A Publication of WTVP

There’s a new era by which we will mark dates in business ethics. We date our year as 2002 A.D. (Anno Domini). Now we are in the year 1 A.E. (After Enron). From the date of the company’s collapse, business ethics textbooks will have to be rewritten because so many fundamental ethical issues were raised. One of the major issues to be reexamined is conflict of interest.

In the Enron collapse, there are many new real-life illustrations of the failure of the corporate board and senior management’s fiduciary responsibility to employees, shareholders and the wider society. History is replete with many executives and managers who lined their own pockets at the expense of shareholders and workers, and of boards who were uninvolved or chose to look the other way. Enron’s top brass took fiduciary failure to new depths.

Avoidance of conflict of interest is a fundamental ethical issue in business operations and especially in the work of nonprofits and tax-supported entities. One must be clear that the benefit of the enterprise (using other people’s money) must take priority over one’s self-interest. If the money or the enterprise is one’s own, a case could be made that one should do whatever brings the greatest financial self-advantage—though I would argue with that assertion. But when one is working for someone else, the enterprise’s interest must come first.

That point seemed to be lost on the Enron executive team. Andrew Fastow, Enron’s former chief financial officer and the executive whom many say was behind the development of multiple partnerships, made himself the president of several of them. Not only did he collect a handsome salary at Enron and watch his stock holdings artificially inflate, he also drew considerable income from the partnerships and from his holding of their stock. Fastow engaged in insider dealing, which reflects a fundamental conflict of interest.

The amazing thing is the parties involved don’t think the situation is particularly wrong. They seem to applaud the cleverness and gamesmanship involved in insider dealing and that conflict of interest is a natural part of the life of companies.

The individuals in question were either highly cynical or very naïve about their responsibility to the enterprises in which they worked.

The notion of conflict of interest arose out of a sense of duty to preserve and develop the life of the enterprise, especially if other people’s money is involved.

The year 1 A.E. is a great opportunity for people in a company to review their fundamental core values and ask whether the values stated are the values that are real. It’s also a good time to review conflict of interest policies and train employees in them.

Most of all, After Enron is a moment when all involved discover why being clear about ethics in a company or organization is key to a successful enterprise and to creating lasting, enduring wealth that is both tangible and human. IBI