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alignment was itself the problem. When we define business success as maximum share price, a soaring price makes it impossible to see problems. What could be wrong? The business is succeeding beyond anyone's wildest dreams. We fail to recognize that managing a corporation with the single measure of share price is like flying a 747 for maximum speed. You can shake the thing apart in the process. It's like a farmer forcing more and more of a crop to grow, until the soil is depleted and nothing will grow. It's like an athlete using steroids to develop more and more muscle mass, until the body itself is destroyed.

The problem with Enron was not a lack of focus on shareholder value. The problem was a lack of real accountability to anything except share value. This contributed to a kind of mania, a detachment from reality. And it led to a culture of getting the numbers by any means necessary.

If maximum share price is an irresponsible management theory, and deregulation a flawed economic theory, there are better theories already at hand. It's intriguing that the movie "A Beautiful Mind" is up for Academy Awards during the Enron scandal -- because its protagonist John Nash won a Nobel Prize for proving Adam Smith's theory was incomplete. Self-interest alone can lead to disaster for all, Nash demonstrated mathematically. Self-interest coupled with concern for the good of the group is most likely to lead to the benefit of all.

Nash's mathematics revolutionized "game theory" and is central to the "evolutionary economics," which emphasizes that cooperation is as vital as competition. It's a more evolved theory than the invisible hand, more appropriate for an economy that has become more humane than the aristocratic world of Smith.

Viewed through the lens of Nash's theory, the Enron scandal can lead us to question our fundamental assumptions. Do we really believe corporations are only about making money? Or do we care how they make their money? Do we really care about ethics and public accountability?

If we do, then we need real accountability. We need actual sanctions for ethical infractions, not a flimsy ethics code that the Enron board could waive on a moment's notice, as it did in allowing Fastow to earn millions from off-balance sheet partnerships.

We need checks and balances not only on the side of shareholder value, but on the side of public accountability. That means changing the system design. What a new design might look like is explored at length in The Divine Right of Capital, but the concept most appropriate to Enron is the idea of graduated penalties for unethical conduct. Firms caught cooking the books, for example, might lose all government contracts. A federal contractor responsibility rule could prohibit the government from contracting with egregious corporate law-breakers. Such a rule was put in place by President Clinton as he left office, but was overturned by President Bush. It should be reinstated and made permanent through legislation.

If Enron had faced the prospect of losing millions in revenues, it wouldn't have waived its ethics rules so blithely. Watkins might have been empowered to approach the board, and the board might have been inclined to listen -- since real financial consequences were at stake.

A more serious penalty was suggested by the attorney general of Connecticut, who recommended pulling the license of Arthur Andersen, so it could no longer do business in the state. If all accounting firms � and all corporations -- knew they faced this ultimate sanction, they would be less inclined to push the limits. We would start to see ethics and accountability with real teeth.

The ultimate lesson of Enron is that effective system design requires our conscious choice. It cannot be left to some invisible hand. It's time we sent that creepy appendage back to the grave where it belongs.

Marjorie Kelly ([email protected])

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Wreckers Unite

Labour has become the workers' enemy. It's time the unions stopped funding it

George Monbiot. Published in the Guardian 19th February 2002

State and corporate power are fusing almost everywhere on earth, but in Italy they have condensed into the stocky figure of a single man. Silvio Berlusconi, the prime minister, is worth around pounds10 billion. He has interests in just about every lucrative sector of the Italian economy. His control of most of the private media (through his businesses) and most of the public media (through the government) means that he can exercise a dominion unprecedented in a democratic nation over the thoughts and feelings of his people. He has been convicted for bribery, tax fraud and corruption, but by amending the law has had those convictions overturned and his business activities legalised. His government is sustained by parties which describe themselves as "post-fascist"; he himself has spoken of the "superiority" of western civilisation.

This is the man who is now Tony Blair's closest political ally in Europe. After their meeting on Friday, Sr Berlusconi told the press that "we see eye to eye on all the matters that were raised." Blair added, "some of these old distinctions - left and right - are no longer in my view as relevant as they were maybe 30, 40 years ago." Blair and Berlusconi are now the only European leaders who seem prepared to support a US attack on Iraq. Both men have introduced repressive legislation restricting civil liberties. Both have granted big business the concessions it demands. At the European summit in Barcelona next month, they will be forming an alliance with Jose Maria Aznar, the rightwing Spanish Prime Minister, in the hope of forcing France and Germany to accept new measures demanded by the corporations.

Among their proposals on Friday was the deregulation of employment. "Europe's labour markets," Blair wrote in Italy's Corriere della Sera, "need to be more flexible. Businesses are still encumbered by unnecessary regulation." The paper they published called on member states to introduce "more flexible types of employment contracts"; to replace labour laws with "soft regulation"; and to increase "the effectiveness of public employment services ... by opening this market to the private sector".

This is just the latest means by which Blair has chosen to antagonise workers in the United Kingdom. Last week the steelworkers struggling to keep their jobs here discovered that the government has been helping a foreign company to secure and then to finance the acquisition of the vast steelworks in Romania. The Department of Trade and Industry appears to be about to renew the UK's exemption from the European working time directive, which means that this country will remain the only one in Europe permitting some employers to force people to work more than 48 hours a week. Last year, the official number of deaths at work rose by 32%. For the past four years, the government has promised the immediate introduction of new safety laws and a new offence of corporate killing. Neither has materialised.