Business Ethics

A Measure of Success? Ethics after Enron

August 30, 2006

By Cheryl Rosen

...Former federal prosecutors Chuck La Bella and Thomas McNamara, now white-collar, criminal- defense lawyers at their own San Diego firm, predict that enforcement activities by the Securities and Exchange Commission will continue at the current level, "though federal prosecutions may have reached a peak." Regulators and law enforcement agents have been so aggressive that companies are starting to fight back a little. Still, they note, "the SEC is pooling hundreds of millions of dollars in resources (into) an enforcement apparatus it didn't have five years ago. They have to do something."

Another "subtle aftermath of Enron" is the increased role of the institutional investor. "They're flexing their muscles, and we're going to see more and more of that," La Bella and McNamara predict. Insurance companies and pension funds are going to demand good corporate governance – and their involvement "is a much more effective solution than an Enron trial, because they are interested in the survival – the growth and prosperity – of companies, and in creating real value."

Smart companies will fine-tune their use of good governance not just to satisfy market analysis but as a public relations vehicle, the former prosecutors predict. "Good corporate governance," they note, "can be as effective a marketing tool as a good quarter."