FROM THE ‘MORAL HIGH GROUND’, where we imagine ourselves, the Enron fiasco should not have surprised us. Enron is simply a quintessential example of the degradation of principles such as trust, loyalty and ethical standards.
However, why it happened is what really needs to be understood if the business is to restore its ethical footing and survive tumultuous times.
Few will argue that business today is more challenging and competitive; almost everyone accepts that the market is more ruthless than ever. We live in a dog-eat-dog world where, for the most part, corporate survival is focused on simply trying not to get eaten.
Not too long ago, things weren’t so cutthroat, or so we’d like to think. Companies had a tacit understanding with their employees: the company will always be there for you. The expression, “I am a businessman,” once represented the unquestionable relationship between employee and employer. The company was our family, and families looked out for each other. Anything less was considered unfair and unacceptable.
The 1990s ushered in changes that still exist today. The 1990s also started us on the slippery slope that altered the ground rules of ethics and basic corporate loyalty. Call it downsizing, downsizing, or realignment, but dedicated employees suddenly found themselves on the sidelines with new, supposedly competitive corporate initiatives sold as necessary to keep businesses viable. Staying viable sometimes meant laying off long-serving employees, left disillusioned, betrayed, and often powerless to fend for themselves.
Before 1990, corporate downsizing was outrageous. Companies had an obligation to take care of their people, right? Apparently, they didn’t. The targets of realignment strategies were suddenly “overvalued” permanent employees. Survival strategies were devised to replace higher earning staff (actually those who had contributed the most to the company) with less experienced workers to reduce payroll expenses.
Cuts in regular staff were easy to justify as long as you accepted the argument that older employees were redundant, that is, they lacked computer skills. There was some legitimacy to this, but therein lies one of the clearest examples of expediency and cost cutting taking precedence over loyalty and ethics.
It was about training existing staff or replacing them with young technograduates at half the price. History demonstrates the route most companies took. It also marked the beginning of the separation of trust between employees and their companies. Little loyalty left.
Today, employees lucky enough to have survived the ’90s occupy many of the corner offices on the executive floors. Those who write the checks and run the companies are the surviving veterans of the last decade, well trained in managing guerrillas now free of moral obligations for traits such as loyalty or ethics.
This is not to cast doubt on today’s executives, but to show how “Enronesque” results can result when industries abandon essential components to uphold moral values.
Ethics and morality have taken a backseat in business, and there is no better example than the outgoing paychecks that are issued to Enron executives. At the same time, Enron employees in their 20s and 30s are losing their entire retirement portfolios.
Executives cannot be entirely blamed. They are victims themselves, the by-product of those well trained in the new corporate religion. Most new executive contracts include a parachute clause, an insurance against the executive or the company that wants to separate. The practice is ethical but, in my opinion, another example of a breach of allegiance. It almost promotes failure.
Parachute planning is analogous to a prenuptial agreement. The purpose and logic are understood. The facts speak for themselves. I read recently that 98.9 percent of prenuptial weddings in North America were reported to fail within three years. From another perspective, it seems that there are now tangible rewards for failure or disloyalty.
The bottom line:
Ethics, trust and loyalty are still there. Core values have not changed. Companies that resist the “everything for me” trend to earn respect and trust will benefit everyone, but it will take time.