Tags: From | Harvard | Enron

From Harvard to Enron

Thursday, 10 January 2002 12:00 AM

They call it the West Point of capitalism: Harvard Business School.

Eight hundred and fifty students, from every conceivable background, are divided into sections - A through J - and stay together from September until the end of the school year. Guided by the instructor, they solve actual and hypothetical cases.

Productions and Operation Management was taught by Dr. Chip Bupp, a thoughtful and serious man. This was a course designed to study factory placement, assembly line management and plant facility problems.

On this particular day the case in question for Section A involved a company that manufactured a product that may be, but wasn't definitively, harmful - even potentially fatal - to the consumer. If you were the CEO of this company what should you do in such an ambiguous - and potentially dangerous - situation?

Several students offered suggestions, none of which galvanized the class. Then a hand shot up from near the back row. Dr. Bupp called, "Jeff, what would you do?"

"Jeff" was one of the brightest members of Section A. With thinning blond hair and wire-rim spectacles, he had a mature persona to go with a slight Southern drawl. He often expressed disdain toward any government intervention. One of the natural leaders inside Section A, when he talked, as the commercial said, "Everyone listened."

"I'd keep making and selling the product," Jeff said. "My job as a businessman is to be a profit center and to maximize return to the shareholders. It's the government's job to step in if a product is dangerous."

Several heads nodded in agreement.

Neither "Jeff" nor the others seemed to care about the potential effects of their cavalier attitude. What if this product harmed consumers? How about the company's employees? Were they in danger during the manufacture of this product? And what could happen to the company if the CEO made the wrong decision?

Few in Section A that day dared to raise these questions. At HBS - and business schools nationwide - you were then - and still are - considered soft or a wuss if you dwell on morality or scruples.

As the years have gone by "Jeff" has had a meteoric career. He rose to become a partner in the top-flight McKinsey consulting firm. From there he joined and was soon promoted to the post of president and chief executive officer of Enron Corp.

"Jeff" is, of course, Jeffrey K. Skilling, who resigned suddenly under unexplained circumstances in August after only six months on the job. In two stock sales before and after his departure he cashed out $30.6 million worth of Enron stock.

Skilling and other senior management encouraged Enron employees to buy and keep Enron stock, even when things started to sour, while they were hurriedly selling huge blocks of their own Enron stock.

Enron's stock has collapsed from a high of more than $90 to 63 cents as of last week. It is already considered "the largest bankruptcy case in American history," according to Sen. John McCain.

The Justice Department has opened a criminal probe. Auditors report that a "substantial" number of key documents have been destroyed. Civil suits are already under way in behalf of shareholders and lenders to recover more than $1.1 billion paid to top management during the past three years. Congress is now holding hearings. As one analyst told CNBC, "It's the biggest insider trading scandal - ever." Another observer noted: "Enron was run to benefit the top executives. They literally looted the company."

Skilling, a Harvard MBA and an accomplished corporate executive, proclaims total ignorance of any problems at Enron. "I had no idea the company was in anything but excellent shape."

Numerous articles about Jeff Skilling written since the demise of his company cite his "arrogance" and "cold-heartedness." He enriched himself while the Enron employees and shareholders - those very people he claimed years before were his No. 1 priority - were robbed of their retirement savings.

But, as was seen almost 24 years ago in a Harvard classroom, the seed of his destruction grew out of a gross misunderstanding about the role of a businessman in our society. Is it solely to be "a profit center" and to "maximize return for the shareholder"?

Harvard, and other business schools, must pay more than lip service to the gross ethical blind spots that the Enron case has exposed. Starting with an admissions policy that selects potential students for ethics and character as well as brains, our institutions need to return to the goal of teaching them to be good citizens first - and money makers second.

© 2019 Newsmax. All rights reserved.

   
1Like our page
2Share
Pre-2008
They call it the West Point of capitalism: Harvard Business School. Eight hundred and fifty students, from every conceivable background, are divided into sections - A through J - and stay together from September until the end of the school year. Guided by the...
From,Harvard,Enron
767
2002-00-10
Thursday, 10 January 2002 12:00 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
America's News Page
© Newsmax Media, Inc.
All Rights Reserved