386 Global Ethics for Leadership
those inside and those outside the company. Closing the gap is im-
portant.
29.6 Shifting and Distorting Value Frameworks
There is no doubt that the changing approach to risk is having a sig-
nificant impact on business. There is also no doubt that many of the
changes in, for example, the UK “Combined Code” on corporate gov-
ernance are useful codifications of what has been found by experience to
be sound practice. But we cannot regulate ourselves out of trouble.
There was a rash of regulatory measures introduced in response to the
Enron affair. But the failure in Enron was for the most part not a failure
of regulation—regulations were in place—but a failure of values. I
doubt that the bulk of those involved in Enron were inherently more
wicked than the rest of us. The problem was that they were working in a
system whose values had imperceptibly shifted over time without them
realising it, so that essentially criminal misuse of accounting appeared
normal to them because they had convinced themselves that their behav-
iour was within accounting rules. There is a remarkable section of En-
ron’s Risk Management Manual, apparently approved by their audit
committee. This said “Reported earnings follow the rules and principles
of accounting. The results do not always create measures that are con-
sistent with underlying economics. However corporate management’s
performance is normally measured by accounting income, not by under-
lying economics. Risk management strategies are therefore directed at
accounting rather than economic performance.” Accounting rules were
devised to present a true and fair picture of the state of the business, yet
here was a value system which had come to accept that the rules, even
when out of line with reality, were more important than the real econom-
ic state of the business. With these values, it is unlikely that further regu-