SCANDAL WATCH: Jury Out on Enron?

HOUSTON – The stock market faces a landmark test of credibility with the outcome of the Enron trial on which a jury is deliberating as I write this. By extension, the social responsibility of business is on trial as well. Critics call it PR. Greenwash in the case of the environment. Or “Astroturf” (as opposed to grassroots) when hidden behind the veneer of a nonprofit that purports to represent a public groundswell rather than a publicly traded company.*

One quote from Enron’s 2000 Annual Report warrants continuing vigilance by the common investor: “We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be” (As cited by Steve Lydenberg in his 2005 book Corporations and the Public Interest: Guiding the Invisible Hand, Berrett-Koehler Publishers).

Enron issued a socially responsible business report. It had staff in charge of socially responsible business. It lied.

If former Enron chair and CEO Ken Lay and former CEO Jeffrey Skilling get off, it will set back the state of socially responsible business a generation. Every generation has its defining moments that impact future generations until their own collective watershed moment when the stars align and the structures that separate us from animals in the investment wilderness show themselves for what they are – a glorified honors system that unethical people will take advantage of until they’re caught when egregious enough to warrant slow moving systems of justice to devote their resources to investigating the problem within the narrow confines of laws that expensive lawyers can’t get around.

“My staff did it,” and “I didn’t know” rank right up there in the annals of modern excuses with “I don’t remember” and “I want to spend more time with my kids.” "Rules," Lay said, "are important, but you should not be a slave to rules, either," and “there's no way I could take responsibility for the criminal conduct that I didn't know about."

We want to believe that Enron was just one of a few bad apples, along with:

• WorldCom (The BIGGEST bankruptcy ever -- $11 billion accounting fraud)
  
• Global Crossing (The sixth largest bankruptcy in U.S. history)
  
• Adelphia ($2.3 billion in hidden debt)
  
• Royal Ahold ($1.1 billion settlement)
  
• AIG ($2.3 billion restatement)
  
• HealthSouth ($1.4 billion in false earnings, says SEC)
  
• Fannie Mae (Over $10 billion in accounting errors)
  

etc.

And we don’t want to believe people like former Enron executive, and author of Confessions of an Enron Executive: A Whistleblower's Story, Lynn Brewer – when she said just about a year ago that “100 of the FORTUNE 500 companies could possibly be cooking their books.”

While some corporate executives have been punished for taking away much needed trust in our financial markets, Enron stands as a symbol that must have closure. Reputations take years to build and minutes to lose. My hopes and investments lie with the jury of eight women and four men in Houston, Texas.

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Meanwhile back in the jungle, as the New York Dolls once sang about Vietnam, Kenneth Lay started his second trial on bank fraud violations where he stands accused of lying about how he used a multi-million dollar line of credit (i.e. “I won’t use it to buy stock,” and then using it to buy stock).

…

Showing the game is never up, as long as the lawyer fees get paid, an embodiment of tech bubble prognostication, who may have lost you more mutual fund money than anybody else by recommending stocks he had a financial interest in – former Merrill Lynch internet stock analyst star Henry Blodget, has admitted no wrongdoing. The firm paid $200 million in penalties. His worst penalty? He can’t work in the securities industry and prescribe stock picks again.

To keep up with the sage’s advice on the tech industry, simply view his blog, where it helpfully notes that Blodget or others in his employ “own stock in Yahoo!, Time Warner, Amazon.com, eBay, and Microsoft and may own stock in other companies mentioned here.”

*What does the nebulous phrase socially responsible business mean? It’s the responsibility a business has to its employees, shareholders, customers, suppliers, stakeholders and communities where it operates. (Cohen, J. (2004) “Socially Responsible Business: Global Trends,” in A Future for Everyone, Routledge and elsewhere).