For investors, the Enron problem couldn't have come at a worse time
For investors, the Enron problem couldn't have come at a worse time. They've been hammered by two years of drastic losses to their portfolios and had already fallen to their knees by the time Enron gave them a good, hard kick.
Who's to blame for the biggest bankruptcy in US corporate history? The obvious choice is Enron itself; that's a no-brainer. Investors blame the company for cooking the books, rewarding executives' financial chicanery, stealing the life savings of its employees, and building a culture of corporate secrecy. In short, investors blame Enron's management for fiddling while the company burned. But that's not enough. They are looking for other guilty parties. After all, one company couldn't pull off a scandal of this magnitude without the help of others.
They also blame the auditors, in particular Arthur Andersen, which signed off on Enron's massaged numbers and whose client list also includes ill-fated Sunbeam and Waste Management. They'll note that Arthur Andersen made even more money consulting for Enron than it did for its auditing services. But that isn't really news - the Big Five accounting firms know the big bucks are in consulting.
They blame securities regulators for allowing Enron's management to propagate its covert, self-serving partnerships while paying lip service to fair disclosure, auditor independence, board accountability and plain English.
They blame Wall Street for failing to ask the seventh-largest US company tough questions - like 'Why are your numbers opaque?' - and instead settling for the philosophy, 'Who cares about their opacity as long as they continue meeting expectations?'
They blame the media for trumping up the Enron myth (see Business Week's February 12, 2001 cover photo of then-CEO Jeffrey Skilling) and lauding it as the quintessential 21st century corporation. Investors are still stinging from the crucifixion of Amazon.com, which came only a few months after Time magazine named CEO Jeff Bezos man of the year.
Investors can blame anyone they want, but that won't help to rebuild their confidence in the integrity of the equities market. Many are left wondering why they should continue investing in corporate America. After all, they might do better if they put their money into other financial instruments or, for that matter, in a shoe box buried in the backyard.
Investor relations officers may say, 'Sure, Enron screwed up. But my company is different - our investors have confidence in the transparency of our corporate culture.'
That claim regarding confidence may be true, but it is less so than it was six months ago. What is true is the Enron problem doesn't only affect Enron. Or Arthur Andersen. Or the SEC. The Enron problem affects every IRO whose job it is to communicate shareholder value.