Professors draw on Enron for lessons

NEWARK, N.J. -- According to the syllabus, the Thursday morning class in Conklin Hall was supposed to focus on Chapter 4, "Ethics in the Marketplace."

Instead, the students in Room 346 spent the time considering material that hasn't yet made it into business textbooks -- the collapse of Enron.

"Ethics in the marketplace is clearly going to be a very relevant chapter for the Enron story," professor Robinson Lilienthal told the undergraduates in his class at Rutgers University's Newark campus.

Lilienthal 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 in Lincoln. "Every day something new is happening and it lends a certain air of excitement to discuss it."

Quickly into class

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. ... No. 4 is managers and directors, fiduciary duty and responsibility -- need I say more?"

Teaching accountants

In the meantime, Buchanan and other professors have already 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 financial accounting class of 200 students, a required course for business majors. Lawrence uses the articles to emphasize the essential role accountants play in delivering accurate information to investors, and the intricacies of judgements they must make.

At NYU, the faculty has organized special forums including one Feb. 7 in which professors from the accounting, finance, and business ethics departments, along with a former judge, gathered as a panel to discuss the case.

The University of Oregon recently hosted partners from the regional office of Arthur Andersen, who spoke to more than 40 accounting students about the controversy, taking questions and trying to allay concerns about the firm. But faculty have also 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."

He said aspects of the Enron case will almost certainly be the focus on dissertations by Ph.D. students by next year.

At Rutgers, Lilienthal's business ethics class has divided into 15 groups, with each focusing on a specific aspect of the case. There's a group researching Enron's off-the-books partnerships, another looking at the workings of its 401(k) plan. The groups are assigned to present their findings in a campus auditorium at the end of the semester, in lieu of a final exam.

Studying Enron, even as the controversy continues to unfold, offers a chance to learn something beyond the textbooks, students in the class say.

"It's valuable now because we can be objective. You can make your own judgment," said Malaika President, a junior majoring in finance who is part of a group studying the role of corporate whistleblowers in the Enron case. "In 15 years, when it's in a book, it's going to be subjective."