10 January 2015
Enron: Smartest Guys in the Room
Enron is unquestionably the most well known ethical scandal of the business world. The only other scandal that even comes close is the Madoff Investment Scandal in 2008. Enron started out as a natural gas company but along the way added electricity along with pulp and paper to its list of commodities for sale. During it’s years of existence, Enron executives Kenneth Lay, Jeffery Skilling and Andrew Fastow falsified earnings reports, skimmed money, artificially inflated stock prices and defrauded the company, it’s employees and subsidies of MILLIONS of dollars. Enron finally collapsed after many of its’ executives were convicted of a litany of federal charges and even managed to take it’s auditing firm, Arthur Andersen, down with them.
As a college student studying Political Science in the late 1990s, it was impossible to ignore the buzz surrounding Enron and what it had “accomplished” during its years in existence. The culture of greed and ethical tight rope walking that prevailed within the organization in a way, provided future businesses with a clear “What Not To Do” handbook and lead to the passing of the Sarbanes-Oxley Act of 2002 which provided sweeping accounting reforms by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes. All of this, however, could’ve been avoided if the people involved with Enron had actually followed the company’s motto of “Ask Why.”
If one looks at the Enron scandal from the “Ask Why” standpoint, one can see that the reasons that Skilling, Lay and Fastow got away with as much as they did is because no one actually asked “Why;” not the traders, the accountants, the board, the banks, the stockholders, the auditors … no one. It wasn’t until 2001 when a reporter for Fortune Magazine