Enron's Lesson for Leaders

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Enron's Lesson for Leaders

By: John A. Baden, Ph.D.
Posted on February 20, 2002 FREE Insights Topics:

The sorry Enron saga reminds us of an important, persistent truth. Unless those at the top are relentlessly vigilant and honorable, large organizations will find compelling reasons to lie, hide facts, and violate ethical standards.

When the stakes are high there is a temptation toward dishonesty and irresponsibility. In the process, innocent people are hurt, often quite badly, while the long-term health of the organization is jeopardized for transitory gains for those at the top.

Gus diZerega, a Berkeley-trained political scientist, recently explained the logic of this institutional pathology. He argues that large organizations are inherently dishonest and will deceive, distort, and hide evidence for short-term benefits while deeply discounting likely long-run detriment.

I disagree-but only when those at the top are relentlessly vigilant and honorable. Usually they are, for smart people know the cost of deceit. But as presidents Nixon and Clinton demonstrated, those in power often believe they can escape the consequences of deception.

Time, however, normally erodes cheaters' cover. Exposure is more common in the business than in the governmental world. Why? When wealth is at stake and folks are disadvantaged by lies, truth becomes a stubborn thing. Again consider Enron's fate. Here are a few other examples illustrating Enron's lesson that cheaters get caught.

When the football scandal erupted at SMU in the mid-'80s I was, very briefly, running the energy program. The school had a history of infractions; dozens of players were paid thousands of dollars from a six-figure slush fund.

The culture of cheating pervaded the institution from top to bottom. With high SATs, my son received a scholarship at SMU. However, he found the environment so corrosive that he left before completing his first semester, ultimately graduating Phi Beta Kappa from the University of Washington.

Even religious organizations practice deceit. The Catholic Church in Boston is embroiled in a protracted, persistent pedophilia scandal. It shows that bishops equal politicians when it comes to cover-ups.

For at least 15 and perhaps as many as 40 years Boston's archbishops have been aware of their many pedophile priests. According to a January 30 Boston Herald article, "nothing was done to address the problem, beyond piecemeal stabs at rehabilitation and all-out efforts to muffle word of the scandal among those most in the need to know: parents."

Here's what makes the Boston Catholic Church's behavior so much more deplorable than Enron's. Not only were the perpetrators and those who protected them supposed to be moral guides and leaders, but the damage they inflicted transcends money. The people responsible for the lies and deceit at Enron and Andersen should be stripped of their assets and thrown in jail, and the victims financially compensated. In principle, they could be. In contrast, there's no possible way to fix the psyches of molested prepubescent boys.

Finally, Washington, like a one-company town, has a clear hierarchy. In that context our president, the most powerful man in the world, may think he has complete immunity-he doesn't.

Polls in 1998 told us the majority of Americans excused philandering with an intern. A friend claimed, "If Bill Clinton shot a person on national TV, he'd get away with it." That's a silly, grossly exaggerated statement-and he was wrong. As I predicted, Clinton's support has since eroded.

Try a mental experiment. Imagine that President Clinton had kept Hillary in the White House while living with Monica in a condo owned by a banker crony. Clinton would not have survived this scandal. In America, no government official assigned a public mansion could long survive. None has. Those involved always suffer a reputational loss which ultimately costs them. All those associated pay.

Time is a relentless though imperfect force. It ultimately unstuffs ballot boxes and exposes dishonorable behavior. Clinton may remain a celebrity of sorts, but respectable people avoid close association.

Trust and integrity are necessary ingredients of enduring respect. Leaders of large organizations often think themselves immune to the forces of moral authority. As an influential Jesuit put it regarding the Catholic church, "The U.S. bishops are destroying their own authority with the faithful by their unwillingness to address legitimate problems, or pretending they don't exist."

Rot starts at the top. When leaders violate their vows, they are susceptible to the force of ethical standards. Not only they, but the institutions they represent, ultimately pay. Healing requires renewed confidence in those placed in authority.

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