Ethics and Honor(A)

Years ago, when our company was being put together, the husband of a former colleague of mine (over coffee after a group dinner), asked me to sleep with his law partners to procure leads for new accounts. At first, I didn’t believe him – I thought he was kidding. When I expressed incredulity and declined, he argued with me. “That’s the way things are done”, he kept saying, “the money is there on the table – you just have to take it.” What made the incident more surreal was the fact that his wife was a professional colleague. To him the whole thing was more like brokering. The next day, his wife apologized, rather lamely, but she had done nothing to interrupt a conversation she could hear.

This incident had elements that make it more dramatic than most ordinary business temptations, including sex. But there were others – offers to manage accounts for people who were obviously hiding money or who thought small startup companies were fair game for “favors” that had long strings attached. One of the people involved in a S L scandal in New England in the eighties, proud of his suburban life as a bank CEO with extravagant trappings and frequent trips to industry events, simply disappeared. I did manage some money for him for a while – with a lawyer looking over my shoulder the whole time. After he disappeared the account did too. No favors were ever requested and the account was managed in a manner that must have seemed boring to my thrill-seeking CEO, who was never indicted for any actual crime. Maybe he was a wannabe.

Ken Lay, The CEO of Enron, and Jeff Skilling, his sidekick, are now heading up The River. I had been in their headquarters as part of an ill-fated CERES dialogue, wisely scuttled by the CERES Board. The sense of self-importance in that building was gigantic and overwhelming – the company had spent big money in Houston on historical renovations and open space. Rising above all that largesse was the modern steel structure in which big and little deals were done, seemingly with no moral compass. Long limousines threaded their way about the building as the current saviors of the universe went about their business over cocktails, coffee and who knows what else. Our conversations with some of the direct reporters to Ken Lay were strange – but one thing was crystal clear. They were certainly no smarter than any of us and probably not as smart as some of us, even in their expensive clothes.

Skilling faces a maximum of 185 years in prison. For Lay, the fraud and conspiracy convictions carry a combined maximum punishment of 45 years. The bank fraud case adds 120 years, 30 years on each of the four counts. Maybe the aggressive public prosecution of these people will serve as a deterrent. But we need to take a much deeper look at our system from the investor through the corporate manager – past the worship of wealth and power to ethics and honor.