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Go beyond legal and ask, Is it right?Tom Eggert
Prominent Enron executives Kenneth Lay and Jeffrey Skilling have become household names. Immortalized in the best seller "The Smartest Guys in the Room," which was made into a movie last year, Lay and Skilling were at the center of a company that climbed to No. 7 on the Fortune 500 list in 2000. In addition to being financially successful, in 2000, Enron was one of the most admired companies and considered one of the best companies to work for. This all changed in October 2001. The fall of Enron was quick; within two months, thousands of people were out of work, billions of dollars had evaporated, and the company once known as Enron was no more. The demise of Enron has now been laid at the feet of Lay and Skilling, men from vastly different backgrounds. Lay was the son of a Baptist minister. He was raised in poverty and attended the University of Missouri on a scholarship. He was very personable and became a favorite of his economics professor. When this professor was appointed by Nixon to the Federal Power Commission, Lay became his chief aide. Lay moved through the ranks of the federal bureaucracy, ultimately becoming a deputy undersecretary of energy in the Department of the Interior. He left the federal government when he became vice president of government affairs for Florida Gas. He worked hard, was politically well connected, and prospered in the private sector. When the opportunity came to become the CEO of a small natural gas company, Lay took it. Skilling grew up in an upper-middle-class family in Illinois. He was very bright. He attended Southern Methodist University on a full scholarship, majoring in finance. He went on to attend Harvard's MBA program, and graduated near the top of his class. His first job out of Harvard was with McKinsey and Co., where he focused on the energy industry. He met Lay while doing work for Lay's small natural gas company. Together, they revolutionized how the energy industry was run. In the process, they took the small company that Lay was running and made it a national leader in the energy sector. Both men were driven by the allure of power and wealth. They looked for, and found, others like themselves. Executives at Enron experimented and perfected ways to move debt off their books and realize revenue by creating "special purpose entities." Enron's auditor firm, Arthur Andersen, judged the accounting tricks they used to be legal. Whether legal or not, there is no doubt that these entities clouded the picture of what was going on at Enron. As such, they served to deceive investors. But, Lay and Skilling embraced them. When Lay and Skilling had to choose between being devious and honoring the expectations and intent of our accounting laws, they chose to hide behind legality, or a perception of what could be deemed legal. This ethical lapse illustrates the culture at work in Enron. Is this the culture at work in your business? Are ethical decisions limited to what is legal? Do your employees know what is expected of them as far as ethical decision-making? Is senior management illustrating those expectations through how they act? Here are some suggestions for better integrating ethics into your day-to-day decision making: • Develop a written code of ethics that lays out what you believe. • Hire people who have the values you want, not just the substantive skills. • Demonstrate the ethics that you want to instill in others through how you conduct yourself. • Evaluate people on how well their actions align with your values, in addition to the traditional performance appraisal metrics. teggert@bus.wisc.edu madison.com ©2009 Capital Newspapers. All rights reserved. |
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