Enron symbolises attack on ambition

The conviction of Kenneth Lay and Jeffrey Skilling, former executives of Enron, on charges of conspiracy and fraud has enormous symbolic significance. Although their trial received little coverage in Britain, it has implications on both sides of the Atlantic.

When Enron filed for bankruptcy in 2001, many found it an enormous shock. For years Enron, America’s seventh-largest company, had been seen as one of the nation’s most admired and innovative firms. It was also thought of as one of the central players in the “new economy” of the late 1990s. With its collapse, it soon became clear that it had been involved in dubious activities – an accusation proved beyond reasonable doubt with Lay and Skilling’s conviction.

But the significance of the Enron collapse went much further than the energy trading firm itself. Arthur Andersen, Enron’s auditor and one of America’s leading accountancy firms, was found guilty of obstructing justice after shredding documents relating to Enron. Following the Enron scandals, others such as Adelphia, Tyco and WorldCom followed.

But the symbolic importance of the Enron case was far more important than its direct impact. It reinforced the widespread prejudice that corporations are essentially corrupt. According to this view, they have created a climate of excessive materialism and greed that is damaging for society.

From this premise, it is argued that there need to be more restraints on the way corporations operate. America’s Sarbanes-Oxley Act, which puts stringent restrictions on companies, is the most high-profile example. The extensive corporate governance regulations implemented in Britain since the early 1990s are, in some respects, parallel developments. Even the corporate social responsibility movement can be seen as firms internalising such restraints.

Although such measures are presented as protecting the weak and vulnerable, the opposite is the case. By institutionalising restraint, they hold back economic development. Measures such as Sarbanes-Oxley have a huge financial cost for little direct benefit, and reinforce a culture of low expectations about what it is possible for companies to achieve.

Rather than being too ambitious, a key problem with contemporary corporations is that they hold themselves back. It would be better if they attempted to achieve rapid growth. The dishonest behaviour of Enron executives should not be used as an argument against corporate ambition.