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Crews work to clean up oil washed ashore at Pensacola Beach in Pensacola Fla., Wednesday, June 23, 2010. (Michael Spooneybarger / AP Photo) What do disgraced CEOs Ken Lay and Tony Hayward have in common? As Robert Bryce explains, they were both shaped by a corporate culture that rewards bad behavior.
Tony Hayward’s lips were moving but all I could hear was Ken Lay.
Indeed, the specter of the late Enron CEO was apparent last week during Hayward’s testimony in front of Congress whenever he said something to the effect of “it wasn’t my job” or “I wasn’t directly involved” in the decisions that preceded the blowout of the Macondo well.
Hayward’s lawyerly excuses, like those made by Lay in the wake of Enron’s spectacular bankruptcy in 2001, are remarkable not because Hayward hopes to avoid blame and reduce BP’s liability. All executives facing a crisis would want to do the same. Instead, it’s clear that just as Lay didn’t understand just how perilous his company’s finances were, Hayward didn’t understand the risks that BP was taking by drilling in 5,000 feet of water. And the failure to fathom those risks may end up costing the company $40 billion, or perhaps much more.
Since Enron imploded, we’ve seen a Gucci-heeled parade of multimillionaire executives get indicted in court—or in the court of public opinion—after their companies failed.
But Lay and Hayward are hardly alone. And that brings us to the essential question: Why, over the past decade, have so many top executives been so blind to the company-killing risks that ended their careers, cost investors hundreds of billions of dollars, and put tens of thousands of people out of work?
Since Enron imploded, we’ve seen a Gucci-heeled parade of multimillionaire executives get indicted in court—or in the court of public opinion—after their companies failed. Notable paraders include Richard Fuld at Lehman, John Thain at Merrill Lynch, and Martin Sullivan at AIG.
• Full Coverage of the oil spill To be sure, the risks faced by those financial firms are fundamentally different from those faced by BP. The British oil giant bungled what should have been the rather routine process of drilling an expensive wildcat well in the Gulf of Mexico, one of the most-drilled provinces on the planet. The Wall Street firms were overwhelmed by their exposure to toxic financial derivatives.
Although the risks that faced those companies were different, there is a common theme among the companies that do a good job of handling risk management. And the various money managers, energy analysts, and former Enron employees who I've interviewed over the past few weeks all pointed to one essential factor: a company culture that rewards honesty, diligence, and open communication.
Corporate culture has long been one of the most talked- and written-about concepts in management. In one of the best-selling business books of all time, Good to Great: Why Some Companies Make the Leap… And Others Don’t, author Jim Collins discusses the need for what he calls a “culture of discipline.” Collins says that while making decisions, great companies “infused the entire process with the brutal facts of reality.”
Enron’s corporate culture depended on unreality. Indeed, Enron’s management promoted a toxic mix of hubris and excessive compensation, which is the exact same cocktail that led many Wall Street firms to bankruptcy, or something close to it.
12 June 24, 2010 | 10:43pm Twitter Emails
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How long have the the Republican leadership been economically incompetent? Linking their fortunes with those of their biggest contributors, selling their votes and developing a philosophy that is now toxic to American's? Like BP they play a vast PR game hiding a core of hypocrisy behind a veneer of slogans. They are clueless without big business guiding them around - so in these times when big business' shortcomings are glaringly obvious all they have for an idea is the word "NO". That's all they have.
Republican leadership?!?! The Democrats presided over both Enron and the Deepwater Horizon disaster. Remember, the Bush administration inherited the dot-bust and the Enron collapse from Clinton. Bush, however, dealt with the mess he was handed instead of constantly whining.
Whatever you're smoking, son, stop. It's not good for your brain.
Why bother learning the potential downsides of your business? You're getting paid well, your underlings keep the business going and you have a parachute to save you if the house of cards falls.
What do disgraced CEOs Ken Lay and Tony Hayward have in common? How about they both perpetrated their fraud under Democrat administrations... "...irregular accounting procedures bordering on fraud perpetrated throughout the 1990s involving Enron and its accounting firm Arthur Andersen, Enron stood on the verge of undergoing the largest bankruptcy in history by mid-November 2001."
You are SO wrong! The frauds were perpetrated under REPUBLICAN administrations and the subsequent crashes occurred under Democratic administrations. Same as the deep water drilling regulations - they were dismantled under Republican Admin and the results of the are being felt by the Democratic Admin. ?? R U paid to push this nonsense? R U inside a notorious thinktank?
beastyjay - are you then advocating more regulation and inspection of corporations by the federal government?
Certain career politicians, corporate criminals, judicial gods and in this case, all of them as influential power brokers, do not cease operations because they have been exposed fraudulent of correct ambition in the eyes of the public. Having some of the most severe egos, their self-serving ambitions are not disconcerted so easily. Being in the public eye for one crime does not prevent the commencement of another crime. Their own self-images lend to consider themselves artists who have an unfinished canvas in the parlor, and who labour nonetheless with brush and palette to unveil new work from their infamous studios. ... Their creations, which are complete in the absolute of their ambitions, leads inevitably to two extremes: monstrous opulence, and monstrous misery. To turn a profit from any circumstance is the quality which distinguished these above the other madmen of the world, and elevates the simplest forms of villainous abominations into the low and underhanded felonies of Satan. So that their villainous activities would move fast, accusation followed accusation, blame after blame, with that conclusive decree obviously forthcoming; that they must all keep their agendas secret to the public. And now upon the first several minutes of their point-the-finger discourse, those capitalistic businessmen of the world are still together... in possession of this once peaceful Earth Mother; or so it seems. Let me be more honest and fair to these irreverent hoodlums: indeed, they held some debate of Mother Earth's welfare, due (only) to the regulatory rules, but they were mostly looking for some secure profit, as they counted their craft to be highly paid for scraping her nature's magnificence- effectively, and cared but for the correct cover-up of exploitation - not to delay. Accordingly, the aspirations of these apparitions which this scene of abominable shadows presented are now heightened dramatically and lowered discretely to its utmost climax when these three supporting characters of the Satan's reptilian forces, absolving themselves from the sin of not yet having drawn high enough wages for their past performances, announced they were willing to cut Mother Earth's throat on the alter of compensated immunities if there were that familiar bonus of prosperity thrown in for service under hazardous world-wide criticism. It was the usual boast of denial, another of these henchmen's infamous proposals; this one as hateful and greedy as another, which could be made as long as it remained quite unknown what character the Earth Mother and her Creator was really made of. Trinity De 'la Falcons, Author of "In the Winds of Forgotten Divinity," Barnes & Noble, Boarders
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