Enron casts dark shadow on academe

0 Comments | Insight on the News, March 11, 2002 | by Jamie Dettmer

As far as the Ivy League schools go, and at least one of their equivalents on the other side of the Atlantic, the last two weeks have been one big red-faced embarrassment -- and it goes by the name of Enron.

The parade of Enron executives and Arthur Andersen auditors up on Capitol Hill has included a fair sprinkling of graduates from some of America's finest and most elite colleges and universities. Their Fifth Amendment pleadings and their laments of "I saw no evil and heard no evil" provoke the question: What exactly were they taught at Harvard, Yale, Stanford and the London School of Economics?

If ethics were on the syllabus, the lessons sure didn't sink in or weren't emphasized enough. Or maybe it was just a rotten generation? On the Other hand, their teachers hardly inspire confidence.

An instructive appearance was made on Capitol Hill by Robert K. Jaedicke, the sixth dean of the Graduate School of Business at Stanford and an Enron board director. Surely he, with all his knowledge and sharp mind, had picked up on the problems at the Houston-based energy giant ahead of the bankruptcy and raised merry hell at board meetings.

That's what you would have expected from a man who, according to Stanford's Website, was "best known for his ability to teach difficult subject matter in a clear and understandable manner" and who won awards for outstanding research from the National Association of Accountants.

But not a bit of it. Testifying before the House Energy and Commerce Committee alongside Enron's complacent former chief executive officer, Jeffrey Skilling (Harvard Graduate School of Business Administration), Jaedicke came across as a perfectly nice man who was completely out of his depth. Everything had passed him by, and Enron's gleaming 40-story skyscraper never had appeared to him as a tottering house of cards. As with others who have testified before Congress on the Enron mess, the Stanford dean sought to shift the blame, noting that if he had seen this approval sheet or that "dash" document or had any inkling of the conflicts of interest rife within the company, he would have raised an outcry -- or, maybe in his case, a timid academic squeak.

Officials at both Arthur Andersen and Enron, the soft-spoken Jaedicke said, "did not fulfill their duty to us [the board]." That looks to be true, but it didn't seem to dawn on him that he had a fiduciary responsibility on behalf of the shareholders and employees to ask probing questions, as an irate congressmen pointed out to him and fellow Enron board director Herbert "Pug" Winokur.

The professor apparently had reversed roles when appearing for board meetings, turning into the dutiful student of Skilling and former chairman Ken Lay (universities of Missouri and Houston, respectively) and forgetting his days expounding at Stanford's business school the teaching of "corporate responsibility and management ethics." Judging by Jaedicke's underwhelming but genial congressional performance, it could be argued that it isn't surprising what happened at an Enron managed by graduates of the nation's top business schools.

Maybe Tufts and Northwestern University's Kellogg School of Management will give greater thought about what is emphasized in class after seeing the allegations leveled against alum Andrew Fastow, Enron's former chief financial officer? Fastow was the brains behind, and beneficiary of, some of the secret partnerships that Enron used to hide corporate debt and inflate earnings. And what of Arthur Andersen, the auditors who did not audit, the document-shredding accountancy firm that will be lucky to survive the Enron failure? The firm draws its recruits year after year from the top schools and prides itself, according to its Website, on "Our culture, our values," which apparently include "integrity and respect."

The corporate-mission statement continues: "Catchy slogans and flashy ads will never equal the power of doing what they claim. This is a time when new ideas are shared, exchanged and brought to life. Today's economy is about finding what creates value: the substance beneath the style." Fine words; pity about the execution!

No doubt some will say blaming the educators is unfair. And to a point it is. After all, Britain's Cambridge University hardly was culpable for the treachery of Cold War turncoats Kim Philby, Guy Burgess and Donald Maclean.

Teachers teach and students learn, yet they have the free will to use well their education or to exploit it for dark and criminal purposes. But in an academe that increasingly has turned its back on traditional values and seems adrift in a world of philosophical relativism, maybe it has forgotten its commitment to turn out not only the brightest but the best.

Mind you, at least no American school suffered the double whammy in February of discovering that not only was one of its graduates, Michael Kopper, caught up in the Enron mess, but also that another one was the chief suspect behind the abduction of Wall Street Journal reporter Daniel Pearl. That honor fell to Britain's London School of Economics.