(10-07) enron presentation
TRANSCRIPT
-
8/4/2019 (10-07) Enron Presentation
1/53
1
2002-2007
Robert T. Sherman, Jr.
Leadership, Ethics, and
the Texas Two-Step
The Truth Behind the Fall of
Enron and Arthur Andersen
-
8/4/2019 (10-07) Enron Presentation
2/53
Id rather be a huge part of the problem
than a tiny part of the solution.2
2002-2007
-
8/4/2019 (10-07) Enron Presentation
3/53
On December2,2001, Enron Corporation sought
protection under Chapter11 of the U.S. Bankruptcy Code It is the second largest bankruptcy in U.S. history (after
WorldCom)
Enrons auditors, Arthur Andersen, were convicted ofobstruction of justice for destroying documents related to
the Enron account in anticipation of an SEC investigation;conviction was overturned
Ten congressional committees have investigated thecollapse of Enron
Thousands of employees were fired, two former CEOswere convicted of criminal charges and more than 30executives have been indicted; many are serving jail terms
Cliff Baxter, a former Enron Vice-Chairman, committedsuicide in despair over the companys demise; he triedvainly to call attention to Enrons misdeeds
3 2002-2007
-
8/4/2019 (10-07) Enron Presentation
4/53
The Good Ol Days
Enron was formed in the mid-1980s by Ken Lay, from the formerNorthern Natural Gas Co., a large interstate pipeline
Under Lay, Enron became the largest natural gas and electricitytrader in North America
Jeff Skilling was hired by Lay in 1990; Skilling earned his
reputation at McKinsey and advised Enron and other gas pipelineson unraveling take or pay gas purchase agreements
Enron became the 7th largest company in America under Lay andSkilling, with a market capitalization of nearly $70 billion
Enron became the global market leader in trading gas, electricity,broadband and even weather-related derivatives
The companys earnings grew by double digits every year formany years
4 2002-2007
-
8/4/2019 (10-07) Enron Presentation
5/53
Growth in Market Capitalization
In January 1998, Enrons market capitalization was
approximately $12 billion
The companys market capitalization approached $30
billion in August 1999 following an initial public offeringof its water subsidiary (Azurix) and launching its
broadband capacity trading and EnronOnline
Enrons market capitalization exceeded $60 billion in
September2000 after tripling net income; in April 2000EnronOnline handled $27 billion worth of transactions
5 2002-2007
-
8/4/2019 (10-07) Enron Presentation
6/53
The Dark Side of the Moon
Lay and Skilling only hired perceived superstars, but eachyear all employees were force ranked and the bottom 20%were fired; top employees were paid exceptional bonuses instock and cash
Enrons feared Performance Review Committee was perceived
as a means by which the company would reward and punishemployees based solely on paper profits booked for thecompany that year
Enrons business required billions of dollars of capital to buildpipelines and power plants, purchase gas, and develop a
world-class commodities trading floor in Houston The company developed a reputation of being the toughest in
the business while offering 10-20 year commodities contractsthat competitors would/could not match
6 2002-2007
-
8/4/2019 (10-07) Enron Presentation
7/53
Enrons Vision Statement
Like many companies, Enron had a visionstatement and a detailed corporate compliancepolicy
7 2002-2007
Enron people always
do what they say they will do
A popular paperweight had that statement on oneside and the following on the reverse side:
If Enron says it will rip your face off, it will
One of the tenets in Enrons vision statement:
-
8/4/2019 (10-07) Enron Presentation
8/53
-
8/4/2019 (10-07) Enron Presentation
9/53
The Beginning of the End
Sometime in the mid to late 1990s, Lay and Skilling recognized
that earnings from gas and electricity generation and tradingwould decline and that the booming U.S. economy of the 1990s
would end
Enrons acquisition of Portland General Electric did not meet
expectations and it was put up for sale The Dabhol project in India was repeatedly challenged by the
Indian government; construction stopped several times, and
litigation ensued
Enron settled charges that it and others manipulated pricing forpower and gas in the California energy crisis of2000/2001;
allegations include selling gas at inflated prices to power
producers and receiving electricity at inflated prices that was
then sold to California consumers
12 2002-2007
-
8/4/2019 (10-07) Enron Presentation
10/53
More Bad News Skilling began to push Enrons trading activity into broadband,
which began to falter in March 2001 when a venture calledBraveheart with Blockbuster unraveled precipitously
The company began to book and project rosy earnings from
power and gas sales, using aggressive assumptions; Enron used
mark-to-market calculations of earnings in illiquid markets,
but assumptions were designed to inflate earnings in early years,using discounted present value analyses that understated risk
Board meeting minutes and company documents show the CFO
(Andy Fastow), Lay and Skilling, as well as the Board of
Directors, approved a waiver of the companys conflict of
interest policies to allow Fastow to become a partner in someSpecial Purpose Entities (SPEs) to remove large amounts of
debt from Enrons balance sheet and to generate higher earnings
10 2002-2007
-
8/4/2019 (10-07) Enron Presentation
11/53
More Bad News
InJ
anuary 2001, Enron came under fire from California politiciansalleging extraordinary profits from spiking electricity prices; the
companys market capitalization began to fall from $60 billion to
approximately $30 billion in August 2001
On August 14,2001 CEOJeff Skilling quit for personal reasons and
Chairman Lay resumed the role of CEO; market capitalization fell to$20 billion in October2001
On October16,2001 Enron recorded a huge third quarter loss and
began reporting losses in shareholder equity due to losses from SPEs;
this followed an investigation by outside counsel precipitated by
allegations made by Sherron Watkins, an Enron Vice President, ofimproprieties related to certain partnerships that were intended to
hedge risks
11 2002-2007
-
8/4/2019 (10-07) Enron Presentation
12/53
The Powers Report
A report, commissioned by Enrons Board, and prepared bythe Dean of the University ofTexas Law School, found thatexecutives, including Lay, Skilling and Fastow,intentionally manipulated profits, inflating them by almost$1 billion in the year before its collapse.
The report says the transactions which led to Enronsdemise were caused by: a flawed idea, self enrichmentby employees, inadequate controls, poor implementation,inattentive oversight, simple (and not so simple)accounting mistakes, and overreaching in a culture that
encouraged pushing the limits.
The U.S. Senate Joint Committee on Taxation found thatEnrons Board of Directors was so lax that it appears norequest for a bonus or other extra pay was ever turned
down. 12 2002-2007
-
8/4/2019 (10-07) Enron Presentation
13/53
Enrons World Class
Board of Directors Enrons Board was largely handpicked by Ken
Lay. It included some of the most experienced
and brightest directors ever assembled The Board included Wendy Gramm (former head
of the Commodities Futures Trading Corporation),
Charles Lamaistre (former Chancellor of the
University ofTexas System) and a former dean ofthe Stanford Business School
13 2002-2007
-
8/4/2019 (10-07) Enron Presentation
14/53
Sherron Watkins Allegations
Sherron Watkins, who worked for CFO Andy Fastow, met withChairman Ken Lay to express concern about Enrons accountingtreatment and public disclosures for certain deconsolidated entities
known as Condor and White Wing and certain SPEs known as theRaptors
Enron engaged Vinson & Elkins LLP to review her allegations whichincluded apparent conflicts of interests by Mr. Fastow in ownership ofvarious Raptor entities, the accounting treatment for the Condor andRaptor entities and adequacy of public disclosures
V&E concluded that the [Raptor] concept appears to have been fullydiscussed with the Office of the Chairman and was presented to andapproved by Enrons Board of Directors at a special meeting on June28,1999
14 2002-2007
-
8/4/2019 (10-07) Enron Presentation
15/53
Sherron Watkins Allegations
V&E further noted the Boards waiver of Enrons code of ethics topermit Mr. Fastow to act as a general partner of the Raptor SPE
A second investment partnership of similar structure was approved at
an October11,1999 meeting of the Finance Committee of the Boardof Directors
Board approval included certain requirements for internal review ofthese entities by the companys chief accounting and risk officers andan annual ethics review
V&E noted Arthur Andersens review of the transactions and found
that it was unnecessary for a third party auditor to review thesetransactions, saying AA is comfortable with the disclosure in thefootnotes to the financials describing the Condor/White Wing andRaptor structures and other relationships and transactions
15 2002-2007
-
8/4/2019 (10-07) Enron Presentation
16/53
V&Es Conclusions
V&E concluded: The facts disclosed through ourpreliminary investigation do not . . . warrant a furtherwidespread investigation by independent counsel and
auditors. Our preliminary investigation, however, leavesus with concern that because of the bad cosmeticsinvolving [these] transactions . . . there is a serious risk ofadverse publicity and litigation.
V&E noted that it had reported its conclusions verbally to
Mr. Lay and to the Chairman of the Audit Committee ofEnrons Board of Directors and at his direction, gave averbal summary of their review and conclusions to the fullAudit Committee.
16 2002-2007
-
8/4/2019 (10-07) Enron Presentation
17/53
Some SPEs the Justice Department pursued
in its investigation of Enron
Raptors
The Raptors were hedgingvehicles set up to protect Enronagainst losses on certain assets.To be considered independent foraccounting purposes and keptoff Enrons balance sheet atleast 3% of their capital had to bein the form of equity from outsideinvestors. Yet it isnt clear
whether the 3% accounting rulewas met. If it wasnt, prosecutorscould consider chargingexecutives with perpetrating afraud.
Chewco
Chewco was another Enron effortto keep debt off its balance sheet.In this case, the crucial 3%outside equity was supposedlyput into Chewco by independententities. But Enron itself backedmuch of the 3% infusion,eventually forcing the companyto reverse more than $400 million
in earnings.
Source: The Wall Street Journal, April 30,2002
17 2002-2007
-
8/4/2019 (10-07) Enron Presentation
18/53
Some SPEs the Justice Department pursued
in its investigation of Enron
Southhampton Place
Several Enron executives were given a chance to get inon a limited partnership set up by Chief Financial Officer
Andrew Fastow. They reaped a windfall when an entityowned by the partnership sold Enron stock back to thecompany in at least two cases, a million dollars on a$5,800 investment. Enrons Treasurer, Ben Glisan,served three years of a five year sentence, forfeited $1.3million for his role in this scheme.
Source: The Wall Street Journal, April 30,2002
18 2002-2074
-
8/4/2019 (10-07) Enron Presentation
19/53
Some SPEs the Justice Department pursued
in its investigation of Enron
Braveheart
Braveheart was an entity organized and funded byCanadian Imperial Bank of Commerce that held thecompanys stake in a joint venture with ViacomsBlockbuster unit.
Braveheart was established to create an on-demandmovie business. At its peak, the venture counted only1,000 test customers, yet Enron claimed over $116
million in profits using mark-to-market accounting. Ken Rice, the head of Enrons broadband unit, pleaded
guilty to securities fraud and faces 10 years in prison andlarge fines.
19 2002-2007
-
8/4/2019 (10-07) Enron Presentation
20/53
2020 2002-2007
-
8/4/2019 (10-07) Enron Presentation
21/53
2121 2002-2007
-
8/4/2019 (10-07) Enron Presentation
22/53
The Skilling Tapes
The Associated Press reports that at a 1997 partyfor departing Enron President Rich Kinder, former
President Bush was shown on videotape as sayingNobody has done more than you to supportGeorge [now President] Bush
In a skit, Kinder doubted that Skilling could pulloff 600% revenue growth
Skilling jokingly replied: Were going to movefrom mark-to-market accounting to something Icall HFV, or hypothetical future value accounting
22 2002-2007
-
8/4/2019 (10-07) Enron Presentation
23/53
Enron Operated Tax Free for Years
The U.S. Senate Finance Committee issued a threevolume report finding that Wall Street banks, legaland accounting firms helped Enron devise shelters thatlet the company operate tax free for years.
Sen. Grassley of Iowa said, The report reads like aconspiracy novel. Enrons tax department wasconverted into an Enron business unit, complete withannual revenue targets.
The front page of one tax shelter deal known as theSteele Project was titled Show Me The Money!
Sen. Grassley said that the people involved displayedunbridled greed and blatant disregard for the law offairness.
23 2002-2007
-
8/4/2019 (10-07) Enron Presentation
24/53
Accusations in California
On May 6,2002 the Federal Energy Regulatory
Commission released memos from Enron that indicate
Enron and others may have intentionally manipulated
Californias power market using at least ten strategies
The memos refer to market-manipulation strategies knownas Death Star, Fat Boy and Ricochet; these
strategies, which may not be illegal, created artificial
conditions in the states power grid that may have resulted
in substantial profits to Enron and other power traders
One Enron memo described the net effect of the Death Star
strategy to be that Enron gets paid for moving energy to
relieve congestion without actually moving any energy or
relieving any congestion
24 2002-2007
-
8/4/2019 (10-07) Enron Presentation
25/53
-
8/4/2019 (10-07) Enron Presentation
26/53
Executive Compensation
In 2001, Enron paid $745 million in cash andstock awards to 144 senior executives, including atleast $104 million to Ken Lay
Enron CFO Fastow received over $30 millionfrom his partnership interests serving while he hada conflict of interest
5,000 employees who were fired after thebankruptcy received a maximum of $13,500 each
($34 million total) in severance pay
26 2002-2007
-
8/4/2019 (10-07) Enron Presentation
27/53
The Costliest Bankruptcy
in History
Bankruptcy costs have totaled over $500
million. More than 3,000 lawyers and otherprofessionals have worked on the case
Lawyers fees range from $300-900/hour
A reorganization plan was approved in
2004; secured creditors will receive about20 cents on the dollar, far less than creditorsin the Kmart and WorldCom bankruptcies
27 2002-2007
-
8/4/2019 (10-07) Enron Presentation
28/53
Arthur Andersens Role
Until its demise, Andersen employed 85,000 people globally and
had been Enrons auditor for many years
Andersen also provided consulting services, helping set up and
opine on the validity of Enrons SPEs under accounting rules
Andersen received $58 million in fees from Enron in 2000 (less
than half of which was from auditing services) and $50-55 million
in 2001
Documents produced for congressional investigators show that
partners in Andersens Houston office debated whether to forcedisclosure of billions in off-balance sheet debt, but decided against
it, citing potential growth of fees from Enron to $100 million per
year
28 2002-2007
-
8/4/2019 (10-07) Enron Presentation
29/53
Arthur Andersens Role In May 1999, Carl Bass, an Andersen partner in its standards group,
complained about Fastows plan to contribute his own money intopartnerships to meet a 3% threshold, saying Conflicts of interestsgalore. Why would any director in his or her right mind ever approvesuch a scheme?
Andersen partner David Duncan, who pleaded guilty to felony charges,replied that the whole thing was a bad idea but Andy is convinced
that this is such a win- win that everyone will buy in. The Enron Boardapproved the deal
The U.S. government asserted that, after investigation of Enron began,following its bankruptcy in December2001, Andersendestroyed/shredded thousands of documents in Houston, Portland,London and possibly other locations
Andersen was convicted of felony obstruction of justice and ceasedauditing public companies in 2002; the conviction was overturned.Appeals court found that jury instructions on intent were overly broad.
Duncans plea was withdrawn and prosecution ceased.
29 2002-2007
-
8/4/2019 (10-07) Enron Presentation
30/53
30
The Arthur Andersen partner was on his cell phone
when he said,
Ship the Enron documents to the feds,
but his secretary heard,
Rip the Enron documents to shreds.
It turns out that it was all just a case of bad cellular.
An Explanation on the Internet
30 2002-2007
-
8/4/2019 (10-07) Enron Presentation
31/53
The Bankers Roles
Enron borrowed billions from banks and raised additionalbillions in debt and equity markets worldwide
At the same time, analysts from the same banks/investmentbanks followed Enrons stock, and gave it investment graderatings on its debt, recommending both to investors
In fact, nearly all analysts did not understand Enrons complexbusiness model, and say they had no idea it was using thousandsof SPEs to keep debt off the balance sheet and pump upearnings
Ten of15 major analysts continued to recommend Enron
securities as a Buy or Strong Buy, until just days before itfiled for protection under bankruptcy law
Investigators records show that many of the same institutionsthat were touting Enrons stock/bonds were also selling, or
buying, interests in the SPEs
31 2002-2007
-
8/4/2019 (10-07) Enron Presentation
32/53
The Bankers Roles
Analysts claim that so-called Chinese walls keptthem from knowing what their peers were doing andwhat Enrons true financial condition was
Two analysts who downgraded Enron securities inmid-2001 or recommended that clients sell it allegethey were fired for doing so
Citigroup,J. P. Morgan Chase, CIBC and others paidover $300 million to state and federal authorities tosettle claims that these banks assisted Enron in variousfrauds
Four Merrill Lynch bankers were charged with fraudfor sham purchases of barges designed to meetfinancial targets and maximize bonuses; convictionswere overturned by the Fifth Circuit Court of Appeals
32 2002-2007
-
8/4/2019 (10-07) Enron Presentation
33/53
Mahonia
In a transaction referred to as Mahonia, Chase
Manhattan Corporation allegedly accepted
deliveries of natural gas which Enron then sold tothem in a so-called round trip trade.
A J. P. Morgan executive said in an email,
[Enron] loves these deals as they are able to hide
funded debt from their equity analysts becausethey book it as deferred rev or (better yet) bury it
in their trading liabilities.
33 2002-2007
-
8/4/2019 (10-07) Enron Presentation
34/53
Whats Next for the Banks?
J. P. Morgan Chase, Citigroup and other banks have agreed tonew procedures that will require them to obtain complete andaccurate information about how their customers will accountfor transactions they advise on and how they would disclose any
deals in financial reports The settlement agreement is unusual in that it requires a bank to
perform due diligence and form an opinion about a transactionfrom the customers viewpoint
According to the SEC examiner who negotiated this settlement,
the banks who are party to the agreement may lose all theirclaims against Enron in its bankruptcy proceeding; these claimstotal nearly $5 billion
Merrill Lynch has agreed to accept responsibility for the bargedeal, agreeing to oversight by the government
34 2002-2007
-
8/4/2019 (10-07) Enron Presentation
35/53
Where Did the Regulators Fail?
SPEs were legal; that is, with only 3% equity investment,which in many cases was not at risk, but was guaranteed byEnron, SPEs could be kept off balance sheet
The same firm that was auditing Enron, and certifying itsfinancials, provided consulting services that helped create the
SPEs, and did not require disclosure Banks/investment banks who promoted Enrons stock/debt
securities helped create and market SPEs; they did not disclosethem to analysts in their own firms
Despite warnings from former SEC Chairman Arthur Levitt and
others, the SEC did not challenge any of Enrons public filingsuntil after it collapsed
Mr. Levitt testified in Senate hearings that Sell-side analysts inthe U.S. today have lost all credibility . . .
35 2002-2007
-
8/4/2019 (10-07) Enron Presentation
36/53
Government Investigations
Enrons activities were investigated by both the U.S.House and Senate (at least 32 bills introduced tochange laws)
Vice President Dick Cheney was sued by the GeneralAccounting Office, which sought release ofinformation on secret meetings held by Lay withCheney on energy policy. The GAO lost the casewhich Cheney won using an executive privilege
argument; now on appeal to the US Supreme Court President Bush has distanced himself from Lay and
Enron. His administration has been heavily lobbied tointervene but apparently has not
36 2002-2007
-
8/4/2019 (10-07) Enron Presentation
37/53
Government Investigations
The Financial Times has reported that Enron gave over $10.2million to Washington politicians over two election cycles, andin 1997-2000 gave $1 million to Texas political actioncommittees and state candidates, while contributing $139,000 to
Texas Supreme Court candidates and spending $4.9 million onTexas lobbyists
In England, Enron gave over $1.13 million to a charity run byPrince Charles; sleaze allegations have been made against the
UK party in control
37 2002-2007
-
8/4/2019 (10-07) Enron Presentation
38/53
38
Source: The StarTribune,Jan. 20,2003
38 2002-2007
-
8/4/2019 (10-07) Enron Presentation
39/53
39Source:T
he StarT
ribune,Jan. 20,2003 39 2002-2007
-
8/4/2019 (10-07) Enron Presentation
40/53
Criminal Charges Against
Companies and Individuals Arthur Andersen was acquitted of obstruction of justice; one
partner, David Duncan, pleaded guilty to a felony and hastestified against Andersen, Lay and Skilling
Fastow pleaded guilty to fraud and received a six year
sentence; his wife Lea has completed a 1 year sentence fortax fraud; the Fastows forfeited $23.8 million
Lay refused to testify in congressional hearings, citing theFifth Amendment, but publicly denied any wrongdoing;Skilling says when he left as CEO in August 2001,
everything was fine, blaming politicians for election yearpolitics in pursuing an investigation of him
Skilling says Enrons demise was due to a liquidity crisis,not illegal activities
40 2002-2007
-
8/4/2019 (10-07) Enron Presentation
41/53
41
Ken Lay
Ken Lay was convicted of fraud, lying to Enron shareholders
and other securities law violations. He appealed his conviction
but died of a heart attack before the appeal was heard. His
conviction was overturned since he was not able to complete
his appeal. Civil suits against his estate continue.
2002-2007
-
8/4/2019 (10-07) Enron Presentation
42/53
42
Jeff Skilling
Skilling received a 24 year jail sentence which he is now
serving in Minnesota. His case is on appeal. He may have to
pay up to $60 million in fines.
-
8/4/2019 (10-07) Enron Presentation
43/53
Impact on Employees,
Shareholders,Others Enrons stock, which was once worth almost $70
billion, is now worthless
Employees 401(k) and pension plans are worth only afraction of original value; company matching portion of
401(k) benefits was required to be held in Enron stock The collapse of Enron had a major effect on the
Houston economy
Directors and officers liability insurance policies will
not cover the losses Anderson and others have reached settlements of civil
litigation but very little will go to injured parties afterlegal fees and costs
43 2002-2007
-
8/4/2019 (10-07) Enron Presentation
44/53
44
Leadership and Ethical Failures
Creating a win at all costs earnings mentality
Conflicts of interest by officers investing privately in Enron
partnerships
Failure to disclose material information to investors
Undue pressure on Andersen, analysts
A culture of fear that prevented employees from approaching
top management to stop abusive practices
44 2002-2007
-
8/4/2019 (10-07) Enron Presentation
45/53
45
Leadership and Ethical Failures
Not having a truly independent, active Board of Directors
Using high levels of political contributions to push aggressive
corporate regulatory agendas worldwide
Extremely high levels of performance-based compensation
provided potential rewards so great that officers were encouraged
to take unreasonable risks (see February 6,2002 report of
Frederick W. Cook & Co., Inc.)
45 2002-2007
-
8/4/2019 (10-07) Enron Presentation
46/53
Whats Next?
Enrons plan of reorganization calls for distributions of
about 20 cents on the dollar to secured creditors; three
businesses to be spun off
Andersen is no longer functioning as a going concern Key executives lost tens of millions of dollars in
personal fortunes
Congress enacted Sarbanes Oxley legislation that
requires CEOs to certify financials and put bonuses,fees at risk if misleading
46 2002-2007
-
8/4/2019 (10-07) Enron Presentation
47/53
Whats Next?
Many companies are now expensing stock options and lookingat new forms of compensation
FASB rules on SPEs changed to require higher equity
investment, truly at risk (but will still be too low)
FASB Interpretation Number 46 became effective July 1,2003
and will require many off balance sheet entities to be reported
on the balance sheet
SEC, others mandated a divestiture of advisory practices from
audit practices and whistleblower rules for lawyers
A crisis of confidence in Wall Street ensued, leading to calls forgreater Board oversight and revamping of executive
compensation
47 2002-2007
-
8/4/2019 (10-07) Enron Presentation
48/53
48
Lessons Learned
There are other Enrons out there; it can happenagain (HealthSouth, WorldCom, Qwest,Tyco andXerox)
Enrons demise was not the result of concertedcrimes; it was brought about by a series ofsignificant personal leadership failures andcreeping mistakes; passing new laws andregulations will help, but not prevent such failures
Ethical Standards to Apply
Wall Street Journal standard: If you dont wantto read about it in the Journal, dont do it!
It is not enough to say its okay to do it if itslegal
48 2002-2007
-
8/4/2019 (10-07) Enron Presentation
49/53
49
Some Practical Advice
Avoid building a culture that emphasizes winningat all costs; there are other legitimate goals such asproviding quality products and services, having asafe, enjoyable place to work, etc. that deserve
equal billing with profit maximization
Treat investors, employees, customers andsuppliers like family; dont use or mislead them
Create an active, independent Board of Directors;surrounding yourself with yes men wont getyou the clear, unbiased thinking you need to besuccessful
49 2002-2007
-
8/4/2019 (10-07) Enron Presentation
50/53
50
Some Practical Advice
Emphasize personal accountability starting withyourself! As CEO or a senior officer, you will setthe most important standards. If you cheat onyour taxes or lie to customers, employees willknow it and will soon follow suit.
Err on the side of too much, not too littledisclosure. If what you want to do is right, themarkets will reward you, but only if they knowabout it. If what you want to do is wrong, and youcant bear to tell everyone about it, dont do it!
Install an effective ethics compliance program andencourage/reward people who do come forwardwith evidence of improper practices.
50 2002-2007
-
8/4/2019 (10-07) Enron Presentation
51/53
51
Postscript
Even today, It cant happen in my company is aprevalent attitude among CEOs and business owners;many companies have ethics compliance policies butdont emphasize hiring ethical leaders over superstars
Some complain that Sarbanes Oxley is too expensive
and are lobbying for major changes in accounting rules Its too late to begin to teach ethical values in business
school or to senior executives; efforts need to begin athome, in elementary school and throughout theeducation process
If its too good to be true, it probably is remains greatadvice when investing; the days of triple digit P/Emultiples are (hopefully) gone
2002-2007
-
8/4/2019 (10-07) Enron Presentation
52/53
52
-
8/4/2019 (10-07) Enron Presentation
53/53
53