Enron, Ethics And Today's Corporate Values
Enron’s heyday has long ended. But its lessons will long endure. The global business community is now watching a painful new chapter is this saga — one where its former high-riding chief executive officer, Jeff Skilling, is getting a decade shaved off of his prison term that should now end in 2017. Enron: The Smartest Guys in the Room (Photo credit: Wikipedia) The company’s failure in 2001 represents the biggest business bankruptcy ever while also spotlighting corporate America’s moral failings. It’s a stark reminder of the implications of being seduced by charismatic leaders, or more specifically, those who sought excess at the expense of their communities and their employees. In the end, those misplaced morals killed the company while it injured all of those who had gone along for the ride. “Just as character matters in people, it matters in organizations,” says Justin Schultz, a corporate psychologist in Denver. Surely, if there are profits to be made, some type of scheme that attempts to skirt the law or even cross boundaries will occur. It’s been that way throughout history. But with each passing scandal, new rules and codes emerge that surpass those of the past. And whileEnron won’t be the last case of corporate malfeasance, its tumultuous tale did initiate a new age in business ethics. Enron, once a sleepy natural gas pipeline company, grew to become the nation’s seventh largest publicly-held corporation. But its shoddy business practices, aided by bankers and advisors feeding from the gravy train, brought down the company in December 2001. Altogether, 16 former Enron execs including Skilling had been sentenced to prison. Its former chairman, Ken Lay, was also convicted but because he passed away before his guilty verdict could be appealed, that case was thrown out. Now, though, an appeals court has reduced Skilling’s sentencing because it said that the trial court had miscalculated the codified penalty. A lot of people have suffered, not the least of whom are the shareholders and pensioners who lost it all. It was a sad “ending” to what had appeared to be a promising beginning to the New Economy in which the internet age would spread wealth and create jobs throughout the social spectrum. While Enron may be the crown jewel of corporate prosecutions, it was preceded by guilty verdicts for top execs at Adelphia Communications, Tyco International and WorldCom. Punishment serves as a deterrent. But a clear-cut mission and a corporate code of ethics is crucial. It’s the foundation to which boards, managers and workers rely when they reach a fork in the road. It’s the principles they use when deciding whether to emphasize short-term gain or long-term stability. Economist Milton Friedman has argued that it is the social responsibility of corporations to increase profits thereby putting more people to work and paying more taxes to support programs that benefit the general public. But business ethicists caution against a myopic pursuit toward earnings. The quarterly reporting syndrome that pressures companies to meet earnings expectations promotes temptation that can push some to distort the truth. But the desire to satisfy shareholders must be balanced with the need to service all corporate constituents — all of whom contribute to a company’s worth. That structure must be reinforced with values that build trust, as well as by more cognizant oversight and notable penalties for egregious acts. “So, even if you can’t really regulate ethics, the fact that more people are more closely scrutinizing board behavior encourages directors to be more responsible,” says Mary Driscoll, an analyst with Standard & Poor’s. “But, there is no panacea, and I think we will continue to see abuses and excesses — but hopefully fewer.” Certainly, ethical dilemmas are not always black and white. And the situations that can lead to hard choices can be as complex as the options themselves. Some companies...
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