Years after Enron, business is still behaving badly
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Version 0 of 1. Respect, integrity, communication and excellence. Those were Enron’s core values, which, the energy company said, guided its behaviour as a “global corporate citizen”. We know how that story ended: bankruptcy, court cases and (unusually for the business world) custodial sentences. The once-mighty accountancy firm of Arthur Andersen was also brought down. Related: VW and the toxic problem of corporate amnesia Over a decade later bad corporate behaviour – the stuff we find out about, anyway – continues to make front page news. That dependable, “clean diesel” Volkswagen turns out not to be so clean after all. Thomas Cook takes an age to come up with a decent and civilised response to human tragedy. And now Sports Direct is revealed to be conducting business in a brutal fashion. Boardroom practices at the company may be comically bizarre, but life in their Shirebrook warehouse is not funny at all. The public have noticed. A survey this week for the Institute of Business Ethics found that 39% of people think business is behaving unethically. The three biggest causes for concern are tax avoidance, executive pay and exploitative labour practices. Two-fifths of the public have given a vote of no confidence in British business. That is, potentially at least, a lot of customers. Why, apart from the headline-grabbing scandals, is business seen in such a poor light? To some extent this represents a failure of the “corporate social responsibility” (CSR) movement. Bad CSR deserves to fail and be seen for what it is – a flimsy public relations exercise. Good companies don’t need CSR programmes. They think hard about their activities and the impact they have on the world. They worry about how they make their money. Good companies make sustainable profits, and don’t externalise the costs of doing business on to the world around them. The rewards for breaking the rules can be high. But the punishments are often feeble But why does bad corporate behaviour still exist? The chances of getting found out are much higher than in the past. Everyone carrying a smartphone is equipped with a vital tool of investigative journalism. Fearlessness, or shamelessness, may have something to do with the “risk/reward relationship”, as it is called in the financial world. The rewards for breaking the rules can be high. But the punishments are often feeble – fines (merely another cost of doing business) and loss of reputation (cushioned by a healthy bank balance and lifetime financial security). Very few business leaders have ended up behind bars on account of their actions. “You’re going to jail!” screamed angry protesters at Dick Fuld, the former chairman and CEO of Lehman Brothers, in 2008. But he isn’t going to jail. He is going to his midtown Manhattan office to work for his new business, Matrix Advisors. Perhaps bad corporate behaviour is explained by the fact that, whether they realise it or not, some senior executives are still coming to terms with the post-financial-crisis world. Deep down they fear it could all go wrong again, any time. They are in a hurry and are cutting corners. They also seek extravagant pay packages to cushion their ultimate, inevitable fall. So, yes, sanctions have to get tougher, and the fear of punishment for wrongdoing has to increase sharply. One encouraging sign is that some responsible business leaders have had enough of the opprobrium brought on their heads by others. Simon Walker, director general of the Institute of Directors, said this week: “IoD members share the public’s outrage… I urge people to remember that Sports Direct is categorically not a representative of British business.” He is right about that. And we as customers cannot complain if we continue to shop with businesses that at other times we might denounce loudly as unethical. We are all in this together. My friend Steven Gauge has written a lovely play about taking up rugby again in middle age, called (perhaps inevitably) My Life as a Hooker. In one scene he is nervously running out on to the pitch for the first time in decades, and confesses to a team-mate that he is probably a bit rusty about the rules. Don’t worry, his fellow paunchy sportsman tells him: “Just cheat until you get caught.” This would have made a more accurate mission statement for Enron. Sadly, it appears to be the guiding ethos for too many people in business today. |