Enron lapses and corporate ethics
New questions surface about corporate leaders as Kenneth Lay testifies before Congress today.
HOUSTON AND NEW YORK
One of the hotter items at the moment on e-Bay, the online auction service, is a 64-page paperback that won't be mistaken for a Stephen King novel. Or perhaps it will. It's the Enron corporate code of ethics. "Never been opened," proclaims one seller, a former employee.Skip to next paragraph
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The dark humor surrounding the book points to a larger issue in the wake of the company's spectacular collapse: the state of business ethics in America.
And former Enron chairman and chief executive Kenneth Lay's sudden refusal to appear today before a congressional committee does little to quiet new questions that have surfaced about the ethical rigor of America's CEOs, in particular, and how much money they make.
Much of the new scrutiny stems directly from the Enron case and the very public way in which it is being played out. Yet the impact is usually magnified when it comes at a time of economic downturn.
"I think a lot of CEOs are down on their knees right now, thankful that Enron got caught before they did," says Marianne Jennings, a professor of legal and ethical studies at Arizona State University in Tempe, Ariz.
Neither Enron's standing nor the larger focus on business practices will be helped by a report released over the weekend by an internal Enron committee. It concluded that company executives intentionally manipulated Enron profits and reaped huge personal gains in the process.
Perhaps worse, it outlined a culture of deception and self-enrichment that permeated the highest levels of management.
Inevitably, a landmark corporate scandal, which Enron has quickly become, tends to force businesses to reexamine their behavior. In the 1980s, for instance, many companies vowed to change their practices concerning insider trading after a series of scandals erupted on Wall Street.
In the 1989, corporate chieftains professed their interest in being better environmental stewards after the Exxon Valdez oil spill in Alaska. The tragic leak of a poisonous gas at a Union Carbide plant in Bhopal, India, killing at least 2,500, brought similar promises of better corporate "citizenship."
Today the questions are focused more on financial integrity - and the admonitions for change are coming from the highest levels. Without naming Enron, President Bush last week challenged business to set a better example.
"Through stricter accounting standards and tougher disclosure requirements, corporate America must be made more accountable to employees and shareholders and held to the highest standards of conduct," he said in his State of the Union address.
While the president had good reason to make such a plea, given the administration's close and controversial ties to Enron executives, the sentiments he was expressing resonate with many Americans.
A recent Business Week/Harris Poll, for instance, found that disenchantment with corporate America is on the rise. Perhaps the most telling finding: 79 percent of those surveyed felt the CEOs of large companies put their own interests ahead of workers and shareholders.
This is not to say that all corporations are greedy or engage in shady conduct. Experts agree most don't. At various times throughout history, some have even taken dramatic steps to show corporate altruism.
Take the Diamond Match Company. In 1910, it obtained a patent for the first nonpoisonous match. That product was so critical to the public's health that President Taft made a plea to the company to voluntarily surrender its patent rights.
Despite the enormous moneymaking potential of the idea, Diamond Match did so. It even sent employees to other matchmaking factories to show them the process.
"They surrendered that patent for the good of the whole and said, 'We are going to find another way to compete in the marketplace.' And they did," says Ms. Jennings, who with her colleague, Louis Grossman, has just written a book on longterm business survival.
In fact, one theme they found in looking at US companies that have managed to pay dividends without interruption for 100 years or more is the candor in their financial statements.
For instance, one annual report by Ludlow Inc. around the turn of the century described a contract it was able to get with the US Post Office.
Because one of its main products at the time was packing string, the Post Office was quite important to its business. The annual report described, in almost journalistic-exposé bluntness, how "darn close" they had come to not getting the contract.
"They didn't want anyone to get overconfident," says Jennings. "They wanted to let shareholders know that they couldn't continue to rely solely on the Post Office for their business."
Some companies are even willing to put their philosophy ahead of Wall Street. That's been the case at various times with Starbucks, the Seattle-based coffee chain, which was under pressure to stop paying 75 percent of the cost of health-care benefits for part-time workers.