Although much has already been written about the rise and fall of Enron, four important questions remain unanswered: What management behavior and practices led Enron down the path from truly innovative to fraudulent management? How could Enron’s board of directors have failed to detect the business, ethical, and legal risks embedded in the company’s aggressive financial strategies and accounting practices? Why did Enron’s external watchdogs—security analysts, credit-rating agencies, and regulatory agencies—fail to bark? What actions can prevent Enron-type breakdowns in the future? Innovation Corrupted addresses each of these questions.
In contrast to the time-line narratives of previous books on Enron that offer interesting but largely unsystematic insight into individual actions and organizational processes, Innovation Corrupted pursues a more methodical analysis of the causes and lessons of Enron’s collapse. Based upon newly available sources, Salter identifies the social pathologies and administrative failures that fostered the company’s ethical drift and inhibited the board of directors from exercising effective governance and control. Salter also goes beyond the work of previous books by proposing practical recommendations for preventing future Enron-type disasters. These prescriptions relate to board oversight, financial incentives for executives, and, most importantly, the maintenance of ethical discipline when operating in the murky borderlands of the law. It was in this shadowed space that Enron’s senior executives lost their way.
A superb book. Innovation Corrupted provides the deepest analysis yet of the collapse of Enron. It's essential reading for anyone who wants to understand why success without an ethical foundation leads to disaster.
What do ethical lapses, director failings, colluding intermediaries, and conflicted watchdogs have to do with Enron's implosion? Everything. Salter's painstaking research into virtually every record and recollection available demonstrates that there is no single villain in the Enron story--rather a posse of insiders and outsiders fixated on the capital market and apparently oblivious to waving red flags. His lesson for the governance of public companies is that board service is not for amateurs dazzled by position and publicity; it requires deep knowledge of the business of the corporation, insight into the potentially perverse effects of financial incentives, time, capacity, and courage to question management's assumptions and obfuscations, and ethical discipline.
Salter goes beyond previous books by proposing practical recommendations (regarding board oversight, financial incentives, and the maintenance of ethical discipline) for preventing future disasters. Salter has produced a very readable, comprehensive analysis of the social pathologies and administrative failures that led to Enron's implosion.
- 544 pages
- 6-1/8 x 9-1/4 inches
- Harvard University Press
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