FOCUS – Enron and all that

by Dr. James ReadMy first job when I graduated from college thirty years ago was as a banker. I was pretty good at it, and in the course of two years I was promoted from management trainee to branch accountant to regional head office instructor, and was on track for a management position in a downtown Toronto branch when I quit to go to UCLA and study philosophy. As I follow the financial news these days, I wonder what kind of a man I would have become if I’d staying in banking instead.

As it was, I don’t think I cared enough about money to stay. Which means that I’m now scrambling just to get a handle on the language in which the present “scandals” around Enron, WorldCom, Arthur Andersen, etc. are being reported. “Capitalizing operating expenses,” “off-balance-sheet financing,” “stock options” are not terms I use every day. But what is happening is too important to ignore.

At the center are corporate CEOs. Stories have focused on their pay, their stock options, their accountability. We learn that heads of big business are often paid forty times what the average workers in their companies make–and perks and bonuses come on top of that. I have a hard time thinking anyone’s work could possibly be worth that kind of money. People are asking, “Is it fair?”

Well, it depends on what principles of fairness we appeal to. For most of my career as an employee of The Salvation Army, I have been paid more than my officer bosses. That’s because historically Salvation Army officers have not been paid a salary at all. They have received a living allowance based on their needs. I have been compensated on the basis of my education, responsibility level, proven success, and so on, but they have been paid according to what it takes to feed and clothe and educate themselves and their family. The principle behind the contracts that corporate CEOs and sports stars sign is different again–it’s the principle of paying someone on the basis of what the market will bear. Arguing whether one way is truly fair and the others aren’t could be a long debate (for another time). But the fact that we care to debate it at all shows that fairness, a moral value, and not just money, a material value, matters to us.

Even more serious than the charge that CEOs are paid too much is the allegation that they have devised or participated in schemes to misrepresent the value of the businesses they manage, and in so doing misled investors.

This is an issue of character more than of balance sheets. I thought President Bush made that point in a masterful way in his July 10Wall Street speech. “Everyone in a company should live up to high standards,” he said, “but the burden of leadership rightly belongs to the chief executive officer. CEOs set the ethical direction for their companies. They set a moral tone by the decisions they make, the respect they show their employees and their willingness to be held accountable for their actions….We need men and women of character who know the difference between ambition and destructive greed, between justified risks and irresponsibility, between enterprise and fraud.”

So how do we get such men and women of character? The President talked about “tougher laws and stricter requirements.” He also said “our schools of business must be principal teachers of right and wrong and not surrender to moral confusion and relativism.” All of which is fine as far as it goes. But where is mention of the importance of church and family, traditionally key factors in the formation of moral character? I think we should take that as a challenge.

Where will the values of the professors in the business schools come from, and what standard of right and wrong will they pass on? Prof. Mark Kingwell of Baruch College, CUNY, recently wrote: “greed is not an excrescence on the true benign nature of markets…to condemn greed in markets is as incoherent as damning the flow of water in turbines.” I trust that this is not the only attitude out there, but it is out there, and so we should not assume that just because a business school talks about values that it’s talking about values that fit with Christian ethics.

And even if the fit were perfect, how old are people by the time they get to university? We can’t wait until then to start character development! As children, future CEOs and CFOs need to be learning to love the Jesus who loves them more than money; and as adolescents they need to be nurtured in a church community whose arms embrace “the whosoever,” refusing to give preferential advantage on the basis of wealth and prestige (James 2).

These of course are lessons we all need, not just present and future CEOs. If I were to take issue with President Bush’s analysis at any point it would be for saying “ultimately, the ethics of American business depend on the conscience of America’s business leaders.” We are all in this together. It would be easy, too easy, to blame the CEOs for the present market woes. Alan Greenspan had a point in saying that we as a community had caught “infectious greed.” The antidote we all need is the infectious love of neighbor that God promises to “pour into our hearts through the Holy Spirit” (Romans 5:5).

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