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I had a CSR (corporate social responsibility) class today (as part of a Certificate in CSR I am doing at the University of Geneva We are covering business ethics this weekend. To start it all off, we watched ‘Enron: The smartest guys in the room’, a brilliant documentary loaded with facts, analyses of what and why it happened, as well as personal experiences and views of people who have been involved with the company. A wonderful couple of hours that I do recommend you to have if you get the chance.

There is probably no need to re-tell the Enron story which is very rich with many facts and twists to it. Just quickly:

Enron was founded by somebody called Ken Lay in the mid-eighties as an energy trading company. Ken Lay was a supporter of energy market deregulation on which principle he founded the business. The company began in the oil business after which it scoped out to working in electricity, Internet bandwidth and even ‘weather trading’. (…??) It was characterised by a culture of aggressiveness and risk-taking especially among the company’s traders.

The company’s approaches to accounting were highly questionable, such as ‘constructive accounting’ and/or hypothetical value accounting. This meant that Enron would write in a profit the minute it was estimated it would be there without it actually having gone to the books at all. This ”constructive accounting” ended up creating an illusion of a very profitable company – this (illusion) raised Enron’s share prices by 50% in one year, then by 90%. Meanwhile, this illusion was disguising the company’s continuous losses. It could not last forever because of that the rest of the market was (hopefully!) not an illusion as well – this led to Enron’s collapse in 2002.
The question is: Why did this happen?

Off course loads has been written on this already and so there is no point in over-elaborating. Still, just simply, the issue is two-fold:

1. First and foremost, Enron was not alone. (this is often not mentioned)

Not only Enron top executives (the chairman, the CEO, the CFO, key traders, amongst others), but also most of Enron’s partners, allies and customers, such as banks (Citibank, Merill Lynch, amongst others), audit companies (Arthur Andersen), legal businesses and other partners – all big names – were willing to be in it together with Enron, driven by a single motive, money-making. (imagine that)

The Enron case is a fraud driven not just from within Enron, despite that Enron orchestrated it. A chain of abuse of shareholders’ money spread from Enron, Enron’s traders to outside of Enron. Top people at Enron and Enron’s partners were, with their actions, or lack of such, supporting the abuse. Committing fraud was so much part of the culture of Enron, as well as, to a smaller extent, those who were working with Enron, that this seemed like the ‘right’ thing to do to those who went along. Are they to be excused?

Certainly not, they are not to be excused. Enron’s case is an example of a people anc corporate cultures chain reaction. It shows how bad cultures can lead even good people to do bad things. We should all not forget this. Recognising the merits of a corporate culture, as well as questioning this, is important. We all have the power to think on our own feet and act in the way that is right.

2. Second and not less important is that the US energy market had been de-regulated. This is what made possible the trading of what would have otherwise been a public service – this possibility was abused by Enron’s traders in California. In other words, it was not just Enron and its partners. It was also the US government. Tough, hein? The whole system was creating an opportunity for Enron to do abuse.

Is this ethical? Can corporations be left to do whatever they want with customers and shareholders provided that they can do it? … The answer to this is no. Still, they may not stop because of this. We can never be sure. And so, it is important to pre-empt instances of abuse by corporations by creating systems for them to work in, systems which do not create opportunities for abuse.


The Enron case sure raises a number of ethical issues. After I watched the movie, I questioned my own approach to the way in which I ‘do business’ in any organisation and context. What are my motives? Are these ethical? In whatever I do, am I doing the right thing? Ethical, and ethics, is a construct that we need to understand and create ourselves.  I think it useful if we take a moment to ask these questions of ourselves and think about our approaches to what we do, if necessary. Business, any business, should not be driven by money but rather by the values that we invest in it. And, we, i.e., YOU, ME, decide what these values are.


August 2017
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