Enron's Ethics
Columbia Law School
The Center for Law and Economic Studies
435 West 116th St.
New York, NY 10027-7201
Working Paper No. 207
Understanding Enron:
It’s About the Gatekeepers, Stupid
John C. Coffee, Jr.
July 30, 2002
This paper can be downloaded without charge from the
Social Science Research Network electronic library at: http://ssrn.com/abstract_id=325240 An index to the working papers in the Columbia Law
School Working Paper Series is located at: http://www.law.columbia.edu/law-economicstudies 1
Understanding Enron: AIt=s About the Gatekeepers, Stupid@ by John C. Coffee, Jr..
What do we know after Enron=s implosion that we did not know before it? The conventional wisdom is that the Enron debacle reveals basic weaknesses in our contemporary system of corporate governance.1 Perhaps, this is so, but where is the weakness located? Under what circumstances will critical systems fail? Major debacles of historical dimensions (and
Enron is surely that) tend to produce an excess of explanations. In Enron=s case, the firm=s strange failure is becoming a virtual Rorschach test in which each commentator can see evidence confirming what he or she already believed.2
Nonetheless, the problem with viewing Enron as an indication of any systematic
*
Adolf A. Berle Professor of Law, Columbia University Law School.
1
As a result, proposals to reform corporate governance through legislation, codes of best practice, and heightened listing standards are proliferating. See, e.g., Tom
Hamburger, ACorporate-Governance Bill Weighed,@ The Wall Street Journal, May
3, 2002 at p. C-10 (discussing proposed AShareholder Bill of Rights@); Kate Kelly,
AStock Exchanges Fortify Watchdog Roles,@ The Wall Street Journal, April 30,
2002 at p. C-1. The SEC has proposed changes in financial reporting, which proposals have encountered mixed reviews. See Gretchen Morgenson,
AInformation Sooner, Yes, But Make It Better Too,@ New York Times, May 5,
2002,
The Center for Law and Economic Studies
435 West 116th St.
New York, NY 10027-7201
Working Paper No. 207
Understanding Enron:
It’s About the Gatekeepers, Stupid
John C. Coffee, Jr.
July 30, 2002
This paper can be downloaded without charge from the
Social Science Research Network electronic library at: http://ssrn.com/abstract_id=325240 An index to the working papers in the Columbia Law
School Working Paper Series is located at: http://www.law.columbia.edu/law-economicstudies 1
Understanding Enron: AIt=s About the Gatekeepers, Stupid@ by John C. Coffee, Jr..
What do we know after Enron=s implosion that we did not know before it? The conventional wisdom is that the Enron debacle reveals basic weaknesses in our contemporary system of corporate governance.1 Perhaps, this is so, but where is the weakness located? Under what circumstances will critical systems fail? Major debacles of historical dimensions (and
Enron is surely that) tend to produce an excess of explanations. In Enron=s case, the firm=s strange failure is becoming a virtual Rorschach test in which each commentator can see evidence confirming what he or she already believed.2
Nonetheless, the problem with viewing Enron as an indication of any systematic
*
Adolf A. Berle Professor of Law, Columbia University Law School.
1
As a result, proposals to reform corporate governance through legislation, codes of best practice, and heightened listing standards are proliferating. See, e.g., Tom
Hamburger, ACorporate-Governance Bill Weighed,@ The Wall Street Journal, May
3, 2002 at p. C-10 (discussing proposed AShareholder Bill of Rights@); Kate Kelly,
AStock Exchanges Fortify Watchdog Roles,@ The Wall Street Journal, April 30,
2002 at p. C-1. The SEC has proposed changes in financial reporting, which proposals have encountered mixed reviews. See Gretchen Morgenson,
AInformation Sooner, Yes, But Make It Better Too,@ New York Times, May 5,
2002,