What really bugs me about the Enron failed business model is when I first heard about the accounting practices they were using I was floored. Basically they were counting imaginary profits they “wanted” to make next year as actual profits this year. Who could possibly run a business like that? I was basemented when I found out they didn’t violate any SEC regulations. A few individuals benefited greatly through selling stock short and were “caught” violating some ticky-tack stock trading laws.
The company filed every SEC filing and every report was signed off by the regulators. Enron’s accounting practices were authorized by the government. If the government authorized a private business to run its accounting that way, it would stand to reason parts of the government also use that same accounting practice!
Right now the US Debt is almost $8.4 Trillion. But that is only the recorded debt. Enron was much further in debt when all the carpets were removed and the government authorized accounting practices were revoked. So how much higher do you think it is?
How can Skilling and Lay be punished for “knowing”? They are punished because the buck stopped with them and they are responsible for knowing what is going on with the business they sign off on. First, they weren’t violating any laws. (Most business laws are defined well after the action has happened…how’s that for constitutional protection?) Second, if they are guilty because they signed off on the accounting practice, the regulators are guiltier.
The regulators have immense power over the employees of a company that a CEO doesn’t have. A CEO can’t extort employees or put them in jail. A CEO doesn’t have subpoena power over the employee’s personal life. If a CEO violated the public trust and allowed this transgression to happen, certainly the bureaucrat that permitted this to happen is responsible, in the same way Lay and Skilling are for knowing and not doing anything about it. I would say more responsible because the regulators have additional power to ensure it is right.
If they aren’t held responsible then what are they good for? They sure didn’t stop anything bad from happening. If I failed and my job and destroyed X billions of capital, I doubt I would be promoted. Skilling and Lay weren’t…why should a bureaucrat?