End of Enron trial is just the beginning

With convictions bringing closure to the Enron trial, PR industry braces for the inevitable lasting impact

With convictions bringing closure to the Enron trial, PR industry braces for the inevitable lasting impact

If, at some level, we the people were a little loath to see the Enron trial end, it may have been because as long as Ken Lay and Jeffrey Skilling were still presenting their defense, it seemed faintly possible that the scandal was not really as big as it seemed to be - that fraud did not need to define an entire era of corporate conduct.

But the trial inevitably wrapped up, the executives were convicted, and the corporate world seems determined to forge ahead. The ultimate lessons of Enron have not yet been written in stone, but a wide range of PR practitioners say that the legacy of the fraud and consequent trial will have concrete impacts on the way they do their jobs.

Perhaps the most obvious changes will have to come in the financial and investor relations arena. Since the wave of corporate scandals began to break years ago, organizations like the National Investor Relations Institute (NIRI) have been focusing on promoting codes of ethics, which have always barred egregious deception and emphasized transparency to shareholders. NIRI chairman Maureen Wolff-Reid says via e-mail that the prominence of Enron's collapse should lead to more assertive IR officers.

"IROs should view the Enron situation as an opportunity to elevate their role as their company's corporate conscience," she says. "IROs must be vigilant in identifying potential red flags, have the confidence to engage management in frank discussion of the issues, and be unwavering with recommendations."

Somewhat less clear is the way that the case will eventually play out in the public affairs world. When the scale of Enron's fraud first emerged, blanket calls for honesty and reform in the boardroom were the norm; now that the main culprits have been convicted, though, it will be telling to see whether that zeal for reform was real or just boilerplate to be spouted until the case blew over.

In fact, the business lobby may decide that now that Lay and Skilling have been convicted, the time is ripe to push for reform of post-Enron laws like Sarbanes-Oxley, which would have been unseemly before the case was settled.

"Momentum is building in Washington for a reconsideration of Sarbanes-Oxley," says Richard Mintz, a partner at Brunswick Group in Washington, DC. "[That] policy was all made in a furious moment after the scandal broke... the pendulum has swung too far."

Though many corporate clients would love to change some of the law's onerous reporting requirements, the Enron case may actually have the effect of solidifying the law because it is seen in the public's mind as playing a role in the conviction of the bad guys, notes Qorvis Communications MD and Washington veteran Stan Collender. He says the verdict "is going to give a boost to those who don't want to have changes" in the law and predicts that any Sarbanes-Oxley reform efforts are "dead in their tracks until next year."

The PR community can take heart, however, in the fact that Enron's communications head, Mark Palmer, actually came out of the ordeal with his reputation intact. Palmer, who did not return calls for this story, was portrayed by reporters as a man who tried to stick to the facts and tell the truth as best he could. In books about Enron, the communications team is depicted "as being the people of conscience, representing the shareholders and other stakeholders at the table," notes Mintz. "They were dismissed."

In the final calculation, the Enron trial may be a testament to the power of reputation. Lay worked for years to build his own reputation in charitable, political, and business circles, only to see it all crumble in the end. Reputation counselor Mike Paul, president of MGP & Associates PR, points out that Lay, the son of a preacher, came out of the courtroom incongruously quoting scripture. "The one line I have for him," says Paul, "is, 'Thou shalt not steal.'"

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