IR may actually benefit from the Enron scandal

The front pages of business sections have been dominated over the past couple of weeks by the start of the Enron trial - not the warm-ups, but the main Lay-Skilling public dismemberment.

The front pages of business sections have been dominated over the past couple of weeks by the start of the Enron trial - not the warm-ups, but the main Lay-Skilling public dismemberment.

The first witness on behalf of the prosecution was Mark Koenig, Enron's former investor relations head. It goes without saying that Koenig will not be winning any "IR Professional of the Year" awards in 2006, but it is equally obvious that he is, for better or worse, the most prominent IR pro in the world at this moment, and will probably remain so throughout the trial.

In spring 2002, months after Enron's financial collapse, the National Investor Relations Institute issued a ten-point set of ethical guidelines for its members as a guide for its practitioners in the new world of corporate scandals. The third point says it all: "I will recognize that the integrity of the capital markets is based on transparency of credible financial and non-financial corporate information, and will to the best of my ability and knowledge work to ensure that my company or client fully and fairly discloses this important information."

Koenig did the exact opposite of this. He manipulated financial figures to fool analysts and investors and enrich corporate management. He has admitted to his acts, and he faces sentencing in May. His testimony has already set the stage for a damning procession of fellow Enron employees who can each testify to Skilling and Lay's hands-on involvement in the conspiracy.

Ultimately, Koenig's time in the spotlight will serve the IR profession well. Enron's fall from grace tarnished IR - perhaps unfairly - in the public mind. It undermined confidence in IR from Wall Street to the dusty streets of Texas. But the profession's reaction to Enron has been a push toward greater transparency, and that will lead to a rebirth of trust long after Lay, Skilling, and Koenig have traded their suits for prison garb.

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