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Enrons Empty Ethics

December 20, 2005
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The term "Enron Ethics" is the new buzzword to describe companies that conspicuously do all the right things to promote good behavior--even as they secretly wallow in turpitude.

    College of William and Mary business school professor Ronald Sims, who notes the emergence of the expression in a 2003 study published in the Journal of Business Ethics, is suspicious of showy gestures such as giving employees laminated wallet-sized copies of the corporate ethics code. Such guidelines mean little, he says, if the company’s "deep culture" rewards unethical behavior.

    A case in point is Enron’s corporate code of ethics issued in July 2000, about a year and a half before revelations emerged about the company’s sale of assets to phony partnerships. Taken at face value, the Enron code seems like a textbook model for right-minded companies to emulate.

    "We want to be proud of Enron and know that it enjoys a reputation for fairness and honesty that is respected," former chairman and chief executive Kenneth Lay wrote in the introduction. "… Enron’s reputation depends on its people, on you and me. Let’s keep that reputation high."

    The code, which employees had to agree in writing to obey, emphasizes basic moral values rather than mere technical compliance with federal laws and securities regulations.

    "We treat others as we would like to be treated ourselves," Enron’s then-management wrote. "We do not tolerate abusive or disrespectful treatment. Ruthlessness, callowness and dishonesty don’t belong here."

    In particular, the document emphasizes Enron’s responsibility to serve a variety of stakeholders.

    "Relations with the company’s many publics--customers, stockholders, governments, employees, suppliers, press and bankers--will be conducted with honesty, candor and fairness," the code says.

    The problem is that those seemingly high-minded values were a sham, designed to conceal Enron management’s true core principle of doing whatever it took to generate profits, or at least the appearance of them. Sims says it doesn’t take employees long to figure out which code to follow.

    "In the end, companies have a way of eliminating or marginalizing those who haven’t bought into the corrupt deep culture," he says. Those who survive tend to buy into "groupthink" and accept the company’s wrongdoing as acceptable behavior, he says.

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