I asked myself that question earlier this month during a talk by Andy Fastow. You may recognize the name. He was the CFO at Enron. He spent 6 years in prison and is the only Enron executive to take full responsibility for his actions. Today, he spends much of his time lecturing on the situations and thinking that led to Enron’s downfall. A cautionary tale with insights on how every single decision sets a tone for the next decision.
Think back to the year 2000. Enron was a $100B company that generated $1B in net profit. Fortune magazine included them on the list of Most Admired Companies due to their innovation and domination of new business categories. By 2001, however, Enron’s CEO had resigned and the SEC was investigating the company for fraud and Enron, one of the ten largest companies in America, was bankrupt.
Enron was disciplined because it willfully misled investors and the public by creating “paper companies” to keep debt off the books and appear more profitable. While the formation of these paper entities was within the law, the overall picture of a profitable company was wholly misleading. Many made investment decisions based on this incomplete information and the consequences came crashing down.
It’s important to remember that just because something is legal, does not mean it is ethical. Enron’s culture was one of greed and deception. Pushing the limits was the norm. Rules were overcome by finding loopholes that, while technically legal, violated the spirit of the rule. Do this enough times and you end up with deals made up of components that are right up against the red zone.
Most companies have a set of values that govern how they do business which serve as a bulwark to reinforce ethical behavior. At Silicon Labs, we have four core values that we display in every conference room in each of our buildings. The fourth and final value is DO THE RIGHT THING. This core value pervades everything we do. Whether it’s how we treat a customer complaint, how we report our finances or how we structure a deal. That doesn’t mean mistakes are never made. But it does set the tone for what is expected, what is accepted and how mistakes should be handled.
Good decisions are more likely to be made if the organization has set clear expectations on what is considered ethical behavior. Read our corporate values here and check out our Business Conduct Standards that serve as a company guide for ethical decision making. What experiences or feedback can you share with us on corporate best practices to set an ethical tone from the top?