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Published: August 26, 2005

 
 

Dirty and Clean Laundry

A new spate of books and reports puts corporate behavior on display — and enlivens the debate about business’s purpose in society.

Photograph by Steve Moors
Enron fooled a lot of people, including me. For two years in a row, 2000 and 2001, the former energy star made Fortune magazine’s list of the “100 Best Companies to Work For.” This list, which I codeveloped, is based on an annual survey of employees. Enron’s employees were enthusiastic about working there, which is why the company made this list. I visited Enron shortly before it imploded, and I also failed to detect anything amiss.

Certainly, it is difficult for outsiders to understand the inner workings of a large corporation. Even astute insiders frequently don’t see trouble coming, especially when the problems have to do with culture and behavior. Note that Enron’s board of directors as the ship went under included Robert K. Jaedicke, former dean of the Stanford University business school, John A. Urquhart, former senior vice president of Industrial and Power Systems at General Electric, and Lord John Wakeham, former U.K. secretary of state for energy under Prime Minister Margaret Thatcher.

Today, nearly four years after Enron declared the largest bankruptcy in U.S. history, reverberations from this financial tremor are still being felt. We are being inundated with books, films, and essays dealing not just with ethical breaches and badly behaved executives but also with corporate social responsibility (CSR). Meanwhile, there has been a surge in comprehensive corporate reports on social performance from large, influential companies.

With corporate behavior increasingly on display, the rules of the game have changed. Corporations can’t hide their actions or true natures, and some writers are using the dirty laundry of recent years to hold companies to a much higher ethical standard. Other books, chronicling the stories of implosion, suggest that human nature, as manifested in the character of the company’s leaders, is the critical factor. And a few writers (including some who speak for companies) are articulating ethical standards for the private sector that could represent a significant change from the past.

Joel Bakan, author of The Corporation: The Pathological Pursuit of Profit and Power and an American on the faculty of the University of British Columbia’s law school, believes he understands exactly what happened at Enron. He attributes the collapse to characteristics common to all corporations: “obsession with profits and share prices, greed, lack of concern for others, and a penchant for breaking legal rules.” These characteristics, he says, are a direct result of the system in which corporations are legally bound to put profit ahead of all other goals.

In his book, published in 2004 simultaneously with the release of a documentary film (now available on DVD), Mr. Bakan argues that the corporation is constitutionally unable to act in the public interest. Only greatly expanded regulation by government can “[bring] corporations under democratic control and [ensure] that they respect the interests of citizens, communities, and the environment.”

This is a viewpoint one might find compelling after dipping into three new books by seasoned investigative reporters that chronicle the travails of Enron and the Walt Disney Company. Two of them — The Smartest Guys in the Room, by Fortune’s Bethany McLean and Peter Elkind (there is also a movie of this one, available on DVD), and Conspiracy of Fools: A True Story, by Kurt Eichenwald of the New York Times — are blow-by-blow accounts of the Enron debacle. The third, DisneyWar, by James B. Stewart, charts the goings-on at Disney under the 20-year reign of CEO Michael D. Eisner. Mr. Stewart, who wrote Den of Thieves, Blood Sport, and Heart of a Soldier, is a former Wall Street Journal editor; he now holds the position of Bloomberg Professor of Business and Economic Journalism at Columbia University.

 
 
 
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Corporate Behavior Resources: Works mentioned in this review

  1. Joel Bakan, The Corporation: The Pathological Pursuit of Profit and Power (Free Press, 2004), 240 pages, $25.00
  2. Kurt Eichenwald, Conspiracy of Fools: A True Story (Broadway Books, 2005), 768 pages, $26.00
  3. Steven Lydenberg, Corporations and the Public Interest: Guiding the Invisible Hand (Berrett-Koehler, 2005), 200 pages, $27.95
  4. Bethany McLean and Peter Elkind, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (Portfolio, 2003), 464 pages, $26.95
  5. James B. Stewart, DisneyWar (Simon & Schuster, 2005), 592 pages, $29.95
  6. Great Place to Work Institute Inc.: Click here.
  7. 2005 GE Corporate Citizenship Report: Click here.
  8. Nike Corporate Responsibility Report FY ’04: Click here.
 
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