May 26, 2006

Kenneth L. Lay and Jeffrey K. Skilling tried to present themselves as clueless victims in the Enron collapse, but the jurors who convicted them yesterday in Houston weren't convinced. Could the two executives have been half-right, though?

Preposterous as it is to argue that others, inside or outside the company, took advantage of them, they were victims nonetheless - victims of their own bad judgment and of their swagger and belief in their own power. They were victims of their overweening self-regard, of the notion that they weren't merely the smartest guys in the room (to crib from the title of a book about Enron) but the smartest guys anywhere around. And, just maybe, they were victims of a larger culture that had become infatuated with the geniuses in the boardroom.

Clueless? Absolutely. In any organization, there are few enough ways for the people at the top to get a regular reality check - the authors of the U.S. Constitution devised a government based on the separation of powers for just that reason - but at Enron there seems to have been no denting the bosses' confidence in their own brilliance. Mr. Lay and Mr. Skilling weren't clueless about the way they had turned Enron into a giant Ponzi scheme - let's be clear about that - but they were certainly clueless in thinking they would get away with it.

The punishment should fit the crime - and a crime it was, clueless or not. For the pain they have caused thousands of former Enron employees and investors (and for presiding over a company that threw California into turmoil by trying to game the deregulated electricity market in 2000 and 2001), Mr. Lay and Mr. Skilling, led away in handcuffs after yesterday's verdict, could be looking at serious prison time. No tears here.

Enron and other corporate scandals led to the Sarbanes-Oxley Act, which mandates greater accountability at the top. Chief executives argue that its strictures are too onerous, but the law should be understood as part of a system of checks and balances that helps to interject a bit of reality into corporate decision-making. Who knows? It might even help a few CEOs avoid temptation - and stay out of jail.

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