HOW TO PRACTICE ETHICS

“I am incredibly nervous that we will implode in a wave of accounting scandals…the business world will consider [our] past successes as nothing but an elaborate accounting hoax,” Sherron Watkins of Enron Corporation wrote in a six-page letter dated August 15, 2001. Watkins, Enron’s vice president of corporate development, sensed that the end was near for her firm, but even she did not know the extent of it. Enron Chief Executive Kenneth Lay, and his top lieutenants, had engineered one of the world’s largest fraudulent corporate accounting schemes in history.

Enron’s ultimate collapse resulted in the loss of $61 billion in shareholder value and the elimination of more than 5,000 jobs. Sixteen employees pleaded guilty for crimes committed at the company. Several top executives, including ex-CEO Jeffrey Skilling, landed in prison for their roles in the scheme and for lying to employees and investors about Enron’s financial health. Skilling was sentenced to 24 years in prison and fined $45 million.

As detailed in his seminal book Conspiracy of Fools, author Kurt Eichenwald revealed that greed and ambition were not the only reasons for Enron’s failure. Another crucial factor was the absence of an ethical culture, which ultimately enabled the wrongdoing.

In the 15 years since Enron’s epic failure, the importance of maintaining an ethical culture continues to grow. As the world of security changes, corporations change, management approaches change, and technologies change. To remain ethically sound, organizations need more than a fixed set of specific rules contained within their codes of conduct. Security managers should take the lead in actively managing their department’s culture so that sound ethics are firmly embedded in all operations, which are in turn aligned with the organization’s values and mission.