In the wake of apparently dishonest practices by Enron Corp. executives, and apparent negligence by members of its board of directors, many are asking how people believed to be so smart could have lacked the moral courage to seek and tell the truth. As there is after every financial scandal, a call is being made for more courses in "business ethics" in the leading universities.
"During the 1970s, you had the [overseas] bribery scandals and the illegal political-contributions scandals," notes Kirk Hanson, who in 1978 became the first business-ethics professor at Stanford and now teaches at Santa Clara University. "In the wake of that, many alumni of business schools said, `Gosh, you better start teaching some ethics at the business schools,' and so the business schools responded. Then you had in rapid succession during the eighties the insider-trading scandals, the defense-industry [overcharging] scandals, savings-and-loan scandals. Each of those ratcheted up national interest and business-school interest in teaching business ethics."
According to Hanson, "Enron, today, is only the latest in the string of such scandals, but it is a big one." He expects a boom in business-ethics courses. Others say the way that many colleges teach business ethics could be part of the problem. "Do I think there should be more business-ethics courses? Given the way a lot of those are taught, my answer is probably not," says Eugene Heath, an associate professor of philosophy at the State University of New York at New Paltz, who also teaches the course "Virtue in Business" online at YorktownUniversity.com.
Heath and other critics charge that business-ethics courses spend too much time on public-policy issues such as environmentalism and inequalities of wealth and not enough time examining such personal virtues as truth-telling and integrity that are relevant to the Enron matter. "A lot of business-ethics courses cover topics such as drug testing and privacy, affirmative action, global business regulations. These are interesting and worthy topics, but I don't think they affect as many individuals in their day-to-day lives as do another set of questions," says Heath, editor of the ethics reader The Morality of the Market. "The other set of questions, which is our focus [at YorktownUniversity.com], is on virtues and vices in the everyday business environment."
INSIGHT looked closely at the backgrounds of the executives and board members at Enron, especially at the universities they attended, for clues about their moral education. Some went to Ivy League schools, while others were graduated from state universities. Former chairman Ken Lay received bachelor's and master's degrees in economics from the University of Missouri during the 1960s. Former president and chief executive officer (CEO) Jeffrey Skilling was graduated with a degree in applied science from Southern Methodist University in Dallas in 1975 and then earned a master's in business administration (MBA) from the Harvard Business School. In the 1980s, former Enron chief financial officer Andrew Fastow, who set up many of the company's dubious partnerships, was graduated from Tufts University in Medford, Mass., with a double major in Chinese and economics before earning an MBA from Northwestern University's Kellogg School of Management. Board member Robert K. Jaedicke was a graduate and dean of the prestigious Graduate School of Business at Stanford University. When he testified before Congress in January, he claimed not to understand Enron's deceptive accounting practices.
The era in which Fastow and Skilling were students was one when business-bashing was rampant in academia, particularly in the Ivy League and especially in the Boston area where they studied. "The party line was ... I wouldn't go so far as to say Marxist or socialist, but it was certainly highly critical of capitalism," says Kenneth Goodpaster, who heads the business-ethics program at the University of St. …