Enronitis, Ethics and Compliance Survey

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Compliance, Ethics and Enronitis

Survey Results

Enronitis, Ethics & Compliance

Survey Results

© Value Based Management.net

Distribution of these results on paper is permitted, as long as Value Based Management.net is credited in the article.

Electronic Distribution is allowed, provided a link is made in the article to  www.valuebasedmanagement.net

In the period from March until April 2004,

Value Based Management.net

(www.valuebasedmanagement.net)

conducted an anonymous visitors survey

on Business Ethics.

Of the participating people:

- 42% were executive officers and directors,

- 27% were other business executives (from which a third were ethics or HRM officers), and

- 31% were students and consultants.

This corresponds with the usual visitors composition of Value Based Management.net

Approximately two-thirds of the respondents expects that ethics/compliance education for senior management might help to prevent future Enron cases.

Over three years after the accounting scandals started, still only a fourth of the organizations have established a helpline for ethics/compliance issues.

Similarly, over three years after the accounting scandals started, still only a fourth of the organizations employ an ethics/compliance officer.

About one third of the organizations of the respondents in the mean time have an ethics/compliance program going on.

86% of the respondents organizations don't measure ethics/compliance in their performance appraisal system. Bearing in mind the well-known saying: "You get what you measure", not a very hopeful result.

43% of organizations do not take appropriate action towards strong performers that don't live up to their organization's ethics/compliance values.

As a final conclusion, a staggering 74% of all respondents believe senior executives have not learned a lesson from Enronitis.

In September 2003,

Value Based Management.net

(www.valuebasedmanagement.net)

conducted an anonymous visitors survey

on Business Ethics.

Participants were asked who according to them is primarily to blame for the accounting crisis.

- 57% blamed primarily Management

- 19% blamed primarily Shareholders

- 12% blamed primarily Accountants

- 5% blamed primarily Analysts

- Another 5% blamed primarily the Media

- And finally 2% blamed primarily the Government

A little later we heard about the article below.

Business Schools share the blame for Enronitis

(Financial Times, July 18th, 2003)

Sumantra Ghoshal, professor of strategy and international management at London Business School, writes that despite the post-Enron rush to teach business ethics and corporate social responsibility to MBA students, business schools "need to own up to their own role in creating Enronitis."

Ghoshal notes that agency theory, created by Michael Jensen at Harvard, taught MBA students that managers could not be trusted to maximize shareholder value and therefore managers' and shareholders' interests had to be aligned through incentives such as stock options.

At Berkeley and Stanford, students were taught transaction cost economics, developed by Oliver Williamson, which argues that the only reason companies exist is because managers can exercise authority to ensure all employees do what they are told. As a result, managers must ensure that staff are tightly monitored and controlled while creating individual performance incentives.

Michael Porter has argued that to be profitable, a company must actively compete not only with its competitors but also with its suppliers, customers, regulators and employees, striving to restrict or distort competition, "bad though this may be for society."

Ghoshal concludes that "by incorporating negative and highly pessimistic assumptions about people and institutions, pseudo-scientific theories of management have done much to reinforce, if not create, pathological behavior on the part of managers and companies. It is time the academics who propose these theories and the business school and universities that employ them acknowledged the consequences."

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