Stephen Drain, Partner at PwC New Zealand, revisits the Enron scandal and asks readers to check their ethical compass: Would you do that? Many white collar criminals don’t necessarily start out as crooks, but a combination of circumstances led them to flout the law, he writes.
It was a thought provoking day recently on the Authentic Leadership Programme. We started out with a visit to the Erebus memorial at Waikumete Cemetery in West Auckland.
Then we travelled back to Waitakere Estate for each leader to consider their own Ethical Compass as a foundation for something much bigger.
As well as a discussion about Erebus, we had all watched the Enron movie “The smartest guys in the room”. It’s a powerful story of corporate greed and fraud. Many of the risk procedures in place in professional services today have their roots in the criminal behaviours of those involved in Enron, and the conduct of its Auditor.
The Enron fraud wasn’t just about moving money. There were real impacts to communities. Lives were upended and put at risk as electricity traders convinced generator operators in California to cut or reduce output, to created super profits for Enron. If the recordings of those traders are to be believed, the callous approach to the harm caused to ordinary citizens was extraordinary.
Employees lost all their retirement savings after being convinced to transfer all their investments to shares in Enron. It was a mirage though, and when it collapsed, all was lost for the shareholders.
Everyone on all our Authentic Leadership Programmes I’ve asked has said that they wouldn’t get involved in this sort of activity: we wouldn’t cover up the mishandling of the flight path that might have caused a plane crash, would we? We wouldn’t sacrifice our values and integrity for money, would we?
We’d hope not. However, opportunity and circumstances can make people do things that they wouldn’t think they are capable of.
As an Investigator at the Serious Fraud Office, most of the people we prosecuted and were convicted didn’t start out as crooks. Nevertheless, a combinations of circumstances (pressure or greed), opportunity (I can do this, no one can see) and justification (I deserve it or it’s mine) can turn ordinary, usually honest men and women into criminals.
In PwC’s Global Economic Crime Survey, we survey participants on those three drivers of internal fraud, known as the fraud triangle: Opportunity, Incentive and Justification. Opportunity comes out in front as the key driver, which tells us that organisations need to start with a strong focus on their control environments, at least in part because trust is not a control.
After we have considered the environment, what else to do about it? I suggest we start with ourselves and our own ethical compass. Every professional is a leader, our actions noticed and scrutinised by others. Having a “true north” sound straightforward, but I think it’s worthwhile to consider some practical components of our own ethical compass.
Here’s some matters I pay attention to. You might do the same, or you might have other areas of focus.
I look at my values as my valuables. Things I take great care of, keep secure, don’t treat lightly and something I have with me through my life. I try not to leave them lying around, so to speak. Of course, there’s a lot more to values, but taking care of those things that really matter to you is fundamental.
We should also pay attention to our lies. If that sounds confronting or obvious consider this: Wise leaders are intentionally clear about their communication and don’t use weasel words that allow for mis-interpretation.
Is taking responsibility your job? Or someone else’s? Taking responsibility is one of the jobs of an authentic ethical leader, in good and bad moments. The willingness to accept responsibility for one’s own conduct is a key source of authentic leadership.
There is only this moment. Leaders grab the moment and take a stand on poor conduct that is, or might be heading across an ethical line.
Learn others’ values
Ask: “why do you do what you do?” Listening and noticing others’ values can lead to meaningful conversations and a shared understanding of ethical conduct.
After the work on the Ethical Compass on the Programme, we asked the leaders to record those key ethical considerations that they won’t allow to be compromised.
That work became the platform for the leaders’ development of what they hope their Legacy will look like.
If you’re struggling with a challenging ethical dilemma, think Legacy. It can’t get much more meaningful than that.
Stephen Drain leads PwC New Zealand’s Forensic Services team and a Leadership Development practice with a focus on Authentic Leadership. In his leadership development practice Stephen works with organisations and senior leaders to develop authentic and innovative leadership development solutions. For the fourth year Stephen is running a modular leadership programme for a large local government organisation with a focus on authentic leadership. Stephen facilitates to ensure learnings are retained and that participants engage in the manner that suits their preferences.
Stephen’s early career was in the New Zealand Police and after qualifying as a detective he moved to the Serious Fraud Office (SFO) initially as an investigator and later Supervising Senior (Investigations). After leaving the SFO, Stephen had two senior roles in leadership development, and joined PwC in 2012. Stephen is PwC Consulting’s People and Culture Partner and has a personal leadership blog. His qualifications, education and professional associations are: Master of Business Administration, The University of Auckland; Post Graduate Diploma in Business (Finance), The University of Auckland; Member Institute of Directors in New Zealand; Chartered Member Human Resources Institute of New Zealand (with specialisation in Development, Training and Learning) and is a qualified to administer several psychometic instruments including MBTI and Saville Wave. Contact Stephen at [email protected] or connect via LinkedIn