IF YOU PUT A FROG in a pot of boiling water, it will frantically try to scramble out. But if you put a frog in a pot of room temperature water it will stay. If you slowly heat up the water, something happens that is quite amazing. As the temperature rises from 70 to 80 degrees, the frog stays put. If you continue raising the temperature little by little, in small steps, the frog will become groggier and more torpid until it is incapable of climbing out of the pot. It will eventually die.
Often, unethical behavior happens little by little, in small steps, and progressively becomes more and more severe. After awhile, one is able to tolerate a certain severity of one’s own unethical behavior. One would not, however, tolerate this level if it occurred all at once in a large dose at the very beginning.
In February of 2002, Enron’s board of directors formed a committee to investigate the CFO of the company, Andrew Fastow. The report released by the committee describes Enron’s “slow journey into accounting hell.”
In the beginning, Fastow began by making relatively small steps down the road of corruption. Fastow broke two regulations when he created a special purpose entity (SPE). An SPE is basically another company. Fastow used the SPE to keep financial debt off the books. The SPE would have been legal if at least 3 percent of its capital was