Following the company's collapse, Enron has become a by-word for corporate irresponsibility. The financial misrepresentation that covered-up the giant black hole at the heart of the company's finances have fuelled interest in how such corporations can be identified and held to account. This is made all the more challenging on account of that fact that - to some observers - Enron was doing the whole "social responsibility thing" with its CSR reporting, environmental and community programmes.

Enron the company

In just 15 years, Enron grew from nowhere to be America's seventh largest company, employing 21,000 staff in more than 40 countries. Far from being a watchword for irresponsibilty, the company was able to boast

Fortune magazine's Most Innovative Company in America six years running
In the top quartile of Fortune Magazine's 100 Best Companies to Work For
On the All Star List of Global Most Admired Companies

The company had published a social and environmental report, which looked at the moves it was taking with regard to its environmental impact, its employee relations, its anti-corruption and bribery policies, and its community relations programmes.

In this report, CEO Kenneth Lay described how the company's behaviours were guided by its vision and values: specifically

respect: mutual respect with communities and stakeholders affected by the company's operations
integrity: examining the impacts, positive and negative, of the business on the environment and on society, and integrating human health, social and environmental considerations into the company's management and value system
Excellence: continuing to improve performance and encouraging business partners and suppliers to adhere to the same standards.

What are the issues?

The firm projected itself as a highly profitable, growing company - an image which quickly turned out to be an elaborate mistruth. Enron's statements about profits were shown to be untrue, with massive debts concealed so that they didn't show up in the company's accounts.

Not only that, but the company was seen to have been extraordinarily active in political lobbying - with large numbers of legislators close to the company in one way or another. This fact had not been enough to save it, but raised questions about how appropriate such closeness between a corporate and the political system actually is.

The question on many lips concerned just how the situation could have evaded detection for so long. The firm's accountants, Andersons, were involved in the shredding of documents relating to Enron's accounts - a fact which suggests a significant degree of complicity.

From the point of view of the movement for corporate social responsibility, Enron represents a turning point in whether the movement can continue to take surface level assurances, and the apparent commitment to a responsible approach which applies to the peripheral issues without going to the heart of how the company does business.

What do the critics say?

It's hard to find anyone who's not a critic at this stage! Those who were critics before the facts came out suggest that the company has always been a poor corporate citizen, and that those who have been seduced by its community and environmental programmes have been duped.

They pointed to the impact on Enron employees, many of whom had significant pension funds tied up in Enron shares, who had been unable to sell these shares as their value began to head south due to the company's obstruction. They also talked about the false valuation of assets, multimillion dollar crimes, and bogus deals.

They point to the personal relationship between CEO Kenneth Lay and President George Bush, suggesting the company had more access to Vice President Cheney's energy policy process than any other single interest.

What does Enron say?

Not a great deal. The various senior executives most in a position to know what exactly happened have refused to testify, arguing that they have no chance of a fair trial. The company's surviving board has said rather little in turn, issuing a series of rather terse press releases dealing with practical matters.

The nearest the company comes to making any kind of statement of regret is in the release which announces the completion of a report by its own Special Investigative Committee of the Board of Directors. "The report", says the company, "is an important step in the Company's effort to stabilise and reorganise its businesses, protect 20,000 jobs and embark on a productive future.

"The report has made the Board aware of numerous past events for the first time. These events are deeply regretted by the Board."

Does anyone else support Enron?

Not that we've noticed.

So what about their CSR reporting?

On the one hand, this is easy. The Enron last social and environmental report was rather light on the kind of measures that are increasingly being demanded. There was a lot of narrative, and a whole range of things that were at the early stages. The company was to take a comprehensive review of its stakeholders. The company was gearing up to address human rights and other issues. It did include a number of figures on environmental performance, and on health and safety records.

But there is a bigger challenge here. The move towards more robust social and environmental reporting will not quickly get to the point where its indicators pick up the deliberate actions at the top that typify this story. After all, what social reporters are trying to do is identify the core reporting data which will give a real picture of the health of the company - just like we already have in financial reporting. But financial reporting was not sufficiently transparent and robust to pick up on the Enron problem - how much more difficult for the hard-to-define measures of stakeholder engagement and social performance?

The main message from this is that expectations of company reporting need to be kept realistic. The CSR movement needs to be wary of promoting the achievements of companies when all they are doing is going through the motions.

Find out for yourself:

References:
BBC summary of the scandal
FT.com's special report on Enron

Enron has now gone into liquidation, and messages to creditors etc. can be seen at the former company website:
http://www.enron.com

Page last checked / updated on 2nd October, 2007

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