Enron to WorldCom and Beyond:
Where was the Ethics Industry?
has been a long time between reflections. My last formal
reflection was in the Fall of 2000 anticipating the U.S.
Supreme Court's decision that opened the way to George
W. Bush's election as President of the United States.
Earlier reflections had predicted serious values-based
difficulties ahead for the Peace
Process in the Middle East. See
the big news is the collapse of global stock indices following
the Enron, Worldcom, and other disclosures and restatements.
In and of themselves, these events, though sobering, do
not warrant much in the way of reflection, in my view.
Judging by the inquiries I receive on these pages, however,
they remain on many visitors' minds. So, what do they
bring to my mind?
and foremost is a question, Where was the ethics industry?
Many of the best and brightest minds in the ethics industry
are being quoted almost daily as to how irresponsible,
if not vicious, executive management and corporate boards
have been. They should not have waived conflict of interest
provisions. Boards should never waive conflict of interest
provisions. They should be punished. They should be punished
more. They should "walk the talk" and "codes
are not enough" and other such cliches that pass
absent, though, is any language of the "I told you
so" variety. Now this may just be good taste on the
part of well-intentioned people, but I suspect it is largely
because the ethics industry did not aggressively push
for executives and boards of directors to be active participants
in ethics and compliance programs. For most ethics and
compliance programs, the program look is down. That is,
many, if not most, ethics and compliance programs are
largely for purposes of risk reduction and crowd control.
Enron's, from all appearances, was largely for show. One
needs only read its provision for reporting misconduct
to suspect that it was not for real. Moreover, for all
the posters for sale on Ebay, I am aware of none that
describes how to seek advice or report misconduct.
back to the ethics gurus. I am not aware of anyone quoted
who said that he or she had ever refused a consulting
assignment because management rejected recommendations
that the executives or members of the board of directors
be included in training programs. I never did. [Though
I do know one consultant (now a former consultant) who
did just that when executives refused to include themselves
in the ethics and compliance training plan.]
these (we) ethics gurus are largely missing the point,
in any event. What seems to horrify the ethics gurus is
that the Enron board waived its ethics code conflict of
interest provisions. What horrifies me is that the Enron
business plan was based upon gaining competitive advantage
in the marketplace through government intervention. The
ethics gurus are concerned that the conflict of interest
provisions were waived, but do not question why Wendy
Gramm, a former high-level political appointee and wife
of a US Senator, was on the Enron board of directors,
let alone its audit committee? The process by which that
occurred might suggest volumes abut the organizational
culture that led to the waiver of the conflict of interest
core of the Enron business plan was based upon government
manipulation of market processes to its benefit. Campaign
contributions and capturing the politically powerful were
means to this end. This, in a country that espouses democracy
and free markets, should be the basic sin. This is what
should never be tolerated. If ethics and policy are ever
to be in sync, the ethics officers and ethics gurus of
this country must demand that the ethical foundations
of the country itself be respected.
I write elsewhere in
this site, the good corporate citizen can lobby government
to remove barriers to free markets (of which there are
many). It may lobby to level market playing fields. It
can lobby to defend itself. But it violates all norms
of limited democracy and free markets to use funds from
owners having only limited liability to influence politicians
and civil servants to grant them preferences, access,
and influence that gives them competitive advantage. Even
using government to open foreign markets, as was the case
for Enron's infamous project in India, gives the large
corporations and campaign contributors clout and cachet
in the long-run that outweigh the short-term market benefits.
who speaks for ethics and social responsibility?
Who speaks for policies of stakeholder engagement such
that all those involved or affected by an organization
have a voice? Who speaks for those who do not have the
financial clout of Enron, Worldcom, and the other corporate
behemoths? If not the ethics industry, especially the
academics, who? I, for one, hear few such voices. There
are a few, to be sure, but they are shrill, easily ignored.
They are not the ones quoted in the nation's major dailies.
is those who are quoted who must make the case for ethics
and policy integration. Or, other voices must be found.
If not, the ethics gurus will remind us most of the Claude
Rains character in Casablanca who is "shocked,
shocked" to learn there is gambling going on,"
and then accepts his winnings from the croupier. In truth,
the ethics gurus themselves are rapidly becoming the "usual
suspects:" the predictable ones. The ones you can
make a point withwithout risking too much. Not too
shrill, not too tepid. Just right.