyday commodity purchases from the desk top, but it Is not a great Idea for pipeline, power or facility procurement except for operational items. And, it is very time consuming. There are safety issues in the material manufacturer and sourcing. Engineering standards to be aware of, substitution Issues, logistics issues, material handling procedures, documentation requirements etc. 5. Record storage. We are continually fighting for electronic storage space. IT policies of 1 year data might be good for traders, but not good for pipeline, power, engineering functions. Paper storage Is expensive. Online storage, not so. If we don't want to keep this Information on-line, why not help the business units develop good methods of downloading Information for record storage. E-mail has become the communication tool of the time - just as paper memos used to be. A project can run for two, three years .... and, to lose data after one year can be detrimental to project success. Each of our business units has different requirements, perhaps some flexibility could be justified I some requirements for different business types. We generally do not see tax audits until 4,5, or more years after a project has reached completion. If we cannot produce the correct Information, we can owe money. If we cannot produce material certifications, testing information etc. on materials ordered for a site that had a spillage or explosion, we could be liable for extra dollars. Contract language and Info can be important long after the contract was completed, due to warranty requirements, etc. We want to avoid this type of liability, and loss of records can be'very costly. It is difficult to export large files to vendors through our fire-walls. Engineering statistics, equipment drawings, large spread sheets etc. that are exchanged with contractors, vendors, partners and others become a liability and in some 7liurvlui•. Sepd'nnl rr 116.21u11 EC2 0000463] 0 Page 74 of 88 EXH063-00432 ============= Page 77 of 90 ============= Ken Lay EMI Sr~I cases we must resort to paper to get the data to the destination. I would like to see IT help us solve our problems rather than tell us our limitations and enforce them without regard to consequences. 6. Mr. Lay, extraordinarily happy you're back. it's going to take a lot of hard work from all employees to turn us around, but It will be a lot easier with someone at the top who listens and cares. • I'm glad Ken Lay is back. ! Enron has taken risks to gain the high returns for our investors (stock price). Unfortunately these investments have not flourished as expected, There have been other Issues, such as California and India that have also occurred untimely. This has driven investor confidence very low. There seems to be a reoccuring issue of "unclear financial reporting"? The employees have been the "bedrock" of Enron. Keep employees clearly informed of our situation. Keep moral high, but do not shelter employees from the facts (good or bad). One Issue I have is better treatment between employees with degrees compared to emotoyees with yrs of experience. For experience: I have 9yrs of Corporate experience, and was promoted end of yr 2000, based on my experience, proformance and my ability to out proform my peers, and handle mufti-functions, and was told my pay could be better, if I had a degree, the only futher education I have is Bussiness School certification. It is hard to attend any schooling when we work long hrs, and even sometimes on weekends, and yet take care of our personal life and family. I attend courses that are offered by Enron when they are available. I was told for my review end Aug. that I would be competing with empotyees with degrees In other departments, since I'm the only one in my group that has the I have. 0 111 find the operations reporting capability amazingly Inept for a large computer savvy organization. 2/ initial Impression is that people get promoted for trading profitably which can result In both weakening trading and having managers who aren't necessarily good at managing. 3/ There Is still too much internal battling over accounts - natgas should not have liquids business end vice- versa now that EGM is fully staffed. 0 Really appreciate Mr. Lay doing this survey. Employees want to feel as though they have a say, It Is our company too. One of the most unsettling things at Enron is the time spent on PRC. Is it really necessary twice a year??? Why if are ranked SUPERIOR by people who know you - then in the PRC meeting you come out a ranking lower by people who have never worked with you and may not even know who you are. I also feel assistants who have spent years in there careers doing a top notch job should receive compensation and not be told they are paid top dollar in the Industry. What Incentive do we have to continue doing the top notch job??? How many years will Enron be able to keep the "BEST" If they don't show we are appreciated with raises. We are not working for the rating - we are working for the almighty dollar. Many of us are the sole support of our families an the cost of living continues going up so should our salaries. If you aan't do raises then how about higher bonuses? ,f Remember the days when' EDC would develop projects like Hainan, Dabhol, Dominican Republic, Brazil, etc.? Remember how Enron Power, EOC or other operations groups would have to live with the bad deals while the developers were buying houses on fairways at the Woodlands? Seems to me like EES was set up on the same model. Originators signing JC Penney, Starwood, Lilly, etc. with no concept of how we ca-possibly deliver on the promises made. And worse, marking profits that will NEVER come to pass. So. they get promotions, or leave rich, flaunt their Porches and Ferrarls, and us poor working folks have to deal with the mess. These same people dominate the PRC, rewarding their buddies, and arbitrarily getting rid of the companies 71a,trrth, ..Sej'lrnther 04. 211111 EC2 000046311 Page 7tof38 EXH063-00433 ============= Page 78 of 90 ============= Ken Lay Ritsponse backbone - the average working guy In the trenches. Ken, THIS HAS TO CHANGE TO RESTORE MORAL AND GET THE COMPANY MOVING FORWARD AGAIN. Thank you for the opportunity to do this survey. 1. I do not understand why (in the face of $83/share ESOP) options issued at year end 2000 for 5 years, why we do not allow employees to trade those options for an equal number of shares priced at today's stock price -- no change of date when the option expires - trade share for share for options that have not been exercised. I do not see this as violating external share holder rights because these options were issues to imployees not to non-employees, and because they were issued as part of the salary compensation package to employees. My way of looking at this is to say to the external shareholders, "Hey If you want to see the Enron stock increase In value in the future, that will take talented employees like those we have on board, keeping them is more important than worrying about what others outside the company may think because to do so will improve the odds that our stock price will improve and sooner, rather than later by haveing that talent on board. What about the saying, "our employees are our most important asset", well If they are, then let's give them a hand in this situation -- one that they did not create, but are the ones suffering. _ 2. 1 do not understand why, if we expect to be the "World's Leading Company" we are not doing more "leading" in the face of all the negatives about Enron and the deregulated electricity market in Catifirnia and the western US. Has Kenb Lay considered taking a more aggressive "industry Leadership" role by mobilizing the energey companies and the state governments to work together to solve the Issues rather that stand behind the banner of '"it was legal free competition and we did nothing wrong". Whether we did or did not do anything wrong, we are getting blamed for something the California and Western US governors "think" we did, and that seniment will be harder to overcome then anything in improving our stock price and getting 'Wall Street' to respect the stock again. Wall Street cannot solve our low stock price........ the situation is the general public does not love us as a company...... why not turn the tables ever so subtley and get people thinking that we are not only the bad guys, but also that we are working to solve the issues they see as causing us to be seen as than bad guys ..... by leading other energy companies to the negotiation table, we beneift by Ion the eyes of the general public by demonstrating 'Industry leadership' and our stock price benefits by having shareholders who appreciate that leadership. Something akin to the colitatfon of business leaders in Houston that Ken led to get Enron Field funded and built. f I am a Director at EES. I ahve been here five years. The edge has been taken off of this company by the way the recent redeployments have been handled. Many employees have lost faith and confidence in this company to deliver the goods. The company appears to have lost its concern about the employee while expecting a greater level of loyalty to it. The ARC system pits workers against workers. Best thing to do with it is TRASH IT. Obviously employees need to be evaluated and those thoughts need to be communicatated. However they don't need to be in competition with one another. Enron needs the "steady Eddies" along with the superstars. One may stay at the same level while the other rises through the ranks, but they're both needed. I'd love to see us go to a 4 day work week. All of us work really hard when we're here. You just don't see people goofing off at all, and I guess that means employees are really committed to the company and to their roles here. Sometimes it's hard to relax and really take a weekend "oft" and I think having 3 days off would really help with that. 0 Thurv,lm, St plembcr 116, 2001 EC2 000046312 Page 76 t,188 EXH063-00434 ============= Page 79 of 90 ============= Kevin Hannon Response * - We need to retain our talent, including at senior management levels. The recent leakage in talent has not been limited to El-people like Mark and Sutton, now Skilling leaves and is followed by Rice and Hannon. If the 'top dogs' are leaving the boat, is it a sign that it's sinking? - What does being 'The World Leading' company means? Leading in what? We need to know what we are about, the previous vision of being the World Leading Energy Company was dear and led to a strategy. Change is good when it leads to something, but it looks like we're starting to change just for the sake of It. - We need to generate recurring earnings and CASH. Mark to market earnings are great, but the street Is probably right in being weary that we'd incur major charges if the accouting rules were to change. Cash generating assets are a good thing, world-class companies prove that every day, and we badly need a couple of them. It was our asset strategy that was probably wrong in that it was too aggressive and overly reliant on deregulation at emerging markets, in addition to an Incentive system that created agency problems. Some people In senior management positions may be good at the deal, but have little leadership ability (e.g., Jim Fallon, Greg Whalley, Kevin Hannon) while the true leaders go unnoticed (e.g., Stan Horton, Rob Walls, Mary Joyce). The hardest thing for me about working for ESS was the ability to respect that Enron is a Fortune 100 company, when I saw so much money being wasted on a daily basis. EBS did not set the standard correctly when they started hiring people and the result was a lot of overpaid, underqualifled people doing nothing but spending Enron's money on travel, food and entertainment. I have never been at a company whos spending was so out of control. The other thing that really bothered me was the lack of respect other Enron entities gave to EBS. I was in charge of making sure Enron's Analyst Conference was webcast and was told on that day, when we were having network difficulties, that there were people at Enron that hoped EBS would fail. Even if that is the case, I don't think it was appropriate to be told to me. On that same day when we were having network issues, I told Ken Rice and Kevin Hannon that Mark Koenig had been very upset at about 5 am and that I Just wanted to let them know what happened so they would be prepared. The response I received from Mr. Rice was, I don't care about the Analyst Conference, I just want the CNN test-to work later today. Again, I don't believe that anything like that should ever come out of a CEO's mouth, but then again it Is the same CEO who drank too much at the Portland Christmas party and told me I was beautiful. These incidents reflect very negatively on me, even though I did enjoy what I did and my co-workers. I am just shocked that these type of things aren't better controlled. I work in technical support for EBS. The now defunct office of the Chair for EBS (Rice/Hannon) wws the worst executive leadership I have experienced in my 13 years as a software system developer. There was NO leadership - no communication, no direction, no decisions, no email, nothing. Strong, decisive decisions about the role of the network and its relationship to trading (i.e. world's best network vs a commodity to trade like any other network) was needed but never materialized and contributed greatly to the financial problems of EBS. In the last three weeks, I have already received more Information from Ken then in the entire tenure of Rice and Hannon. Keep it up and keep providing direction. The most serious issue at my level Is the "prima donna vs peon" attitude of Commercial to Commercial Support. I understand that traders are busy - we all are. They are also the money makers for the company. I would assume they are compensated accordingly. It is very difficult to provide support to people who regularly don't show up at meetings, don't reply to emailslphone messages, and don't review requirements. This seems to be a common problem throughout the company which tells me that this behavior Is at least tacitly acceptable at the highest levels or it wou)d stop. Cooperation between Commercial and Commercial Support is the key to success, not competition. : The trading floor layout IS NOT an appropriate layout for software development. This layout is conducive to conversations, spontaneous meetings, and interruptions -in other words -making trades. It4.NOT conducive to creating systems. Software development requires individual, clear thinking - an efficient software development floor is one where you can "hear a pin drop". Different jobs require different layouts. I think the attitude that the trading layout is fine for everyone is another symptom of the "prima donna" attitude found in Commercial. ; Tharstiur. ,SeplemAer Ilh. 2001 _ Page 77 of 88 EC2 000046313 EXH063-00435 ============= Page 80 of 90 ============= Kevin Hannon Response Finally, currently an employee's bonus is based on how much perceived value their work provided for the company In the last year. This makes sense. The employee's rating is also based on this perceived value - this is unethical and lacks integrity. If an employee Is assigned to a high risk project, does excellent work, but -the project fails to meet its objectives, the employee should not be ranked as "average" or "needs improvement" because of this. Obviously, their bonus will be affected - their ranking should still be "excellent". The current pressures of the PRC to "fit the curve" almost guarantees that the employee will be ranked lower than is ethical. My main issues with Enron today are that I cannot get a good feeling about where we stand today and the degree of promise that our future holds. I can weather the Enron bashing in the external analyst community if I can firmly say that their writings are misplaced and points unfounded. However, with the state of EBS and the stories of how major EES deals are missing key variables and requiring major clean-up leaves me uncertain as to where future revenue (besides Wholesale and ETS) are going to come from. Additionally, from a personnel front, the following have left me with lower morale and (unfortunately) positivity about working at Enron:- - a tot of really talented and super individuals have left Enron for various reasons in the last year - unexplained removal of those individuals whom 1 thought to be most deserving and akilled to make a successful business of trading advertising (in the Media Services group) by arrogant and unproven Individuals. - apparent lack of interest and caring by ex-EBS and now ex-Enron executives Rice and Hannon. I feet that they fooled me as much as the market in the prospects of EBS (aside from the telecomm meltdown). 4 I am disappointed that all the founding executives such as Jeff Skilling. Ken Rice, Cliff Baxter, John Echols, Kevin Hannon has left the company. it seems as they lost their Inspiration and drive by working long hours and weakened travel and what else? These gentleman were an asset to Enron and I enjoyed working with them and contributing to a team effort. The PRC needs serious review. It may function at the MONP level but, not at the lower levels. The salary and titles are not consistent among the business units. I am experiencing this Issue and having been trying to resolve for a year. The unbalance affects my compsentation and bonus and earning potential, coupled with the stock price, It has not been a financial stellar year. • Would basically want full disclosure from management if there Is some storm brewing In the background that others are not aware about ...seems very odd that Skilling, Hannon, & Rice all departed the company within a month....Is there something going to where they don't want to be around to have egg on their face when whatever arises?? • This is my last day, as the Portland office is being shut down. While I had no illusions the Poittand office would stay open forever, it was discouraging to hear one thing ("we're committed to a strong Portland presence") and see something else Cobs and departments being moved to Houston). As a shareholder, I applaud the move to cut expenses. As a (very-soon-to-be-former) employee, I can't help but think that this whole experience over the lost six months could have been handled more openly. I find it ironic that the three people (Skilling/Rice/Hannon) who stood on the podium at the Marriott in Portland five months ago to announce layoffs at EBS are now "pursuing other interests"... • We need to stem the flow executive leadership departures. This cannot be good for the company In the long run. We have lost Sutton, Baxter, Hunicke, Pai. White, Rice, Hannon, Sunde. A tremendous amount of talent that is not easily replaced. We have smart people who know how to make money, but do not necessarily know how to run a business with talented employees. i I was offended with the recent communication stating the departure of Ken Rice and Kevin Hannon. Specifically, the part that gave them a very nice pat on the back for a job well done. Maybe I'm naive, but I think many of us know what contribution they really made and personally I would have appreciated the communication stating...Keh and Kevin have decided to leave Enron and we wish them the very best -- and Tbirrsdar. September 116, 2001 EC2 000046314 Page 78 of 88 EXH063-00436 ============= Page 81 of 90 ============= Kevin Hannon Response leave it there... as this communication doesn't have any fluff that might not necessarily be true. • Glad Hannon is gone. He was filthy-mouthed, arrogant, and did not respect others. We don't need that type of person in a key leadership position, or In any position for that matter, at Enron. The message needs to be sent that that type of attitude/behavior will not be tolerated here. Regarding United Way, I am grateful for the financial benefits that Enron provides to me and I was glad to be able to give to support the United Way. I anticipate, however, that there might have been some hesitancy on the part of other Enron employees to give as a result of the stock's decline. So we didn't raise as much this year or have as high of a participation rate. That's OK. Let's just say we did our best and move on. No more time extensions or emailsill i Too many executives are leaving Enron with too much money after accomplishing too little. 13hatnagar, Rice, Hannon - the list goes on. And EBS, while moving towards a streamlined company, is still retaining overpaid underperformers. In general, however, I am proud of Enron and hope we can pull out of the slide. Than..lm. Sg'k'nihcr 06.2001 EC2 000046315 Pirgr 7s of 38 EXH063-00437 ============= Page 82 of 90 ============= LF ouise Kitchen Respansc I don't think we have really had a forum for employees to share their Ideas with management on different topics- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this lately. I don't think we really embrace the vision and values at Enron - we talk a great game, but we idoot walk the walk, We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others like trash. Several of them are on the management committee- Whalley, Kitchen, Koenig (& Rieker), Lavorato, Shankman. It really sends a loud and dear signal to the rest of us. It is not that the aforementioned aren't extremly smart,, talented and great for this company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and it makes it very hard to work for this company and defend us to others. I think we play too much in the gray areas. I don't think we are wrong in the California situation, but It certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the UM deal. I realize that it is legal, but l think it walks an ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. I think we need to take a look at the way IR has handled our stock price drop. I don't think our "logistics company" message has worked AT ALL None of us even understand it, so I don't know how anyone else can- not customers, not analysts, not the media. We really have some good guys here at Enron too- Frevert, Sherriff, Kean, McConnell, Horton... they work hard and follow the vision and values. I think the Issue is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead in this company. r r I EC2 000046316 T'lutn da . ,Sememhcr 06. 2001 Page Rn of 88 EXH063-00438 ============= Page 83 of 90 ============= Ylark Frevert t don't think we have really had a forum for employees to share their Ideas with management on different topics- tike the committees we had at one time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this lately. I don't think we really embrace the vision and values at Enron - we talk a great game, but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others like trash. Several of them are on the management committee- Whalley, Kitchen, Koenig (& Rieker), Lavorato, Shankman. It really sends a loud and clear signal to the rest of us. It is not that the aforementioned aren't extremly smart, talented and great for this company, tit they aren't the "whole package". Ken Lay has never treated any employee disrespectfully,-but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and it makes it very hard to work for this company and defend us to others. I think we play too much In the gray areas. I don't think we are wrong in the California situation, but it certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the UM deal. I realize that It is legal, but I think it walks an ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. I think we need to take a look at the way IR has handled our stock price drop. I don't think our logistics company" message has worked AT ALL. None of us even understand it, so I don't know how anyone else can- not customers, not analysts, not the media. We really have some good guys here at Enron too- Frevert, Sherriff, Kean, McConnell, Horton... they work hard and follow the vision and values. I think the issue is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead in this company. V In light of our published "values" respect Is one of the major challenges our management team should Concentrate on. While I did not select the disparity between commercial and non-commercial as a tap 5 challenge, some of our lower level commercial managers (Director thru VP)could utilize a bit of humility. Those who have excelled and are excellent role models include Mark (revert, Dave Delainey, Mike McConnell and Janet Dietrich. Our employee benefits implementors could use improvement, Its difficult to get the right answers at the right time when one needs to make changes outside of open enrollment. I My business unit has decided to allow only 50 hours of FWP; why Can't policies be unilateral across Enron Corp, rather than by business unit? This was never an Issue in my 14 years in GPG. When I have asked about the long-term sabbaticals as described In "Work Perks" I was told, it too, would be decided on by business unit. This is very disappointing to me. I feel that the Old Enron that was fun and exciting to work for, that I was proud to work for, has gone away. I must say that I was jubilant uron hearing of Mr.Lay's return to CEO. I am also very impressed with the selection of Mark Frevert; an excellent choice, in my opinion. urn. rlnr, Seplewher 1)6, 11)11 EC2 000046317 PrguSi of R3 EXH063-00439 ============= Page 84 of 90 ============= r Mark Haedicke Response Because we've gotten so used to change, I fear many of us have stopped caring about the "big picture" of the company. This causes us to lose our sense of direction. I like it when we are told about the company's plans and strategies. I The work atmosphere In many departments make employees feet Isolated. I'm a legal specialist (paralegal) In EWS Legal, and even though our department is fairly small, I don't know more than half of the people in It. I Mow, legal specialists were just "un-invited" to the EWS Legal Conference due to cost reasons, we were told. 1 feel diminished and less Important (and thus more isolated), since all legal specialists heretofore have been Included In these types of offsite meetings. - A regrettable situation In EWS Legal is that many well-qualified and highly regarded administrative assistants, including my own, have been "run-off' by the group's administrative coordinator. 1 believe that nobody speaks up because the coordinator is Mark Haedicke's assistant, so people figure he must want things this way. As a consequence, the (Enron) experience base of the administrative assistants is not very deep, and morale is low. This has affected a large portion of our group because there's little "esprit de corps." FC2 000046318 T1,ursd?P. September 075. 2#111 Page32of88 EXH063-00440 ============= Page 85 of 90 ============= Mark Koenig Response • I don't think we have really had a forum for employees to share their ideas with management an different topics- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this lately. I don't think we really embrace the vision and values at Enron - we talk a great game, but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others like trash. Several of them are on the management committee- Whalley, Kitchen, Koenig (& Rieker), Lavorato, Shankman. it really sends a loud and clear signal to the rest of us. It Is not that the aforementioned aren't extremly smart, talented and great for this company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and it makes it very hard to work for this company and defend us to others. I think we play too much in the gray areas. I don't think we are wrong In the California situation, but It certainly makes me wonder what 1 don't know. 1 can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the LJM deal. I realize that it is legal, but I think it walks an ethical One when out CFO personally profits from an Enron deal like that It warrants external attention. I think we need to take a took at the way IR has handled our stock price drop. I don't think our "logistics company" message has worked AT ALL. None of us even understand It, so I don't know how anyone else can- not customers, not analysts, not the media. We really have some good guys here at Enron too- Frevert, Sherriff, Kean, McConnell, Horton... they work hard and follow the vision and values. i think the issue is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead in this company. The hardest thing for me about working for EBS was the ability to respect that Enron is a Fortune 100 company, when I saw so much money being wasted on a daily basis. EBS did not set the standard correctly when they started hiring people and the result was a tot of overpaid, underqualified people doing nothing but spending Enron's money on travel, food and entertainment. I have never been at a company whoa spending was so out of control. The other thing that really bothered me was the lack of respect other Enron entities gave to EBS. I was in charge of making sure Enron's Analyst Conference was webcast and was told on that day, when we were having network difficulties, that there were people at Enron that hoped EBS would fail. Even if that Is the case, I don't think it was appropriate to be told to me. On that same day when we were having network issues, I told Ken Rice and Kevin Hannon that Mark Koenig had been very upset at about 5 am and that I just wanted to let them know what happened so they would be prepared. The response I received from Mr. Rice was, I don't care about the Analyst Conference, I just want the CNN test to work later today. Again, I don't believe that anything like that should ever come out of a CEO's mouth, but then again it is the same CEO who drank too much at the Portland Christmas party and told me I was beautiful. These incidents reflect very negatively on me, even though t did enjoy what I did and my co-workers. I am just shocked that these type of things aren't better controlled. Th,i, dal.. Selirnther 116, 2.901 E C2 000046319 Pager 4.r of 88 EXH063-00441 ============= Page 86 of 90 ============= r Mike McConnell Response t • In light of our published "values" respect is one of the major challenges our management team should concentrate on. While I did not select the disparity between commercial and non-commercial as a top 5 challenge, some of our lower level commercial managers (Director thru VP)could utilize a bit of humility. I Those who have excelled and are excellent role models include Mark Frevert, Dave Delainey, Mike McConnell and Janet Dietrich. Our employee benefits Implementors could use improvement, it's difficult to get the right answers at the right I time when one needs to make changes outside of open enrollment. I don't think we have really had a forum for employees to share their ideas with management on different topics- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and I asking people to serve on committees to enhance change. We haven't done much of this lately. 1 don't think we really embrace the vision and values at Enron - we talk a great game, but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we I consistently promote people to high levels within Enron who treat others like trash. Several of them are on the management committee- Whailey, Kitchen, Koenig (& Rieker), Lavorato, Shankman. It really sends a loud and clear signal to the rest of us. It is not that the aforementioned aren't extremly smart, talented and great for this I company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and it makes it very hard to work for this company and defend us to others. I think we play too much in the gray areas. I don't think we are wrong in the California situation, but it certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the LJM deal. I realize that it Is legal, but I think It walks an ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. i think we need to take a look at the way IR has handled our stock price drop. I don't think our "logistics company" message has worked AT ALL. None of us even understand it, so t don't know how anyone else can- not customers, not analysts, not the media. We really have some good guys here at Enron too- Frevert, Sheriff. Kean, McConnell, Horton... they work hard and follow the vision and values. I think the Issue is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead in this company. EC2 000046320 Thoralnr, Srplensher 06. 2001 Page 84 of 88 EXH063-00442 ============= Page 87 of 90 ============= 0 tck Ca usey ponse 1) l hope this is really anonymous. We are having huge problems with ibuyit payables or ipayit as it is called today. These problems are not user errors as Rick Causey said they were. We have met many times with the ipaylt chain of command and have showed them huge errors. This system has taken a process that my assistant used to spend two to three hours a week doing into a system that takes twenty or more hours if we do it right. What 1 mean by doing it right is checking out Invoices before we code and approve one to make sure it has not already been paid. The system Is very slow to use just to pull up the invoice to view it can take between 15 and 45 seconds, when you have 60 or 70 Invoices a week this alone adds an hours time to everyone that has to touch this many Invoices. 2) Global Strategic Sourcing Is a good idea but they have way too many people and too much time on their hands, they are all working hard to justify their existence (we all should) but they are playing a numbers game with the savings they claim. Two examples of this are: #1 They negotiate a deal with a vendor this year and it saves us I million dollars, the next year we double our business with that company. They have done nothing on the contract but this year they claim another 2 million in savings based on what they did last year. Could they rest of us base our performance on what we did last year? #2 They meet with a business unit to negotiate a price on a product we need. They ask for information on the deal. We give them budget numbers, let's say I million dollars, we give them retail price and our present Enron discount price. They come In and negotiate a price 2% below our present Enron price which is great, but when they want you to sign their deal sheet at the end they will try to claim the saving from the retail numbers or even ! the budget number. They should be claiming the delta between the present Enron price and the final negotiated price. This is the real value they have added, not some inflated number. EC2 000046321 Ttprrarrm. ,S,.nh'ntbrr 06. 2001 Page 8.5 of 88 EXH063-00443 ============= Page 88 of 90 ============= e I R w Stan Horton Response * Some people in senior management positions may be good at the deal, but have little leadership ability (e.g., Jim Fatloh, Greg Whalley, Kevin Hannon) while the true leaders go unnoticed (e.g.. Stan Horton, Rob Walls, Mary Joyce). * Now let me tell you the major issue I have. Stan Horton In the process of saving dollars is allowing Phil Lowery to run our pipline company to ruin. We are not allowed a budget that enables us to properly run this pipeline, We ask for OEM monies to paint and treat corroded engines and pipe. Is it there? NO! They say, "take it out of your existing O&M budget which is already so flat that it won't meet our day to day operational requirements. We ask for monies to mow our right of way so that we do not have 40 foot trees growing over our pipe. Do they give us the money? No again! 'Take it out of your existing O&M budget" they say, knowing It hardly will support our falling forty year old equipment. The real sad part of this story is that people like Phil Lowery make promises to turn back 33 million to Stan so that he (Phil) looks good and prospers; you know personal gain without regard to others. Well we would like our operations to look good too and were not expecting great big personal bonuses in return. We just want a safe place to work, one that looks good, and something we can be proud of and tell others good things about Oh, one more thing. Relieving the stress of trying to manage a billion dollar operation on a hundred dollar budget would help feelings around here. This Is my opinion and I know that those in control will only say that I don't have all the facts. Well this Is true, but this one fact I do know, we better get more monies to operate this pipe or we are In for hard times. Thank You for your time Mr. Lay and may we all genuinely make this a better place to live and work. From a concerned Florida Gas Transmission Company employee. PS. My intentions were not to do harm to Mr.Horton or Mr. Lowery because I do realize they don't have all the facts either. 1 don't think we have really had a forum for employees to share their ideas with management on different topics- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this lately. I don't think we really embrace the vision and values at Enron - we talk a great game, but we don't walk the walk. We reward and promote people based an the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others like trash. Several of them are on the management committee- Whalley, Kitchen, Koenig (& Rieker), Lavorato, Shankman. It really sends a loud and clear signal to the rest of us. It is not that the aforementioned aren't extremly smart, talented and great for this company, but they aren't the "whole package". Ken Lay has never treated any employee disrespectfully, but he continues to promote people who do. I think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and it makes it very hard to work for this company and defend us to others. I think we play too much In the gray areas. I don't think we are wrong in the California situation, but it certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the LJM deal. I realize that it is legal, but I think it walks an ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. think we need to take a took at the way IR has handled our stock price drop, I don't think our "logistics company" message has worked AT ALL. None of us even understand It, so I don't know how anyone else can- not customers, not analysts, not the media. We really have some ood guys here at Enron too- Frevert, Sherriff, Kean, McConnell, Horton... they work hard and follow the vision 4nd values. 1 think the issue is that If we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead In this company. Upper management needs to publicly recognize those employees who have done something significant for the company. Maybe quarterly, recognize 1 or 2 individuals from the various companies who have gone above and beyond to either reduce costs, help a customer, or make Enron money. If Stan Horton called me and said, hey, I like your project, keep up the good work, I'd probably fall off my chair. nurrdi, '..Si ,ft'n,h r afi, 3/1/11 EC2 000046322 P ge m a f.78 EXH063-00444 ============= Page 89 of 90 ============= 1 j Stan Horton i f Response This may sound crazy but when I heard that Ken Lay was leaving I was so sad It was like losing a Father, after asking around and.talking with others they felt the same way. During our all employee meeting as I sit there observing all the tears that came to peoples eyes when Mr. Lay announced he was back[!! I do want to thank the redeployment team effort and I thank God and the people I mentioned above but if it wasn't for Stan Horton and H.R. I may not be here today. I think there could be some improvements to I redeployment l believe the single greatest challenge faced by Enron today is In operating profitable businesses. We have an outstanding team of originators who are highly incanted to create and sell our Ideas. However, we have a great deal of difficulty in profitably delivering on those Ideas. The ideas are excellent, the opportunities to profit from them are outstanding, the execution has been less than stellar. Examples Include Enron Energy Services, Azurix, and Broadband. There have been great rewards for those creating the Ideas and initiating these businesses and those same Individuals, in some cases, have been given the opportunity to run the business they created. Unfortunately, the skills necessary to create and sell the idea are very different from those necessary to manage and grow an operating business. I strongly believe in the Enron approach to creating new and innovative businesses, to driving greater efficiencies into markets and to monetizing businesses and assets when doing so provides the greatest value to Enron. At the same time I believe that greater value could be realized from those assets If they were better managed. The rewards at Enron are greater In origination than in managing an operation. Perhaps a greater balance could be struck between rewarding origination and operations. There may be value in creating a strong team of general managers who demonstrate skill in delivering value to the enterprise through the management and growth of new businesses. Stan Horton stands out in my mind as an example of an Enron business leader who has demonstrated the ability to manage operations with excellence. While we have the best traders and originators in business today, the skills of those individuals do not necessarily translate into great general management skill needed to grow a new business. I appreciate the opportunity to provide my thoughts. I believe Enron has the opportunity to capitalize on our strengths, to improve on our weaknesses and to restore Investor confidence as we work through this time of change. Thanks for your leadership. + 1. Enron needs to lower the cost of doing business. EES and International, in particular, have been notorious in the past for unchecked spending. one immediate way to save Enron several million dollars per year of expense would be to put the operations of the ESS fiber lines under Stan Horton. Another guggestion would be to benchmark Managing Directors against their counterparts to determine if the MD's are focused on cost effective management and then include the results In the PRC process. 2. Originators In EW5 should not be leading projects to build jurisdictional facitties, Originators typically do not understand jurisdictional processes and are unwilling to work within the parameters to make a project successful. After giving Enron a bad reputation with the general public, regualtors or special interest groups, an originator can move on to another deal, however for the rest of the organization who manage those relationships on an ongoing basis, the job has been made much more difficult and Enron assets and future development opportunities have been put in jeopardy because Enron has fallen out of favor or received a black mark on its record. EC2 000046323 Thurtdor. Saplemher 06, mol Page 87 of 88 EXH063-00445 ============= Page 90 of 90 ============= Steve Kean Response • YYY~ Y~.r. ~Y/ Y~Yi~~~~Y rill P/ rY.Y~I~~ YI~M~r ~~IAl11~AY~YY~Y~~Ai•Ii~lY~l ~/~YYrI There needs to be a better work/life balance. For example, i want to go on vacation and not feel compelled to check voicemail, email or take my call phone. The downside about this job is that it Is all-consuming -- I work nights, weekends, vacations. There is never en Enron-free break. This is a surefire recipe for burnout - and resentment. I do not have complete confidence in upper management -- t truly believe that Jeff Skiliing's resignation left us with an enormous void - we do not have a strong "second string" management team, with the exception of Steve Kean. It would help externally if Ken Lay made a commitment to stay for a set period of time - f.e. he will remain as chairman and CEO for at least two or three years. At this point, If Ken left, I would leave, and our stock would plummet I am concerned with our ethics and Integrity. While I believe that we are always within the bounds of the law, I think we straddle the line consistently. An example of this Is LJM -- while there may not be anything Illegal, the appearance that our CFO personally profdted - and that the board had knowledge of the situation - could send our stock Into a tailspin. The "Lavo" situation In Canada is another example where we were within the bounds of the law, but had the appearance of impropriety. Analysts and shareholders do not trust Enron to provide the "straight story." I do not have confidence In our investor relations team. I am also concerned that credit Is not given to good managers, They are not held accountable for providing feedback, and their management abilities are not taken into account in the PRC. The only emphasis is on results -- not on interpersonal or management skills. The stock price is the single most important issue. Morale Is low because the stock price is so low. I don't think we have really had a forum for employees to share their Ideas with management on different topics- like the committees we had at one time. Cindy Olson was always listening to what employees are saying and asking people to serve on committees to enhance change. We haven't done much of this lately. I don't think we really embrace the vision and values at Enron - we talk a great game, but we don't walk the walk. We reward and promote people based on the risks they take and the money they make for Enron, but we consistently promote people to high levels within Enron who treat others like trash. Several of them are on the management committee- Whalley, Kitchen, Koenig (& Rieker), Lavorato, Shankman. It really sends a loud and clear signal to the rest of us. It is not that the aforementioned aren't extremly smart, talented and great for this company, but they aren't the "whole package". Ken Lay-has never treated any employee disrespectfully, but he continues to promote people who do. i think this says something to everyone about how differently this company will be run following his departure. I also question many of our business ethics and It makes it very hard to work for this company and defend us to others. I think we play too much In the gray areas. I don't think we are wrong In the California situation, but it certainly makes me wonder what I don't know. I can't defend us when I know we pride ourselves on bending the rules to meet our needs. I question Fastow and the LJM deal. I realize that It is legal, but I think it walks an ethical line when out CFO personally profits from an Enron deal like that. It warrants external attention. I think we need to take a look at the way IR has handled our stock price drop. I don't think our "logistics company" message has worked AT ALL. None of us even understand it, so I don't know how anyone else can- not customers, not analysts, not the media. We realty have some lJood guys here at Enron too- Revert. Shertiff, Kean, McConnell. Horton... they work hard and follow the vision and values. I think the issue is that if we aren't ALL going to follow the V&V, then just get rid of them and quit touting them. Be clear with what the rules are to move ahead in this company. LC2 000046324 Thur 4fa,V, Sepren,har Sri, 2001 Page 88 of 8R EXH063-00446