A UMNS FEATURE
By Diane Huie Balay

THE COLLAPSE OF ENRON CORP., the one-time energy trading giant, and the collateral damage to accounting bastion Arthur Andersen LLP continue to generate repercussions around the United States, from the halls of Congress to the pews of United Methodist churches.

CHARGES OF CONFLICT OF INTEREST, SECURITIES FRAUD, insider trading, cooked books, hubris and a gross breach of fiduciary responsibility are being hurled about with considerable emotion, while Andersen is on trial after being indicted for obstruction of justice related to the destruction of Enron documents. The financial impact of Enron's collapse has been widespread, leaving a blot on investors' balance sheets and erasing the retirement savings of many employees who sank everything into the company's 401(k) plan.

Beyond the dollars and cents, the Enron debacle offers a new textbook example of failed ethics in business. It has prompted standing-room-only attendance in business ethics classes at schools such as United Methodist-related Duke University and Cox Business School at Southern Methodist University.

What do ethics have to do with corporate responsibility? In a word: Everything.

It is unclear whether the interest in business ethics classes is a trend or a fad, or whether the students really want to learn ethical behavior or want to stay out of jail and congressional hearings. However, leading financial experts, both church and corporate, do make clear that ethical behavior is good for business, employees and investors.

"One of the potent messages of Enron is that ethics matter, and matter a lot," says Thomas Donaldson, ethicist and Wharton School business professor. The economy depends on the integrity of the markets and companies that operate in them, he notes. Ethics begin with individual character, says Richard O. Mason, director of Carl M. Maguire Center for Ethics and Public Responsibility at Southern Methodist University in Dallas.

Mason, an author and management consultant who also teaches corporate ethics at SMU's Cox Business School, calls Enron and the attendant corporate damage "tragedies."

"A lot of really fine people got clobbered who were innocent of wrongdoing," he says. "One needs spiritual and religious resources to draw on in those tough times."

'Over the pale'

In 1984, Mason says, Enron was on the right track under the leadership of chief executive Ken Lay, an active member of First United Methodist Church in Houston. At some point, the company began "taking things off the books," failing to reveal the full truth about certain business transactions. Says Mason: "They went 'over the pale.'

"It was classical hubris," he continues. "They were doing things well, got patted on the back by individuals and by the marketplace, and they bought into it."

Ultimately, he says, the corporate culture became destructive. The company hired the brightest and best graduates, but then subjected them to a corporate culture of "rank and yank" – ranking 10 employees and yanking, or dismissing, the bottom three. Big money was awarded to those who did well in the eyes of the corporation, he says.

"These practices built up a culture of backbiting and a very destructive atmosphere compared with, say, Southwest Airlines' organization that really cares about their employees," Mason says.

What causes a destructive atmosphere? Do some companies have so much stress at the highest levels of management that no one's ethics could withstand it? Are the pressures so intense that a good corporate culture may become destructive? And, if so, what can people of faith do about it?

So much money is at stake that "a lot of people don't want to hear the straight truth," Donaldson says. "Investors don't want the CEO to say something negative that will drop the stock, even for the short term. There's a culture of puffery, a culture of winking." The mere presence of a code of ethics is not likely to make much difference, he says.

As a consultant in corporate ethics, Donaldson says he knows within reason the content of a corporation's code of ethics before he even looks at it. All of the top corporations have such codes, he says. Recently, he showed his class a copy of a letter that an insurance executive received from Enron last fall. The letter, signed by Lay, boasted about Enron's high ethical standards. In addition, Enron passed out paperweights to employees reminding them of the corporation's ethics. However, none of that prevented acts of deception, Donaldson says.

"What is important in corporate ethics is the example provided by the leadership – what they say and do and how they reward people," he says. "That is especially true at the top of the organization."

At Enron, for example, then-chief executive Jeffrey Skilling held a celebration for an employee who broke the rules, Donaldson says. "One of the great lessons here is that all the bells and whistles, all the fine high talk, all the codes of ethics and all the lawyers amount to nothing if the culture is ethically dysfunctional."

Donaldson describes two business movements that strongly influence corporate culture. The "shareholder" movement promotes ever-increasing shareholder values. The chief executive officer's primary goal is to continue pushing the company's stock prices up. The "stakeholder" movement is based on the premise that profits can be made by holding the interests of the stakeholders – customers, shareholders, employees and the communities where they live – in balance.

Other business experts add a third movement, the "social" model, which holds that companies are in business to provide jobs for employees and to generate tax revenues for government. In this concept, companies may be used to engineer social change.

If a corporation subscribes to the shareholder model, could the drive to increase stock value put pressure on corporate officers to withhold information that would drive share prices down? Could it lead to unethical and illegal behavior? Could it lead to a corporate culture in which any attempt to say "the emperor wears no clothes" would be discouraged, ignored or worse?

'Good' people

Whether or not such a corporate model influenced some Enron and Andersen officers, interviews show that many employees of those firms believed the companies were good. Those people suffered real grief at their company's plight.

"Few of the executives were high-fliers," says the Rev. Steve Wende, pastor of First United Methodist Church in Houston. "Many, if not most, are very solid, churchgoing, community-minded people. These are people who went out of their way to invest in ministry with the poor and to sharing the Gospel with people in need."

Wende says that Lay was attracted to First Church because of its diversity. "Here, folks of great means can be found sitting next to street people. Ken liked that," he says. Like many Houston congregations, First Church had members who were hurt by the Enron collapse. Some lost jobs. Some were retirees who lost significant amounts of money in pensions.

"Our church has tried to stand beside those in Enron," Wende says. "People have a good deal of maturity in the business meltdown. We're not the judge. God is the judge.

"One member said, ÔIf Christian fellowship is just for the good times, it's not Christian.'" The church has tried to help those who were laid off find other jobs, Wende says. For the most part, he says, those efforts have been successful.

"Enron was a major player in support of organizations in Houston for community betterment. These social agencies will suffer," says United Methodist Bishop Alfred Norris of the denomination's Houston Area.

Sometimes the difference between right and wrong can be lost in a corporate environment. The Rev. Rebekah Miles, associate professor of ethics at SMU's Perkins School of Theology in Dallas, writes that Christians working or investing in the business culture need to remember that others do not always operate with the same values.

"To assume that all will act like faithful Christians," she writes, "and that we don't need laws and other protections against evil is, as Martin Luther says, Ôlike placing lions, sheep and eagles together in the same fold' and saying, ÔHelp yourself and live in peace with one another.' You don't get peace and happiness in that setting. You get a lot of fat lions.

So we need to set up laws and guidelines to protect the sheep and eagles against the lions in the fold," she says. "It can be tough for Christians not to give in to corporate values that may be different from the ones they learned in church – especially when their financial future and that of their family seems to be at stake," she says. "The pressures and temptations can be overwhelming.

"If their commitment to doing the right thing, to living well as Christians and to telling the truth is not as strong as their desire for financial security or their ambition for advancement, then they can easily fall into trouble," she continues.

"It is important, then, for Christians to foster strong, faithful communities where people not only learn basic moral principles but learn to live them out," Miles says. "It is important to practice them and to practice so long and faithfully that these principles become second nature. Then they might stand a better chance of withstanding the temptations to put their own interest before their responsibilities to the truth and to their fellow employees and society."

Balay is a free-lance writer in Dallas and a frequent contributor to church-related publications.

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