Enron Teaches Us That a Moral Compass Matters

I recently finished reading “The Smartest Guys in the Room,” an amazing account of the characters who were complicit in the rise and fall of Enron.   It is a page turner; I couldn’t put it down.

The authors, Bethany McLean and Peter Elkind, tell a story of how exaggeration, manipulation and obsession with the numbers, particularly stock price and quarterly earnings, were ingrained in the culture of the company long before anyone had heard of Enron.  From executive management down to the traders, all anyone at the company cared about was making money–and making it now.  If they had to fiddle with the numbers and push the limits of the rules, so be it.  If the auditors could be coerced to agree and the bankers blackmailed, they can be considered on board.  They simply did what had to be done.

I wrote about Enron for the Boston College’s campus newspaper nearly eight years ago just as the Enron outrage was hitting full stride.  What I believed then was reinforced by what I read in the book: Enron’s corporate culture bred corruption.

Mind you, I’m no saint.  I am an unrepentant capitalist.  I make no apologies for making money during the current recession that drove people out of their jobs and homes.  And although I’d written for the college newspaper that Altria Group manufactures products that kill people, I don’t find it morally reprehensible that some people choose to invest in a company that pays a 6% yield in a fairly stable business.

But I don’t cheat, lie, steal or mislead in order to make money.*  I, like most members of society, have a moral compass, that part of myself called the conscience that tells me there are some lines I cannot cross even if I can’t precisely demarcate it.  It is what enables me to realize that the rules aren’t there to be circumvented, but are there to articulate in a concrete manner the amorphous ideals that we as society hold ourselves up to.  It is what stops me from saying “just because I can, doesn’t mean I should.”

Enron lacked that sense of right and wrong that goes beyond (even within)  the written rules.  From the earliest days, Enron rewarded those who moved debt off the books and inflated earnings.  It was driven by booking the deal in this quarter rather than serving the customers for the term of the contract.  The company’s culture was not of innovative ideas–which need not have been, for its idea of trading natural gas did revolutionize the industry–but of creative accounting.

The saddest part about fully understanding the story of Enron is that I believe Jeff Skilling, the company’s former CEO, when he says that he doesn’t think he did anything wrong.  He blames the “classic run on the bank” for the company’s collapse yet conveniently ignores all the accounting misstatements that led to the run in the first place.  He  simply doesn’t get it.  Much like an entity in two dimensions that can never imagine, much less comprehend, a sphere, Jeff Skilling can’t understand what most of us with a common sense of decency see as an obvious wrong.  No amount of Congressional oversight or bureaucratic regulation can compensate for this deficiency.  For people like Skilling, rules are just words to be strictly abided, lacking any context or substance.

The Enron story is a tale of tragic flaws,  but not in the mode of a Shakespearean tragedy.  Shakespeare’s characters are imperfect people undone by their hubris, indecisiveness and ambition, yet the same traits may be turned into a virtue as confidence, thoughtfulness and the drive to excel.

There is no way to positively spin a moral vacuüm.  There is no bright side to moral bankruptcy.  When I think of the filth cultivated at Enron, I don’t feel disbelief as much as despair.  There is an overwhelming dreariness in realizing that we, as society, should be conducting ourselves in much higher standards but we aren’t because of some who simply can’t, not due to their inability to live up to the higher standard, but due to their inability to know any better.

Yet, I can comfortably sleep at night because I have faith, not only in God but also in most people.  Most members of society have developed a sense of right and wrong even if they fail to live up to it.  I can live with myself–and find joy in the every day I do so–because I have surrounded myself with people who have developed it.

*John McCain told his son, a fourth generation McCain to enter the Naval Academy, that so long as you don’t cheat, lie or steal, everything is fair game.  I mostly agree with that, but I think you need to throw in “mislead” and the ancillary “deceive” to remain a distinguished, even if competitive, gentleman.