Thursday, January 19, 2012

Ten years later- Have we learned from ENRON?

by Rick Gould, CPA, JD

December 2, 2011 was the tenth anniversary of the bankruptcy filing of Enron. The demise of Worldcom, Healthsouth, Tyco International, Global Crossing and other high profile public firms followed soon after that event in 2001. I recall vividly the time I taught the Entrepreneuring graduate course I created at Parsons School of Design and how I specifically chose these firms as model case studies. The relevance was there 10 years ago. But I wonder in the context of today’s business environment… have we really learned from these examples?

The downfall of these firms and the liquidation of Arthur Andersen, the CPA firm for many of these firms, generated millions of dollars for other companies. The bankruptcy law firms, the movie industry, as well as the cable specials and books that chronicled the drama, all profited from the failure of these firms and their corrupt executives.

For these past ten years, those of us in the business community and corporate governance heard about and preached about the importance of ethics, transparency and integrity. But have we really absorbed the lessons learned from the ‘Enronrisque’ culture? Have we fully addressed the fallacies that so devastated our feelings of trust and accountability in large companies? That distrust exists more than ever now, as fully exhibited in the NYC Zucchotti Park Wall Street protest and the wider “Occupy” movement.

What is really in place to stop the cover-ups and off-balance sheet transactions that Enron’s Ken Lay, Jeff Skilling and Andrew Fastow so neatly orchestrated? How can the practice of using a business as a personal piggy bank, replete with illegal and immoral abuses that Dennis Koslowski was convicted for as CEO of Tyco, be eradicated?

In light of all the rules and regulations imposed by the SEC, by FINRA and the “Enron Act,” renamed as Sarbanes-Oxley, I have to truly wonder: how effective are they, and how far we have truly advanced in the areas of ethics and transparency?

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