Corporate Integrity Need Not Be An Oxymoron

Whether Kenneth Lay and Jeff Skilling still believe they were gutsy entrepreneurs, not greedy fraudsters, is immaterial. For now, the guilty verdicts the two Enron bosses received from a jury that deliberated for six days overshadow everything else. National Public Radio analyst Daniel Schorr spoke for many when he said he didn’t expect to see this kind of humbling of corporate America in his lifetime.
Lay was found guilty by the jury of six counts of conspiracy and fraud and Skilling on 18 counts but was acquitted on all but one charge of insider trading. In a separate trial in front of the judge Lay was also found guilty of bank fraud. He faces a maximum of 45 years in jail (plus up to 120 years for the bank fraud) and Skilling could receive 185 years inside. The judge is set to sentence them September 11. Both men said that they would mount an appeal.
From the outset, investors and employees had no doubt who was to blame for Enron’s collapse. Until Lay and Skilling stood in court, no top Enron executive had faced trial for -- much less been convicted of -- any wrongdoing. Some 30 people were charged in connection with the case. Nearly half made a deal and some testified for the government.
This led both defendants to put too much faith in weakness of such evidence.
Skilling and Lay sought to portray Enron as a fundamentally sound company that had been brought down by panic in the markets brought on by short-sellers and stoked by the media. The jurors saw little evidence that subordinates could have conducted massive fraud without the chief executive’s knowledge.
The defendants’ contention that they had merely engaged in activities common during the tech boom was puerile. An Enron-scale juggling of accounts was not so widespread as to rise to the level of standard operating procedure. In sum, the defense’s attempt to portray Enron’s collapse as an intrinsic hazard of capitalism was doomed from the start.
Are we on the threshold of the Age of Corporate Integrity? Businessmen may have self-interest in bemoaning the Sarbanes-Oxley legislation on corporate governance as excessive. The suspected malfeasance of a few cannot justify unreasonable encumbrances across the boardrooms. Moreover, how long would it take for such restrictions to impose a chilling effect on America’s entrepreneurial zeal?
Yet the onus is on corporate America. It could do itself – and the rest of us -- a huge favor by resisting the temptation to describe out-and-out crime as risk-taking.