Former Enron Exec Lauds Family Business

Andrew FastoEnron Logow, the former Enron CFO, and poster boy for one of the greatest corporate frauds in history, is now out of jail and on the speaker circuit. As reported in the August 19 Globe and Mail Report on Business, he recently spoke on the subject of business ethics to a group of governance experts at a gathering of the Canadian Society of Corporate Secretaries. No lack of irony here. “It’s like inviting Kim Kardashian to talk to your daughters about chastity” he said, admitting surprise to find he is now asked to speak on the topic of board ethics. Good to see he has retained a sense of humor after spending than five years in the big house!

Now why should we listen to someone who played a central role in the destruction of an estimated $60 billion in shareholder wealth, and tens of thousands of jobs? Well, it is a good bet Mr. Fastow learned a thing or two about how boards behave, and in particular how they rationalize decisions if they believe they are following the “rules”.

According to Mr. Fastow, the board of Enron gave their approval to dozens of ‘Special Purpose Entities’ because they were asking “Is this allowed?” – which was the wrong question. Rather, the Enron board, and all boards, ought to apply diligence as if they were a family business by asking: “If this company were privately owned, and I were leaving this company to my grandchildren, would I make this decision?” Mr. Fastow figures the Enron board would have nixed 99% of the stuff they ultimately approved had they asked this simple question.

Ultimately, it all comes down to cultivating a mindset of stewardship at the top of any organization – whether a small family business, or a major multi-national. As the CEO of a very successful 3rd generation family business told me: “If you leave the business better than you found it – and made a decent living as a family – that is good stewardship.”

Business family’s who succeed over multiple generations embrace the concept of stewardship and embed it in their corporate culture. They always ask the question Mr. Fastow now urges all boards to ask.

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