Debating the Enron Effect

(washingtonpost.com)

Jeffrey Pfeffer, professor of organizational behavior at the Stanford Business School, said the belief that stock price is all that matters has been hard-wired into the corporate psyche. It not only dictates how people judge the worth of their company but also how they feel about themselves and the work they're doing. And over time, he said, it has clouded judgments about what is acceptable corporate behavior.

In many companies, Pfeffer said, the ethical backsliding starts with a small, relatively innocuous deception -- backdating a contract by a couple of days or tucking a vague reference to a major screw-up in the footnotes of the annual report -- the financial equivalent of running a red light at a deserted intersection. Then, each successive quarter requires a bigger and bigger deception to keep the earnings momentum going.