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I got to hear Andy Fastow, former CFO of Enron, speak today.
It was interesting to hear his take on how disincentivized the business world is from doing the right thing.
It was interesting to hear his take on how disincentivized the business world is from doing the right thing.
If I were to ask you how many tax loopholes you take advantage of, you’d likely say “as many as I can.”
Why pay more when you can pay less via loophole?
Why pay more when you can pay less via loophole?
Well if our kids told us they were going to use loopholes to get out of doing chores, while still “following the rules” we’d be upset.
This double standard is what’s bizarre.
This double standard is what’s bizarre.
We all consider ourselves ethical, but the business and tax laws we operate within are oftentimes very very grey.
This grey area is where people like Andy push boundaries and often times get away with it, and/or are rewarded. And in other instances they’re jailed.
This grey area is where people like Andy push boundaries and often times get away with it, and/or are rewarded. And in other instances they’re jailed.
Now I’m not saying I’m an Enron apologist. He was the first to admit wrongdoing today.
But he pointed out several simple examples of companies doing what was legal, but to the outside was seemingly very unethical.
But he pointed out several simple examples of companies doing what was legal, but to the outside was seemingly very unethical.
He referenced the quote by Supreme Court Justice Potter
“Ethics is knowing the difference between what you have the right to do and what is right to do.”
“Ethics is knowing the difference between what you have the right to do and what is right to do.”
Sometimes we have the opportunity to do things that are within the confines of the law, but probably fall outside of the spirit of the law.
The problem is that our system doesn’t incentivize closing the loopholes, or disincentivize using them.
The problem is that our system doesn’t incentivize closing the loopholes, or disincentivize using them.
If anything, it makes it hard to assess the risk of using them, and has created a culture in which using them is rewarded as smart.
It’s literally what President Trump bragged about for four years.
It’s literally what President Trump bragged about for four years.
At the beginning of his lecture, he held up an award for CFO Of The Year he won alongside his Prison ID Card.
He pointed out that he won both of them for doing the same thing.
Exploiting accounting and tax loopholes that had become commonplace at many large companies.
He pointed out that he won both of them for doing the same thing.
Exploiting accounting and tax loopholes that had become commonplace at many large companies.
The misleading picture this painted about his business led to massive losses for investors and layoffs for thousands of employees.
It decimated what was one of the 10 largest businesses in the world by revenue in 2001.
In his telling, it was all technically legal.
In the public’s (and federal government’s) eye, it was not.
The interpretation of ethics is the dividing line.
In his telling, it was all technically legal.
In the public’s (and federal government’s) eye, it was not.
The interpretation of ethics is the dividing line.
He said he didn’t understand it for a long time and it took several years in prison before it clicked.
I’m not Jewish, so I’ll describe what he said.
He was told by a Rabbi that there are 613 Jewish Commandments.
612 tell you exactly what to and not to do.
But you could technically follow all 612 of those and still not be considered Holy if you don’t follow the 613th.
He was told by a Rabbi that there are 613 Jewish Commandments.
612 tell you exactly what to and not to do.
But you could technically follow all 612 of those and still not be considered Holy if you don’t follow the 613th.
And there are 613 total. Not 612.
The one not mentioned doesn’t say what to do. It says what to be.
Be Holy.
The one not mentioned doesn’t say what to do. It says what to be.
Be Holy.
Don’t just follow the 612 Commandments. Follow the spirit of those commandments.
Follow the intent.
Follow the intent.
So as business leaders it’s critical we do the same.
We’re faced with grey areas in contracts, laws, people issues, etc.
The culture of the systems we work within won’t necessarily induce us to always do what’s right.
That’s on us.
We’re faced with grey areas in contracts, laws, people issues, etc.
The culture of the systems we work within won’t necessarily induce us to always do what’s right.
That’s on us.
It’s not always easy to know in the moment, but it’s important that we ask ourselves often. Give ourselves the gut checks to stay on the right side of the line, even if everyone else (including competitors) aren’t.
He gave out his cell phone number to anyone who wanted to ask questions afterward. So I asked him two.
Do people still confront you about the whole thing and do you think the Astros cheated?
Do people still confront you about the whole thing and do you think the Astros cheated?
As someone who grew up in Houston and remembers a lot of family friends being affected by Enron, it’s surreal to get to chat via text.
More surreal? Getting a good set of takeaways on ethics from the guy who architected one of the largest corporate scandals in history.
More surreal? Getting a good set of takeaways on ethics from the guy who architected one of the largest corporate scandals in history.
