Toward Ethical Compliance: Lessons from Enron

Doreen McBarnet

Chapter Chapter 2 in Global Perspectives on Ethics of Corporate Governance, 2006, pp 27-38 from Palgrave Macmillan

Abstract: Abstract In any contemporary discussion of corporate governance and the erosion of trust in business, one name is unavoidable: Enron. Enron has become an icon for corporate fraud on a massive scale with, to date, 30 indictments, going to the top of the corporate hierarchy. There has also been an extensive legislative response. In any attempt to restore trust, however, two points will have to be acknowledged. First, Enron has exposed to a wider public not just vast fraud, but the pervasive practice of “creative compliance” (McBarnet and Whelan 1997; McBarnet 2003). The irony is that much of Enron’s misleading accounting was based on “perfectly legal” devices that constitute normal business practice in the United States and beyond. Second, we need to take care in pinning our hopes on change only through law. Legal regulation of business cannot succeed without a new focus on business ethics—not ethics as ancillary to law, but ethics as intrinsic to the way business executives and their advisers view law and define their responsibilities under it. This chapter draws on empirical research to demonstrate the limits of law and the need for a shift in the ethics of compliance.

Keywords: Corporate Social Responsibility; Business Ethic; Corporate Governance; Balance Sheet; Legal Control (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1057/9780312376192_3

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