Lasting Lessons from Enron

Last month, Newsweek printed excerpts of an interview with William Powers, current President of the University of Texas.

And while not belittling either the title or responsibilities of a president of a large university (as both are huge), what is important about Mr. Powers in the context of this blog is that prior to becoming university president, he was asked by the Board of Enron to head a special investigation into the company’s collapse in order to uncover what went wrong—and why.

The focus of Newsweek’s excerpted conversation is those “lasting lessons” that Powers believes we should take from the Enron collapse.  Enron was—or at least it should have been—a learning opportunity for every nonprofit, as well as every for-profit.

Nonprofits had the opportunity, especially with the passage of Sarbanes-Oxley that, with the exception of two provisions applied only to for-profits, to affirm what it was already doing very well and to take note of areas where they, too, needed to ensure independent oversight.  (And, as an aside, and kudos for the nonprofit sector, a good number of for-profits looked to the nonprofit sector to learn its best practices of board governance.)  And reading Powers’ conclusions, Enron’s collapse should continue to teach the nonprofit sector.  His identified lessons, eight years later, are equally applicable to nonprofits as they are for for-profits.

Here are some of his lessons that are equally applicable to nonprofits.

1. “The good times do end.”  Thus, nonprofits, instead of relaxing in those good times, we need to enjoy the good while simultaneously preparing for the bad times that are coming.
2. “You need to surround yourself with good people who are competent, honest—and are not going to take shortcuts.”  Which means that we must hire good, qualified, honest people and not hesitate to release those who are not.  And this applies equally to board members as it does to staff and other volunteers.  Powers adds that we must evaluate “…the people, not just their talent, but their culture—including how they conduct the rest of their lives.  Are they honest?  Are they trustworthy?”
3. He has several pertinent observations for boards.  In responding to the question of how he would be a different board member today than pre-Enron, he says that he would not succumb to the fear of making “…a fool of myself by asking a stupid question.”  He would ask that question and push to understand.  He observes that at Enron many of the board members has been there “for a long time.  They had grown up with the company; they had come to trust the company and had disengaged a bit.”
4. “…it is likely that each generation is going to forget its values.”
5. We must instill “in young people the idea that they should do honest, hard work for a fair return, whether that’s a financial return or the other kinds of returns we get.  ….  We can teach students that earning rewards fairly is the way to live your life, rather than a get-rich-quick mentality.”

The sad part about these lessons to which Mr. Powers rightfully points is that none is earth shattering; all seem to be basic common sense.  But apparently these days, we need to remind people just what common sense entails.