If Aristotle Ran Enron

Tom Morris

I vividly remember my former financial advisor telling me long ago that "There is an interesting energy company in Houston, called 'Enron' and it's a company to watch." My ticket to watch ended up costing me a lot of money. But she was right. It was indeed an interesting company - but not in the way she initially had thought.

Several jounalists over the years have asked me whether all the companies that bring me in to speak about ethical success really believe in the message, or whether I ever suspect that, at least sometimes, the executives at a few of those companies are just using my visit as "window dressing." I've been asked: "Are they just running the flag of ethics up the pole for everybody to salute and feel good about, or do they actually want solid ethical values respected in their organizations?" My answer has been that I honestly think the companies who have hosted me as a speaker do care about the difference between ethical success and unethical practices. They want to understand the ethics of their business lives more deeply and develop a powerful perspective on how to create a stronger ethical culture in their organizations. They are looking for ethical tools they can use, and an inspirational perspective for using them effectively. I'm also convinced that if anyone ever did invite me to speak "for the wrong reasons" - for show - they'd at least hear the truth. And I'd be bringing that truth to someone who really needed it. So I've never really worried about the issue of motive in all the invitations I receive to give talks on ethics and success to some of the biggest companies in the world.

But many people around the country are starting to worry about the motives and the sincerity behind some corporate ethics policies these days, having recently learned that Enron went to the trouble of publishing a 64 page Code of Ethics that was given to all employees. And, in case you're wondering - no, it didn't consist of just blank pages. The New York Times has reported that recent Enron Chairman Ken Lay sent out an interdepartmental memo with each copy of the booklet stating that, "As officers and employees of Enron Corp., its subsidiaries and its affiliated companies, we are responsible for conducting business affairs of the Company in accordance with all applicable laws and in a moral and honest manner." All employees were instructed to read the Code and to sign a pledge, or Certificate of Compliance, promising to abide by its guidelines. And they were asked to report any violations they might see in the company to a compliance officer.

Why, then, did so many of the corporate dealings of Enron seem to have turned substantially on deception? Honesty may have been honored in their published Code of Ethics, but it was apparently a victim of greed and creative scheming in the actual workings of the company, day to day.

How do highly intelligent people like Jeff Skilling, Andy Fastow, and Ken Lay get themselves into such a mess as the scandal we've just seen unfold at Enron? As a philosopher, I suspect that part of the problem consists in a misunderstanding of what ethics is, and of what the appropriate virtues of business are. Let me explain what I mean.

Many people seem to think that ethics is mainly about staying out of trouble. Any explanation they give concerning the role of ethics in business today will inevitably feature a discussion of compliance, legal liability, and the Federal Sentencing Guidelines. The great thinkers of the past had a very different perspective. Ethics is not mainly about staying out of trouble. It's about creating strength: strength in individuals, in organizations, and in relationships with clients and suppliers. Any conception of ethics, if even on an unspoken, unconscious level, as being essentially a way of avoiding trouble, ends up creating a mindset which will allow any other way of attaining the same result to become a practical substitute for a truly ethical perspective. People then begin to be very careful about how they do what they do, keeping things quiet, covering their tracks, and creating plenty of room for "deniability," while becoming far less concerned about doing the right thing. If the true goal of ethics were just to keep people out of trouble, a good enough plan of deception might indeed come to seem like a viable alternative, as apparently it appeared to at least several Enron executives and their colleagues.

By contrast, if we can really come to understand how ethical action creates strength, it quickly becomes clear how all unethical behavior is in the end self-defeating and, ultimately, self-destructive, as we've just seen in the case of Enron. Socrates long ago was right to point out that a bad deed always hurts the doer, regardless of its other consequences. It looks like the Enron disaster resulted from lots of bad deeds masquerading in the minds of their doers as shrewd business.

I suspect it's not just a misunderstanding of what ethics is that lies behind the Enron debacle and problems like it. There's also a misunderstanding of virtue abroad in the land, and it needs to be corrected right away. Too many people seem to think that "Business is war," and so go looking for their models of virtue, or strength (the etymological meaning of "virtue") primarily among history's great warriors. The western paradigm for these warrior virtues is to be found in The Iliad and The Odyssey of Homer, but the same qualities can be seen portrayed and praised in many ancient military epics. A couple of classic examples of warrior virtues would be the qualities of courage and craftiness.

The importance of courage in times of war cannot be overstated. It has great value in many other human endeavors as well. Certainly, it plays a role in the world of business. Where courage is lacking, innovation stalls. It can often take courage to do the right thing, however unpopular that might be. Courage can often make the difference between average results and excellence in the life of a company, or an individual. It's clearly a transferable, or universal, virtue. But the warrior virtue of craftiness is a different matter altogether.

Craftiness is certainly a virtue in war, one that the ancient hero Odysseus was much praised for having. It's clear that the ability to deceive an adversay is a vital skill for avoiding an unnecessary loss of life, sometimes on both sides of a conflict. In most circumstances, it's been the judgment of many great military strategists that it's better to trick an enemy than to kill him. And certainly, it's better to trick an enemy than have him kill us. Deceiving an enemy is often the first step toward defeating him. The most perceptive philosophers who have ruminated on this fact have concluded that the same moral judgment can be made about any circumstance where a life is threatened by a madman or an evil person bound on inflicting severe bodily harm. I can justifiably hide a gun from an enraged killer, and deceive him about its location. Such actions will bring on me no moral critique, and, especially if I'm successful, I may very likely be thanked and praised for helping to prevent great harm.

And this is not just a life or death allowance. Deception seems also to be morally permissible in sports, and, of course, in preparation for surprise birthday parties - but within certain limits. We are properly outraged when a championship Little League player lies about his age, or an Olympic athlete tries to get away with taking banned performance enhancing drugs. But we think it altogether allowable for a quarterback to fake a run when he knows quite well that he really plans to pass the ball. In many sports, an art of craftiness is cultivated, within prescribed limits, without any ethical concern arising at all. The trickier a player is on the field or on the court, the more formidable he may be, and all the more admired.

If you truly thought that business is war, or even that business is really just an intelligent sport, then you might be inclined to embrace all the warrior virtues that seem to facilitate winning. Just as it's not only permissable but necessary to be courageous on occasion, you might naturally conclude that it's perfectly ok, and even necessary, to be duplicitous every now and then as well - when it helps you win, or at least helps you to prevent an opponent, or competitor, from winning. "All's fair in love and war, and I sure love to win," is a phrase I've heard repeated by many well meaning, highly competitive people.

But business isn't literally war, and it's not just a sport either. When Odysseus fools the Cyclops, we approve. He saved his own life with a clever trick. But the stock market is no Cyclops, despite its singular gaze at the bottom line, and no one's physical safety depends on how an analyst rates a stock. What's allowable in war is just not permissible in commerce. In much the same way, we can admire the head fake that Michael Jordan uses to throw off an opponent in a great move to the basket, without thinking for a second that business is no different from roundball, and that faking it with investors can get you to your proper goal. Again, the context of sport is distinctively different from the real life of business in crucial respects.

Here's the rub. There is a measure of gamesmanship in any competitive endeavor. We rightly admire the person who surprises the competition through clever strategy and by keeping his own counsel well. There is an element of the game in many business contexts. Perhaps there is even a whiff of battle. People aren't supposed to die, but product lines and companies might. So several of the classic warrior virtues do apply, like courage, patience, fortitude, commitment, and persistence. But not all are properly operative in the business domain. Confidentiality isn't the same thing as deceit, and creatively surprising moves in taking a product to market don't require morally offensive lies on the part of any of the players. It's a failure to see the difference that has contributed to unethical behavior and self-destructive patterns of activity in many highly competitive companies.

The simplest moral rule for everyday life would have prevented the Enron disaster: Do unto others as you would have them do unto you. Treat others the way you would want to be treated. No one wants to be deceived about their investments. No one wants to be be duped into conduct that may one day get them arrested. No one wants to be humiliated, vilified, and financially ruined. If the chief architects of Enron's complex financial practices had just taken this one rule, and these few facts, to heart, things might have gone very differently for them.

True success never requires unethical behavior. In fact, as the great American philosopher Ralph Waldo Emerson saw over a hundred and fifty years ago, following such great minds as Plato and Aristotle before him, a lack of proper ethics will unravel any appearance of success over the long run. A few years back, I wrote a book called If Aristotle Ran General Motors. I wish the executives of Enron had read it and absorbed its lessons. If Aristotle had run Enron, he would have concentrated on realities rather than appearances. He would have created a durable inner strength at every level in the company. He would have have built their culture on the four great transcendental values of Truth, Beauty, Goodness, and Unity - respecting the intellectual, aesthetic, moral, and spiritual needs of every employee, client, and investor. He would have done everything in his power to encourage everyone in the company to use these four foundations of sustainable excellence as a checklist for every business decision they made. And things then would have gone very differently, indeed.

If Aristotle ran Enron, I wouldn't have lost thousands of dollars, and neither would any of his other investors. He would never have to resign in disgrace. And there would be no congressional hearings on the company, except perhaps to understand how an ancient thinker could be doing such a great job with a modern energy company, and thriving in Houston, Texas, where no one else wears a toga. But I think Aristotle could get away with it. A nice side effect of genuinely ethical behavior is that you do tend to stay out of trouble.

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