Enron: End of an Era

Guilty verdicts bring closure to one of history's great financial scandals.


The hand of justice may be sure, but it isn’t swift.

Fifteen weeks after the trial first began, and 54 witnesses later, prosecutors finally secured guilty verdicts in the case against Enron’s Kenneth Lay and Jeffrey Skilling. CFOs had little doubt about the outcome: a CFO magazine survey of 183 finance executives found that nearly all of them expected the verdicts. The defendants argued that aside from former CFO Andrew Fastow’s thievery, Enron was a perfectly law-abiding and healthy company. Not surprisingly, few CFOs bought that argument. Once the curtain was pulled back, it was clear that Enron was a deeply troubled organization. And as most CFOs will tell you, an organization infected with ethics problems is rarely healthy at the very top.

Certainly, Enron has changed how companies operate. Some of those changes are for the best: nearly half of survey respondents say their managers are now more apt to ask tough questions about business performance. A study of workforce attitudes (2001–06) by HR consultancy ISR found a sharp rise in the number of employees who say their companies act ethically.

Other changes have been less constructive. Three-quarters of the companies CFO surveyed say they are spending more time on compliance — time that’s presumably not being spent running the business — and 37 percent of respondents say their managers are more risk averse. Only a minority of CFOs think that the verdicts will deter future Jeffrey Skillings. Fifty-nine percent say there is at least a 50/50 chance that companies will engage in Enron-style fraud over the next 10 years. Indeed, three-quarters say that the lesson they draw from Enron is that regulation can’t stop a determined fraudster.

As for Skilling and Lay, finance executives have little sympathy for them. The two are expected to be sentenced on September 11. Eighty percent of CFO respondents say that the likely punishment (12 to 25 years in jail) is appropriate or too lenient for Lay; 84 percent say the same for Skilling. One CFO had a better idea: forced employment at the SEC. — Don Durfee

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