A Look Back at Enron’s Risky Business

Risky Business

It’s almost Friday, but before we start celebrating the weekend’s arrival, let’s enjoy Throwback Thursday. We’re heading back nearly thirteen years to a scandal that rocked corporate America.

In the Winter 2014 issue honored alum and Deloitte partner Richard Herlin reminded us about the human tragedy that was Enron in “Rise to the Challenge.” The now infamous company committed the largest accounting fraud in history. Herlin asks himself what sort of moral compass did the scheme’s mastermind, former Enron CFO Andrew Fastow, have when he began committing fraud? How did Fastow get to the point he could rationalize what he was doing?

These questions were answered in “Risky Business,” a feature written by journalist Celia Shatzman in the Winter 2013 issue. The article focused on professor John Bingham’s research about the motives behind seedy behavior in the workplace.

“We always imagine people doing unethical things for self-interested reasons,” Bingham says. “But at Enron, mid-level managers were willing to jeopardize their standing in the organization by shredding documents to preserve someone else’s name.”              

Why did good people—moms, dads, and Sunday school teachers—lie for others when they had nothing to gain? How did they get to that point? And was it a long road from honest employee to shady accomplice? Intrigued by these questions, Bingham and Elizabeth Umphress, a management professor at the University of Washington, decided to study the motivations behind such actions. The results were striking.

Employees in a variety of industries were willing to do dishonest things for their organization, especially when they felt they had a positive relationship, attachment, or loyalty to their workplace. And those who claimed a strong moral code in their personal lives didn’t fare much better.  But it’s not all doom and gloom for office loyalty, Bingham says. By building a good corporate culture, rewarding the right behaviors, and tightening company guidelines, organizations can offer their employees a guilt-free guarantee.

According to Bingham’s research, the most important thing a company can do is spell out its standards and implement ethical practices from the top down.

That’s not to say that individuals don’t also have a responsibility to do the right thing even when they love their workplace or their colleagues. Herlin summed it up well.

“There’s nothing—no issue, opportunity, client, boss, or fee—that should compromise your integrity or divert your moral compass,” he said. “The consequences of compromise are dire and swift. Warren Buffet was right when he said, ‘It takes twenty years to build a reputation and five minutes to ruin it.’”