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The Honolulu Advertiser
Posted on: Sunday, March 17, 2002

Enron collapse teaches lessons

Advertiser Staff and News Services

On the desk of University of Hawai'i professor David Bess, former dean of the UH College of Business, sit two stacks of papers from undergraduate students writing about business ethics.

Bess expects many of them to focus on the collapse of Enron.

In both his graduate and undergraduate courses, Bess has focused on Enron and its troubled accounting firm, Arthur Andersen, to talk about who had responsibilities within the organizations. He also elicited students' reactions to some of the statements that executives were making in the press.

"Virtually everything that we do, especially at the graduate level, involves integrating theories and concepts with what's going on in today's world," Bess said.

Bess is not the only one drawing on the Enron debacle for teaching material. Professors and students in business schools around the country have quickly seized on the tale of the energy giant's collapse as a compelling real-life lesson, useful for examining everything from accounting standards to business ethics.

"One reason we're using Enron so much is it's one of the few times you can throw out an actual case that everyone here knows about," said Janice Lawrence, an accounting professor at the University of Nebraska. "Every day something new is happening, and it lends a certain air of excitement (to classes) to discuss it."

Business professors at the university typically leave time in each semester to weave in business events that unfold in real time.

Nick Ordway has talked about Enron and Arthur Andersen in his executive MBA, business law and accounting law classes.

"It's difficult to continually provide cutting-edge information to our students, but that's our job," Ordway said. "We want to incorporate any immediate developments into our course study."

Ordway is particularly interested in focusing on Enron and Arthur Andersen because "we want to make sure students get the message that this is wrong."

Enron is the newest in a long line of corporate controversies that have become the focus of classroom case studies, including the Equity Funding scandal of the early 1970s, the environmental disaster caused by the Exxon Valdez in the late 1980s and more recently the antitrust litigation against Microsoft.

But the speed and scope with which Enron has inserted itself into the classroom is unusual, professors say. The reason, many say, is that Enron is a vortex for many of the most compelling and complex issues in business: corporate governance; executive compensation; the roles of auditors, accountants and analysts; financial disclosure; the responsibility of a company to its employees; political contributions by business.

"The thing about the Enron case is that it is so multifaceted," said Bruce Buchanan, a professor of business ethics at New York University's Stern School of Business. "There are aspects of it that are either uniquely gray or uniquely horrible."

Buchanan, who co-edits a text of corporate case studies used by graduate students in a required course on business ethics, said Enron happened too late for the current edition. But the company's meltdown is bound to be included in multiple chapters of editions for years to come.

The first chapter "is truth and disclosure. Well, that's where the whole thing started with Enron," he said. "No. 3 is about whistle-blowing. I'm sure (Enron executive) Sherron Watkins will make that ... next year. No. 4 is (about) managers and directors, fiduciary duty and responsibility — need I say more?"

In the meantime, Buchanan and other professors already have woven the topic into their current classes.

At Nebraska, Lawrence has been clipping newspaper and magazine articles about Enron and putting them on the overhead projector in her accounting class of 200 students, a course required for business majors. She uses the articles to emphasize the essential role accountants play in delivering accurate information to investors and the intricacies of judgements they must make.

The University of Oregon recently had partners from the regional office of Arthur Andersen speak to more than 40 accounting students about the controversy, taking questions and trying to allay concerns about the firm. But faculty also have drawn on the case to lighten up a serious topic.

"One of my marketing colleagues came by my office and asked whether, in accounting, do we teach shredding and deleting," said Dale Morris, a professor of accounting. "I had to pass that on to my students."

Advertiser staff writer Dan Nakaso and the Associated Press contributed to this report.