Dear Ethix – Issue 22

Enron & Ethix

The current issue of Ethix (Jan-Feb, 2002) arrived today. I am finding the Bulletin so interesting that it is taking precedence on my reading agenda over numerous other publications.

I would expect that over the next month, two or three, you will be responding to the Enron debate. I would be grateful for your sharing with me any printed responses you might be drafting in the light of this tangled story. It appears to be so baffling how such a monumental disaster could have occurred. Did you see it coming?
Prof. F. Burton Nelson
North Park Theological Seminary, Chicago

I woke up this morning thinking about Enron and how these guys are just not stepping up to the plate with any accountability or responsibility for what has happened. Who was tending the store? Where is the moral and ethical responsibility of caring for and protecting corporate assets? The two highest responsibilities of any executive are to make profits and protect assets. Where were these guys? This slope is so slippery. This is serious stuff, a wake-up call to corporate America. This is a great opportunity for Ethix! If I were you, I would be all over this thing and talking to these guys. Seize the opportunity. Go get ‘em.
Jack Madson
Kirkland, WA

On the Ten Principles

As a board member of two high-tech organizations, I read Ethix with interest and was impressed by your “mission” and the “Ten Principles,” especially in light of the Enron developments.
Rocky Bridges
Board of Directors, SyncEssentials, Inc.

Your “Ten Principles” are excellent as far as they go, but how about working in the theme of community contribution and citizenship? We don’t want “people-friendly” to become too individualistic. I’m also surprised that you don’t mention the increasing conflation of business ethics and political correctness (which is far from even warmed over “traditional moral philosophy”). That is what I saw in the high tech circles I frequented, leading to the politicization of United Way and similar tragedies. I also know a thing or two about corporate realities after 25 years in both low and high places at Hewlett-Packard, and don’t believe a conversation with the top people of a company (e.g. 4Sight’s work with HP and others to connect shareholder value with ethical values) or even a large division can make much of a connection with what is really going on with employees, including the employees who actually touch customers and suppliers. If there is anything striking about HP’s situation today, for instance, it is the loss of the HP Way as practiced in person by Bill and Dave. Finally, saying that ethics means “doing the right thing” begs the question of what is right. Do you really think all of this will go very far without taking God out of the closet?
Robert D. “Skip” Rung, Corvallis, OR

Editors’ Note: We agree that ethics is about communities, not just individuals. We don’t at all “beg the question” of what is right: the Ten Principles are a hearty, even if debatable, start at providing definitional substance. Yes, experience (of which you obviously have a lot) suggests that ethical reform is very difficult. We want to be realistic but not fatalistic or discouraged. No stakeholder should be “in the closet,” including God!

The Enron Debacle & Ethics Watchdogs

The Enron debacle may go down in history as a classic breakdown of professional and ethical practices in a corporation. The details have been analyzed thoroughly in the media and corrective ideas have been presented. Many seem to think the government should do something to prevent such a scandal from happening again. Perhaps another regulatory agency (’with teeth in it’) should be created that vigorously would go after guilty parties. Televised hearings could be conducted in which the guilty, or suspected, could be castigated publicly. Not only could the violators be punished, but also the agency could pick up some political capital, showing that the government really cares and will not stand for such outrages.

The age-old problem of who regulates the regulators would need to be solved. Perhaps an oversight committee could be created to ensure that the agency is not corrupted by ‘donations’ from potentially embarrassed companies. A second level oversight committee could then oversee the first level oversight committee, and so forth. If enough levels of oversight are created, no company could afford to buy out all of them.

Perhaps an entrepreneurial approach to the problem could provide a better solution. Analogous to Morningstar, which provides ratings for mutual funds, a company (“Eveningstar” say) could provide ratings on the “Professional and Ethical Practices” of publicly traded corporations (PEP ratings). Perhaps a squeaky clean corporation would get a 10 and Enron would get maybe a 3. Conceivably, corporations even worse than Enron could get 1 or 2. Any company with a PEP rating less than 5 would be considered junk status, similar to junk bonds. A 10 rating would be very prestigious, similar to the Malcolm Baldridge award for manufacturing. Of course Eveningstar itself would need to rate a 9 or 10, or else the whole business plan would go down the drain. There is a built in incentive for companies to avoid attempts to bribe Eveningstar because such an act, in itself, would be grounds for lowering the PEP rating of the company.

The market for Eveningstar’s reports would be huge. Every savvy investor in the world would want to know the PEP rating of a company before investing in it. Every quality company would proudly tout its PEP rating in its annual report and news releases.

Eveningstar could do useful and noble work, and potentially make a little profit at the same time. Perhaps it is possible to force companies to clean up their acts without the creation of another governmental bureaucracy.
Stan Jensen
Los Altos CA

Editors’ Note: The IBTE’s “Ethix Company Review” is in development as we speak. Last month’s Benchmark Ethics (“Time for Your Corporate Ethics Audit?”) was our progress report.