The Business Ethics Blog

Here’s a nice little commentary from Andrew Leonard, writing in Salon: Enron: Bad apple or poisoned orchard [requires subscription]

Leonard has 2 main points to make.
First, he points out that it’s too easy for everyone to agree that Enron (or rather, its team of senior executives) was bad. Bad, as in one bad apple, one isolated problem:

Naturally, media attention directed at Enron right now is focused on a very narrow question — are Lay and Skilling guilty of intent to commit fraud? Once we get a yes or a no on that, then the whole sorry mess is theoretically wrapped up neatly with a bow, and we can move on to the next corporate scandal. But the truth is that their guilt or innocence doesn’t amount to a hill of beans in the grand scheme of things. The real story of Enron is the story of a company that flourished in an age of deregulation, that had such mighty power that it could get laws changed to allow it to act with less and less restraint, and that with that freedom came complete and utter irresponsibility.

Leonard is of course right about this. Just as any one crooked individual won’t get far with attempts at wrong-doing within a corporation with a sound, ethical corporate culture, a crooked company won’t get very far within a business community and regulatory environment that is intolerant of its shenanigans. Of course, internal policy & practice at Enron made the company fertile ground for pernicious actions by individual employees, and as Leonard points out, the deregulated energy market in the US (along with a willing & cooperative financial community) made it easy for Enron to flourish.

Leonard’s other point (really, for him, just a building block for his main point), is about the fact that Enron really isn’t the worst-case scenario. Enron was in the energy industry, which was bad enough (just ask the people of California, including people with home medical equipment that relied upon the electricity that Enron so gleefully turned off and on in order to manipulate prices). But it could have been worse:

Imagine if, say, a Merck or a Monsanto were run as recklessly as an Enron. The potential public health or environmental disasters that could be spawned by cutting-edge pharmaceutical or biotech firms is a cyberpunk nightmare. Modern multinational corporations have far too much power to be allowed to A) police themselves, and B) influence the crafting of laws that affect their business. They need to be reined in, and they need to be isolated from the political process, not in charge of it. Of course, the complete opposite has been happening in the global economy. Corporate influence and power is at an all-time global high.

The idea that things could’ve been much worse if Enron had been a biotech firm is one I’ve been making in public presentations for 3 years now. Of course, that’s only partly true: biotech (at least the kind related to human health) is, in all fairness, more tightly regulated than the energy industry.
But I think the overall point stands, especially with regard to the role of corporations in the policy-making process. It’s pretty well known, for example, that Monsanto wrote the US regulations on genetically modified foods, and essentially handed them to policy makers in Washington.
That sounds pretty bad, but in some ways it’s more understandable than you might think. Policy-makers in some cases need to rely on those who know more than they do about complicated issues, and companies like Monsanto have a lot of information (not all of it unbiased) at their fingertips. And it’s hard to fault the company for wanting to influence policy. Everybody — private citizens, NGO’s, mom-and-pop companies, large corporations — want governments to make decisions that reflect their values and interests.
So the challenge is this: a) how do we get companies (perhaps entire industries) to show reasonable degrees of restraint in their efforts at lobbying government, and b) how do we make sure that the civil service is sufficiently capable that high-level policy makers don’t have to rely on the world’s biggest corporations to advise them on how to regulate them.