Innovation Corrupted

by Salter, Malcolm S.

• ISBN13: 9780674028258
• ISBN10: 0674028252
• Format: Hardcover
• Copyright: 2008-06-30
• Publisher: Harvard Univ Pr

Summary

Although much has already been written about the rise and fall of Enron, four important questions remain unanswered: What management behavior and practices led Enron down the path from truly innovative to fraudulent management? How could Enronrs"s board of directors have failed to detect the business, ethical, and legal risks embedded in the companyrs"s aggressive financial strategies and accounting practices? Why did Enronrs"s external watchdogs-security analysts, credit-rating agencies, and regulatory agencies-fail to bark? What actions can prevent Enron-type breakdowns in the future? Innovation Corrupted addresses each of these questions. In contrast to the time-line narratives of previous books on Enron that offer interesting but largely unsystematic insight into individual actions and organizational processes, Innovation Corrupted pursues a more methodical analysis of the causes and lessons of Enronrs"s collapse. Based upon newly available sources, Salter identifies the social pathologies and administrative failures that fostered the companyrs"s ethical drift and inhibited the board of directors from exercising effective governance and control. Salter also goes beyond the work of previous books by proposing practical recommendations for preventing future Enron-type disasters. These prescriptions relate to board oversight, financial incentives for executives, and, most importantly, the maintenance of ethical discipline when operating in the murky borderlands of the law. It was in this shadowed space that Enronrs"s senior executives lost their way.

Table of Contents

Acknowledgments	p. vii
Introduction	p. 1
The Origins of Enron's Collapse	p. 15
From Innovation to Reckless Gambling	p. 19
The Impact of Perverse Incentives	p. 59
The Evolving Culture of Deceit	p. 95
Ethical Drift	p. 131
The Directors' Failure	p. 154
The Collusion of Financial Intermediaries	p. 190
Enron and Its Public Watchdogs	p. 218
Enron's Legacy	p. 241
Strengthening Board Oversight	p. 245
Avoiding Perverse Financial Incentives	p. 278
Instilling Ethical Discipline	p. 303
Afterword	p. 331
Appendixes	p. 339
Notes	p. 381
Bibliography	p. 487
Index	p. 509
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