Executive ‘Thou Shalt Nots’

UC Irvine is offering business school students an ethics class that will try to draw lessons from Enron Corp.’s dramatic and painful implosion. Good timing. As President Bush said Tuesday in his speech on corporate responsibility, “America’s greatest economic need is higher ethical standards.”

The thinking behind the class titled “The Enron Case” is that today’s headlines will make tomorrow’s corporate executives and accountants more eager to contemplate ethical business practices.

We’re not certain that merely offering first-hand accounts from the likes of Enron whistle-blower Sherron Watkins, a top accountant and a U.S. attorney will do the trick. Classes in business ethics surface after every wave of corporate wrongdoing, and a few weeks of studying Enron won’t stop the next generation of executives from pushing generally accepted accounting principles into the next county.

Still, our advice to UCI’s curriculum planners is to keep the course top-heavy with “thou shalt nots,” including prohibitions on lying and stealing.

Recruit successful alumni who made their money the old-fashioned way to tell tomorrow’s tycoons and bean counters that after the current shakeout, the best way to attract savvy shareholders will be to deliver quality products and services.

Explain the danger of blindly worshiping the quarterly stock price and warn students against coveting the neighbor’s business without having a clue as to what makes it tick.

The Enron fiasco isn’t the first time supposedly smart people have turned a once-staid business into a carnival house of horrors. The collapse reminds us of the young savings and loan executive in the 1980s who belittled an old-timer for his “boring, dull, residential lending.” Within a year, the know-it-all, who pushed his S&L; into riskier car loans and junk bond investments, was forced to turn the key to his failed institution over to the feds.

Schooling alone won’t ensure that ethics permeate executive suites. Only when corporate boards commit to hiring and supporting executives who espouse ethical behavior will the best aspects of human nature rise from the mailroom to the boardroom. The class on Enron should teach that premise but also emphasize the value of whistle-blowers when corporate boards and executives fall short.

Finally, let’s hope the professors at Irvine impress upon their charges that investors are demanding a sea change when it comes to corporate responsibility, as reflected in Bush’s call Tuesday for “tough new criminal penalties for corporate fraud.”

We encourage Bush and Congress to follow such tough talk with action, so that the Enron class speakers can honestly assure students that the bottom line on falsifying revenue or misstating earnings is not a new mansion in Florida, but jail.