8/7/2019 Crash of the Cult-Enron's Ethical Issues

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Crash of the cultEnron tolls the bell for deregulation

LeaderThe Guardi an, Friday 30 November 20 01 11.38 GMT

Unt il a few weeks ago, a huge banner was str ung across the headquar ters of Enron i n

Houston, emblazoned "The world 's leading company". There were plenty who endorsed

the claim and the corporate cult ure of ambiti on, arrogance and rapid money-making

which lay behind it. Enron's revenue growth had been spectacular, from $7.6bn in 1986

to $101bn in 200 0. The accolades from analysts, management consult ants and int ernet

gurus poured in: as recently as last June, the Economist praised Enron for creating what

might be the "most successful in ternet venture of any company in any i ndustry

anywhere". But, t he banner was recent ly t aken down and in one of t he biggest corporate

collapses in US history, Enron's shares fell 85% on Wednesday (and more yesterday).

The corporation is now expected to f i le for bankrup tcy in the next few days. But t his is

more than a spectacular corporate saga, it also represents comeuppance for a form of

aggressive capitalism and political manipulation which earned Enron many enemies.

A combination of bor rowing heavily and concealing i t in "off-balance sheet" deals,

meant that the crisis only became apparent a month ago. The repercussions are now

beginning to emerge as the company's "aggressive accounting" - as the Wall Street

Journal put it - is unravelled, and major lenders such as JP Morgan Chase are likely to

be vulnerable. Not t o mention the damage to thousands of Enron employees' pensions,

and the hold ings of many investors in the US, who saw i t as one of the surest bets of the

dot.com m ania. But the energy markets have not been as shaken as was fi rst feared

possibl e a month ago.

Losers apart, there wil l be many dancing on Enron's grave. In the US, it had attracted a

degree of notor iety for i ts part in the bungled pri vati sation of Cali forn ia's electrici ty,

which led to black-outs earlier this year. But i t was in the developing world that Enron

had a near unparalleled reputation for corporate irresponsibi li ty. I t has been the only

company to warrant an entir e Amnesty In ternational r eport , a chil li ng catalogue of

human ri ghts abuses from India to Latin America. The anti -corporate movement

accused Enron of subvert ing the polit ical process of vir tually every country i n which it

operated to advance its interests. Enron was in the thick of one of India's biggest

corrupt ion scandals in whi ch huge sums were paid to poli ti cians in the pri vatisation of

electricity firms.

Such deals abroad relied on close co-operation from friends back home in Washington,

and once again Enron lavishly paid into election campaign funds, most notably of

George W Bush. Key poli ti cal f igures were signed up as lobbyists and advisers. All t he

polit ical manoeuvri ng served the company's ideological vision of the pri macy of free

markets, deregulation and privatisation. Enron was described as an "evangelical cult"for t he fervent advocacy of thi s vision by Enron founder and chairman, Kenneth Lay - a

vision from which he personall y profi ted by mill ions. The fact that the finance dir ector i s

also now being investigated for possible irregularities suggests a culture of hubris and

greed at the company's core. For the anti-corporate movement, Enron is a major scalp

(though exposure of its wrongdoings was not the cause of the collapse). M ore

importantl y, it is a reproof to stock traders who continued to boost Enr on's shares long

after they had lost their understanding of it s balance sheet. And it trounces for ever the

idea that publ ic uti li ti es can be subject to li ght regulation amid such speculative

profiteering.

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