‘As a partner in the communities in which we operate, we believe the company has a responsibility to conduct itself according to certain basic principles.’ And if in any doubt, these values were very explicit: Respect, Integrity, Communication and Excellence. Not a couple of PowerPoint slides or a few posters, but a 66 page manual.
This company had 20,000 staff, 110 billion US dollars in revenues, and was named America’s ‘Most Innovative Company’ by Fortune for six consecutive years. I am talking about Enron, which filed for bankruptcy in 2001.
Reading that particular Ethics Code Manual, a commentator said, it is like finding a copy of the Titanic’s “Safety at Sea” manual.
There are hundreds of accounts of what happened and did not happen, and I am not an expert on the technicalities that led to fraud. Malcolm Gladwell’s ‘Open Secrets’ in the New Yorker, January 2007, for example, is a good piece on this that I have read more than once. But from the myriad of comments from every imaginable management angle, including of course the frequently quoted Enron’s value system (as I am doing here) as an illustration of the meaningless of ‘values on paper’, one aspect has caught my attention recently. I confess, I did miss this before. It is explained in a 2011 article by David Burkus, and I am sure in many other places that I had missed as well.
It refers, not to the CEO, Jeffrey Skilling, now in jail until 2017, but to Andrew Fastow, the Chief Finance Officer. Burkus says that ‘Fastow undertook an elaborate process of establishing special partnerships to bundle assets and secure loans. The board of Enron, understanding that Fastow’s involvement in these partnerships was a violation of its code of ethics, voted to suspend the code of ethics’ application to Fastow while these partnerships were active. Fastow’s actions and the board’s decision were not kept private, as SEC regulations required the identities of these partnership members to be disclosed’.
This is a story within the story: (1) Not only the value system did not seem to count much; (2) it was suspended (the code of ethics) so that special partnerships could be formed without conflict; and (3) The Board did it, and it was in the open.
This is surely the most bizarre, public, temporary suspension of a Code of Ethics to enable most senior people to be unethical if needed. It is the ‘contingency model’ in action. The one that says ‘it depends’. The ‘it depends’ model, which appeals to rationality (‘situations are different’) is very handy. It allows people to deal with uncomfortable barriers. It has always been with us.
Will we always behave in X way? It depends, in India however, it is possible to do Y because this is the way things are done there.
Is behaviour Y always unacceptable? No, it depends, in culture Z this is normal, so who are we to judge?
Is ethical policy A non negotiable? Well, it depends, because in country B you could not enforce it.
Will our Corporate Social Responsibility be universal? It depends, region C is not really ready for it.
The old tension between ‘Values-Based leadership’ (values and behaviours that are not negotiable) and ‘Contingency (‘it depends’) Leadership’ is an old one. It has not gone away. Reviewing the old war stories about Enron, when doing my research on ethics and corporations, has brought back the ‘it depends’ that I have confronted frequently during my business life, and that has always driven me mad.
The Contingency Elephant is still in room, well fed and alive. An inventory of your ‘it depends’ is a good start. Some things change, some must stay, no matter what. Some things depend on other things, other don’t; they have never a ‘it depends’ attached.
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