Enron Corporation

Arrogance, Corruption, Greed, and Ruthlessness

Enron was not the first or the last or the largest of the corporate scandals in recent years. Nevertheless, Enron became, above all other companies, the emblem for management fraud, director negligence, and adviser misconduct. Enron is easily the most widely studied and best documented of the recent corporate frauds. Enron was a prolonged media event.

The high education levels and intelligence of Chairman Kenneth L. Lay (Ph.D. in economics), CEO Jeffrey K. Skilling (Harvard MBA and top 5% Baker Scholar), and CFO Andrew Fastow (Northwestern MBA) raised serious questions about business school treatment of ethics and law. In January 2005, the documentary movie Enron: The Smartest Guys in the Room, based on Bethany McLean and Peter Elkind's 2003 bestseller of the same name, premiered at the Sundance Film Festival in Utah. Spring 2005 releases took place in Austin and then Houston. The theme of the book and the movie is that smart guys can outsmart themselves as well as everyone else.

The most astonishing aspect of the Enron scandal was that a significant number of executives had engaged in improper actions despite the company having in place the key elements and best practices of a comprehensive ethics program. There was a detailed 64-page “Code of Ethics” with an introductory letter from Chairman Ken Lay and a “Statement of Human Rights Principles” together with a sign-off procedure on the code for each employee, an internal reporting and compliance system, visible posting of corporate values (banners in the headquarters building, signs in the parking garage, and so forth), and an employeetraining video—Vision and Values—discussing ethics and integrity. Enron issued a 2000 annual report on corporate responsibility. The “Code of Ethics,” like other Enron paraphernalia, was later auctioned on eBay. The Smithsonian Institution reportedly obtained a copy of the code for its permanent collection.

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