On the evidence of critics’ three principal reactions to the Enron scandal, little has changed over the years:

1. Tsk-tsk. Most liberals responded to Enron with stern rhetoric -- and wildly insufficient proposals.

For example, the New Republic’s latest anti-Enron editorial calls for adding more staffers to the Securities and Exchange Commission! And Business Week’s latest 5,000-word scold calls for making corporations produce quarterly reports within 30 days rather than 45. A giant step for mankind!

2. Mao-mao. For radicals, Enron is just further proof that the corporate world is inherently corrupt and evil.

“It’s the system, stupid!,” proclaimed The Nation on one of its recent anti-Enron covers. “The Enron scandal provided a rare public window into the depth of the corruption of the ruling institutions of the suicide economy,” pronounced anti-globalist leader David Korten in an important online document (www.pcdf.org/Living_Economies/ II_Empire.htm).

You can guess what kinds of measures the radicals have in store for corporations. The Program on Corporations, Law & Democracy (“POCLAD”), one of the most prominent anti-corporate NGOs, is now calling for “banning corporations utterly from . . . charitable giving”; “prohibiting corporations from all discussion and debate about public policy”; and “denying corporations the privilege of owning other corporations.” That’ll fix ‘em!

3. Woo-woo. Liberal and radical thinkers are at least attempting to confront the Enrons of the world. Transformational thinkers are envisioning fantasy worlds in which corporations as we know them have been eliminated, people’s values are largely in synch, and all of us are above average.

In his recent book Moving Forward, Michael Albert -- long-time editor of Z Magazine -- imagines an economy that would engage in national but “decentralized” economic planning via “workers’ and consumers’ councils.” And in a recent online document, “The Path to Living Economies,” members and fellow travelers of the Social Venture Network -- most of them rich or well connected to foundations -- envision such measures as alternative money systems, barter, “mutual aid,” maximum local self-reliance, community-scale businesses, “cooperative forms of organization,” and matriarchal forms of organization (www.svn.org/initiatives/fall2001.html, then click on the title of the document).

"Culturally relevant" reforms

Fortunately for us all, a fourth kind of corporate critic has stepped forward during the Enron affair. Call these new kids on the block the “visionary realists.”

Like liberals, visionary realists are comfortable with the institutions that have gradually evolved in this country over the last two centuries, including limited liability corporations, representative democracy, the money system, and the stock market. They’d rather improve those institutions than waste precious time and energy trying to replace them. (That’s the “realist” part.)

However, like the radicals, visionary realists are committed to getting at the roots of our problems. And like the transformationalists, they’re committed to moving toward a galvanizing vision -- albeit a real-world vision that would make actually existing corporations delightful places to work and appropriate places from which to serve society. (That’s the “visionary” part.)

Put their ideas together and you come up with something like this:

-- Corporate culture was at the heart of the Enron debacle. “Capitalism” or the “corporate form” was not (see Part I below).

-- You can reform corporate culture directly, by bringing in consultants (see Part II below).

-- At the same time, you can reform corporate culture indirectly, by passing laws that don’t “punish” corporations, as POCLAD’s would, but that contribute to steering corporate culture in the right direction (see Part III below).

Just as the radicals of the 1960s put forward the concept of “non-reformist political reforms,” so visionary realists seem to be putting forward a concept of “culturally relevant corporate reforms.”

PART I: ENRON'S APPALLING CORPORATE CULTURE

Enron was not a happy place at which to work.

Some observers may have been fooled, some of the time, by the patina of New Age gobbledygook. Enron sponsored one of the most ostentatious display booths at “Windpower 2001,” the annual conference of the American Wind Energy Association.

And one of the noblest corporate documents of the year 2000 was Enron’s “Corporate Responsibility Annual Report,” a gorgeous 32-page booklet filled with pictures of trees, leaves, baby humans, baby cheetahs, doves, cranes, and a smiley Ken Lay.

“We will work to foster mutual respect with communities and stakeholders who are affected by our operations,” the document blithely declared. “[W]e treat others as we would like to be treated ourselves” (www.enron.com/corp, then enter “ethics” in the search box).

Beneath the surface, though, greed, arrogance, intimidation, and fraud held sway.

"Unabashed greed"

Enron embodied an “ethos of unabashed greed and self-aggrandizement,” says Harvard Medical School psychiatrist John Mack.

Top executives routinely took home tens of millions of dollars a year -- even after it became clear that the company was in trouble. And the greed wasn’t confined to the top. One executive told Fortune Magazine that Enron traders were afraid to go to the bathroom because the trader sitting next to them might use information off their screen to trade against them.

There was a maniacal focus on short-term profit. TV monitors throughout the Enron building displayed the stock price at all times! In a bitter e-mail to Ken Lay d. August 29, 2001, Enron energy trader and “deal person” Margaret Ceconi complained, “Enron Energy Services only manages quarter to quarter. They are reactive, not proactive. . . .” (www.house.gov/commerce_demo- crats/press/107ltr131.htm, then click on “10-page e-mail”).

Arrogance was equally pervasive. “Enron is a very arrogant place with a feeling of invincibility,” former Enron Vice President Sherron Watkins told the House Oversight and Investigations Subcommittee (see transcript at www. nytimes.com/2002/02/14/business/15 ENRON-TEXT.html). A banner in Enron’s lobby proclaimed, “THE WORLD’S LEADING COMPANY.” An in-house spoof video made in 1997 (and later leaked to the Wall Street Journal) recounted how in the year 2020 Enron was elected “the world’s first global governing body.”

You rarely find arrogance without intimidation, and Enron proved no exception. “Mr. Skilling and Mr. Fastow are highly intimidating, very smart individuals,” Ms. Watkins told the Subcommittee, “and I think they intimidated a number of people [including accountants and lawyers] into accepting some [financial] structures that were not truly acceptable.”

Enron’s annual performance review system institutionalized the intimidation. Each year, over 400 managers and vice presidents were ranked by 20 key executives. The top 5% got significantly larger bonuses (and stock option grants) than the next 30%, and so on down the line.

How did Enron managers and vice presidents get to the top? “You don’t object to anything,” one former Enron executive told Business Week. “The whole culture at the vice-president level and above just became a yes-man culture.”

In a culture like Enron’s, fraud is almost inevitable. That’s why it’s misleading for the media to focus on a few “bad men,” or to neglect to trace the fraud back in time.

Former Enron trader Margaret Ceconi (cited above) made it clear that many employees knew of the fraud and did nothing. “Enron Energy Services has knowingly misrepresented [its] earnings,” she wrote in her underreported-on e-mail. “This is common knowledge among all the EES employees, and is actually joked about” (italics added - ed.).

At least two reputable sources refute the common belief that the fraud was a panicked company’s response to recent economic setbacks. According to a story in the New York Times, the president of Enron Global Power met with Ken Lay in 1995 and “recounted assertions of accounting irregularity swirling within Enron” (Feb. 20).

And according to feminist and Columbia Journalism School professor Marie Brenner, “The aura of fraud permeated Enron from its inception in 1983, when the legacy and corporate style of Michael Milken [who helped Enron raise its start-up funds] were imprinted on Lay and his company” (Vanity Fair, Apr. 2002, italics added).

Even Enron’s own Special Investigative Subcommittee reported -- after Enron had gone belly-up -- that Enron had generated “a culture that appears to have encouraged pushing the limits.”

Beyond the "big lie"

One of the great constants of American politics is the “big lie.” Every couple of years, extremists on the far left or far right will begin repeating the same untruth so often -- and in so many different contexts -- that eventually many good people will assume that it’s true.

In the 1990s, a new Big Lie began to arise on the far left -- the idea that it’s illegal for American corporations to operate on any basis other than by maximizing short-term profit for shareholders.

You can find traces of that Big Lie in the writings of David Korten, in Charles Derber’s Corporation Nation (1999), even in the excellent book by Marjorie Kelly reviewed in RAM #19-A.

If the Big Lie were true, then all corporations in the U.S. would sooner or later end up like Enron, since all would be under a legal imperative to “behave like cancers [and] maximize financial returns to absentee owners without regard to the consequences for people or planet,” as Mr. Korten puts it.

In the real world, though, there’s nothing legally binding about the theory of shareholder wealth maximization. As corporate law professor and Radical Middle advisor Lewis Solomon explains in his book Corporations (3rd ed., 1999), the theory of shareholder wealth maximization is just that -- a theory. It has never been written into black letter law.

If any reader of this article can find even one final court decision from the last 50 years holding that directors cannot run a corporation from the perspective of what they sincerely consider to be the long-term, broad-gauge (as distinct from short-term, narrow-gauge) interests of the shareholders, then I will be happy to literally eat these words -- and announce my Happy Meal on our website.

Others would also have to eat their words. For example, in his extraordinary book The End of Shareholder Value (2000), management consultant Allan Kennedy asserts that “shareholder-value-driven managers” are recklessly “mortgaging companies’ futures to achieve a higher stock price now.”

So far as Mr. Kennedy is concerned, such behavior is not only not legally mandated, it’s practically insane. “Future generations of investors, customers, and employees will pay the price,” he says.

Mr. Kennedy -- co-author of the first important book about corporate cultures (Corporate Cultures, 1982) and a consultant at prestigious McKinsey & Company before striking out on his own -- spends his days in the corporate trenches, trying to convince corporate managers to jettison the idea of maximizing shareholder value in favor of the idea of “building and sharing wealth.”

“[B]oth ‘building’ and ‘wealth’ imply something lasting,” he says.

PART II: ALTERING CORPORATE CULTURE VIA CONSULTANTS

Beneath the radar of the national media, which focuses almost exclusively on “politics” narrowly defined, many visionary realist consultants like Mr. Kennedy have been trying to convince corporate managers to take a broad-gauge view of their companies.

In the post-Enron world, their efforts couldn’t be more relevant.

"Articulate a core ideology"

Consultant James Collins shares his secrets in Built to Last (1994, with Jerry Porras) and Good to Great (2001), two of the best-selling business management books of our time.

According to Mr. Collins, a teacher at Stanford Business School before turning to consulting, the impulse to seek “More Than Profits” is one of the eight “successful habits of visionary companies.”

“Contrary to business school doctrine,” he writes, “we did not find ‘maximizing shareholder wealth’ or ‘profit maximization’ as the dominant driving force or primary objective through the history of most of the visionary companies.

“They have tended to produce a cluster of objectives, of which making money is only one -- and not necessarily the primary one.”

One of Mr. Collins’s key pieces of advice to CEOs: “Articulate a core ideology.” Write down a statement consisting of the organization’s “essential and enduring tenets” and “fundamental reasons for existence beyond just making money” -- and then publicize it throughout the corporation and around the world.

A core ideology can “serve to guide and inspire the organization for years,” Mr. Collins says. But it has to come from executives’ “gut” -- it can’t come from the PR department or the social responsibility backwater, like it did at Enron.

Don't use pay to divide people

Just as passionately as Mr. Collins, consultant Terrence Deal argues that the quest for short-term profits is corrosive and self-defeating.

“The individuals who founded and managed . . . exemplary companies . . . were in business for more than just making money,” he says in his important book The New Corporate Cultures (1999, with Allan Kennedy).

But those same individuals were also “hardheaded businessmen,” he adds, and the task of every good consultant is (or should be) to help executives achieve “a balance between hard management -- designing a good product, setting the right price, and pursuing the right strategy -- and soft management -- ensuring that employees are connected and motivated to give their best.”

One of his most important pieces of advice in that regard: Don’t do what Enron did and erect a complicated incentive compensation scheme based on performance reviews.

“The key cultural rule about compensation is fairness,” he says. “Differences in compensation levels for people performing comparable kinds of work are divisive [and] anathema to requirements for building a strong culture. . . .

“Differences arising out of variable incentive terms like executive bonus and stock option plans are even more difficult . . . to justify. Unless the compensation scheme’s objective is to promote an ethic of ‘to the winner belongs the spoils,’ such plans are inevitably disruptive to cultural cohesion.”

Foster emotional competence

Most of us think of Daniel Goleman as the New York Times correspondent who wrote the global bestseller Emotional Intelligence (1995); few realize he went on to become one of the most innovative management consultants in the U.S.

In his books Working with Emotional Intelligence (1998) and Primal Leadership (2002), he tells corporate managers what will happen to their companies if they fail to develop leaders with the capacity for “recognizing [their] own feelings and those of others [and] managing emotions well in [them]selves and others.”

What will happen is their companies will turn into Enrons.

Companies whose “profitability is won at the price of violating” members’ values and feelings will pay dearly, Mr. Goleman says.

To build healthy companies, Mr. Goleman would have corporations provide what he calls “Emotional Competence Training” to all their employees, top to bottom. Conceivably even board members and affiliated professionals (auditors, lawyers) could be included.

The training would be implemented by “training officers,” who’d work with people one-on-one over the years.

Among the services these training officers would provide:

-- “Assess [managers and employees] for readiness, and if someone is not yet ready, make cultivating readiness an initial focus”;

-- “Spell out the specifics of [each emotional] competence and offer a workable plan to get there”;

-- “Design into the change plan feedback from supervisors, peers, friends”;

-- “Help people use lapses and slip-ups as lessons to prepare themselves better for the next time.”

Keep at it!

John Kotter, the Matsushita Professor of Leadership at Harvard Business School, may be the most respected management consultant in the U.S.; and beginning with his book Corporate Culture and Performance (1992, with James Heskett), he’s been a leading proponent of the view that certain kinds of corporate cultures -- namely, “adaptive” cultures -- are essential to highly successful companies.

According to Mr. Kotter, unadaptive cultures are very much like Enron’s -- e.g., “Most managers care mainly about themselves.”

By contrast, in adaptive cultures, “Most managers care deeply about customers, stockholders, and employees. They also value people and processes that can create useful change.”

Mr. Kotter’s book Leading Change (1996) is a bible for people like Marc Sarkady, the political-activist-turned-consultant we interviewed in RAM #19. It instructs consultants in how to help corporations build adaptive cultures step by step. Aspects of some steps:

-- “Putting together a group [within the corporation] with enough power to lead the change”;

-- “Using every vehicle possible to constantly communicate the new vision and strategies [within the firm]”;

-- “Encouraging risk taking and nontraditional ideas, activities, and actions”;

-- “Articulating the connections between new behaviors and organizational success.”

Underlining all of Mr. Kotter’s work is the refrain, DON’T LET UP. “After watching dozens of major change efforts in the past decade,” he explains, “I’m confident of one cardinal rule: Whenever you let up before the job is done, critical momentum can be lost and regression may follow.

“Until changed practices attain a new equilibrium and have been driven into the [corporate] culture, they can be very fragile. Three years of work can come undone with remarkable speed!”

PART III: ALTERING CORPORATE CULTURE VIA LEGISLATION

Altering corporate culture via consultants can take us only so far. After all, some corporations don’t want to change; and much poisonous corporate behavior is facilitated by inappropriate laws or condoned by the absence of laws.

Now that Enron’s troubles have gone public, the media is awash in public policy proposals. However, most would not affect what most pressingly needs to change -- corporate culture itself.

The liberal proposals cited earlier -- e.g., to increase staffing at the SEC -- are classic examples of reforms that would not affect corporate culture.

And the radical proposals cited -- e.g., to ban corporations from charitable giving -- are merely punitive. If they’d affect corporate culture at all, it would probably be for the worse!

You can recognize the visionary realists in the Enron policy debate. They’re the ones coming up with policy proposals that would alter corporate culture for the better.

Altering managers' behavior

Enron’s top managers were dishonest and self-serving -- to say the least!

Among other things, they created over 3,000 bogus off-the-books “partnerships” to conceal mounting losses, and they provided themselves with obscenely generous stock option grants (in the year 2000 alone, Mr. Lay realized $123 million from exercising stock options; Mr. Skilling, $62 million).

Culturally, the issue is how to make managers feel more accountable. The law is good at that.

In a speech to the Economic Club of Chicago (Feb. 25), Paul O’Neill, a former CEO turned Treasury Secretary, proposed that corporate executives be held personally responsible not only for intentional fraud -- the traditional legal standard (and virtually impossible to meet) -- but also for failing to stop corporate wrongdoing out of negligence.

Mr. O’Neill also wants to force executives to certify the accuracy of their companies’ financial statements. And he wants to keep them from being able to insure themselves 100% against legal claims.

Mike France, Business Week’s great securities law writer, immediately grasped the implications for corporate culture: “It would . . . mak[e] executives who mislead shareholders bear some of the pain caused by their misdeeds. That’s all too rarely the case these days” (Mar. 11).

Another culturally pregnant proposal comes from Warren Buffett, CEO of Berkshire Hathaway: Force stock option grants to be recorded as a corporate expense. As it is now, they’re expense-free!

(“Essentially what you do is you issue stock options to reduce compensation expense, and therefore increase your [company’s apparent] profitability,” former Enron CEO Jeffrey Skilling brazenly told the House Oversight and Investigations Subcommittee, citation above.)

“If options aren’t a form of compensation, what are they?” Mr. Buffett thundered in the Wall Street Journal (Apr. 9). “If compensation isn’t an expense, what is it?”

Forcing executives to list their stock option grants as a corporate expense should induce them to be less greedy. An even more culturally relevant approach to options comes from management consultant Allan Kennedy (cited above).

“Make any stock options or grants awarded [to executives] vest only some period of time, let us say five years, after their service in office is completed,” he says. “[That] will in one stroke force managerial interests to focus on the long-term welfare of the company,” since executives won’t be able to cash out toward the end of their terms as did Lay and Skilling.

Altering directors' behavior

Enron’s 14-member board of directors was full of high-powered “stars.” It was also laughably inept.

The board meeting that approved Enron CFO Andrew Fastow’s proposal to aggressively move debt off the balance sheet lasted one hour (New York Times, Feb. 22). Many abuses at Enron could have been prevented had board members been less eager to rubber-stamp executives’ policies, socialize, and fly home (Washington Post, Mar. 8).

Allan Kennedy -- drawing on the work of several other visionary realist consultant-professors (especially Dan Bavly and Michael Porter) -- has developed a series of reforms designed to alter the very culture of corporate boards.

He’d cut most board sizes to 6-8 people. That would ensure their seriousness of purpose.

He’d ban CEOs of large corporations from serving on the boards of other large corporations, and he’d limit the number of boards people could serve on to three. That would protect boards “against the inbreeding that now affects the corporate scene,” and force them to reach further afield for potential board members, thus expanding “the range of experiences available to them.”

He’d mandate adding 2-3 members to the board (still keeping its total size to 6-8) “to represent the interests of major outside constituencies, suppliers, communities, customers, and/or employees, [depending on] which are most important given each company’s unique position. . . . The presence of such outside advocates will play a major factor in curbing some of the recklessness that seems to have overcome corporations.”

Most important of all, perhaps, Mr. Kennedy would give board members real jobs!

Instead of having board members simply ratify the decisions of management, he’d charge boards with “responsibility for developing targets for the company -- targets predicated on the company’s remaining viable over the long term -- and require an annual report from the board on the progress the company has made in moving toward these goals.”

In other words, he’d have boards define their principal task as “[e]nsuring the long-term sustainability of the enterprise.”

To help boards perform this vital task, he’d require all corporations to provide “dedicated, professional staffing” for boards. Board staff should have “full access to anything that goes on in the company” and should even be chartered to “conduct special investigations, as requested by individual board members.”

Altering accountants' behavior

One of the most outrageous aspects of Enron’s collapse is that Enron’s accountants were “cooking the books” since at least the early 1990s, and Enron’s auditor -- Arthur Andersen & Co. -- did nothing to stop the shady practices, meanwhile collecting millions of dollars a year from Enron not only in auditing fees but in consulting fees for related services (see esp. Marie Brenner in Vanity Fair, Apr. 2002, and Bethany McLean in Fortune, Dec. 24, 2001 & Feb. 4, 2002).

Vindictive legislation is fun to dream up. For example, Rep. Dennis Kucinich would create an “FBA” to parallel the FBI, a Federal Bureau of Audits to, in his words, “police America’s books. . . . The Enron scandal suggests we need cops who carry calculators instead of firearms!” (www.house.gov/kucinich/ press/pr-020227-federalizingcorp.htm).

Legislation that can alter the culture of the accounting profession might do more actual good, however.

First, as recommended by Norma Garcia, senior attorney with Consumers’ Union, we can require that audits publicly “disclos[e] the use of aggressive accounting techniques, and of judgment calls made in preparing financial statements.” That should induce accountants and auditors to take more responsibility for their decisions (www.consumersunion.org/finance/accountwc202.htm).

Second, we can “require [auditors] to state whether the client’s financials would provide a reasonably informed reader with an understandable picture of the company’s operating results and overall condition” (Louis Lowenstein, American Prospect, Mar. 25). That should boost many auditors’ sense of pride in their work.

Third, we can prohibit auditors from providing most or all non-audit services (such as management consulting and tax consulting) to their audit clients. In other words, we can induce accountants to see themselves exclusively as accountants again.

Paul Volcker, the 75-year-old former Federal Reserve chairman, is the most prominent proponent of a total ban. He’s convinced that the rise in consulting income from companies like Enron is the main reason accountants are lax in auditing a client’s books (New York Times, Mar. 15).

Fourth, to induce accountants to feel more account-able to the public, a new self-regulatory organization should be set up.

As it is now, accountant self-policing is a mess. Several groups are supposedly in charge, all under the friendly auspices of the American Institute of Certified Public Accountants (AICPA), the industry trade group. Not surprisingly, no Big Five accounting firm has ever been punished under this system (see Nanette Byrnes’s expose in Business Week, Jan. 28).

The outlines of a viable self-regulating organization were presented to the U.S. Senate Committee on Banking March 19 by Charles Bowsher, a heroic accountant-turned-bureaucrat-turned-whistleblower (he engineered the termination of his toothless accounting regulatory body, the Public Oversight Board).

The new organization should be called the Independent Institute of Accountancy (IIA), said Mr. Bowsher, because it would be “totally independent of the AICPA, the Big Five, and other firms.” Its seven members would be appointed by government representatives, and if Aulana Peters (Bowsher’s former colleague at the POB) has her way, not one of the seven could be affiliated with any accounting firm or the AICPA.

The IIA should “exercise oversight for all standard setting for accounting [and] auditing,” Mr. Bowsher testified. Instead of continuing with peer review among large accounting firms, “IIA employees” would review firms’ work, and “no activities of a firm would be off limits to IIA reviewers and . . . these reviews could take a systemic, in-depth look at a firm’s systems, policies, procedures, and operations.”

The IIA would also be charged with overseeing “continued professional education for those in the profession.”

And by the way, all funding “would be provided through fees imposed on public corporations” (www.senate.gov/ %7Ebanking/02_03hrg/031902/bowsher.htm).

Perhaps the most culturally relevant policy proposal of all comes from American University professor and former Arthur Andersen & Co. accountant Ralph Estes. He’d have the SEC mandate that corporations disclose a whole new set of statistics and information to the public on an annual basis (to be audited by CPAs along with the financials) -- information of special relevance to customers, workers, and communities.

For example, he’d have corporations annually reveal all product liability claims brought by consumers, all incidents of carpal tunnel syndrome reported by workers, and how much styrofoam packaging was added to the community’s waste stream.

Thus Mr. Estes’s proposal would turn CPAs into facilitators of corporate social responsibility (see esp. Estes, Tyranny of the Bottom Line, 1996, and www.stakeholderalliance.org).

Altering lawyers' behavior

Enron’s lawyers were as supine as its accountants.

Every single one of Enron’s in-house lawyers, along with its prestigious outside law firm (Vinson & Elkins), failed to identify serious conflicts of interest -- failed to act on information that should have raised concerns about Enron’s accounting -- or actually helped construct the web of partnerships that Enron used to fraudulently conceal its debt (see esp. Business Week, Jan. 28, and New York Times, Mar. 15).

Even Michigan Rep. John Dingell, one of the least idealistic souls in Congress, was moved to declare that the Enron lawyers’ behavior made him feel ashamed of being a lawyer (see House Oversight and Investigations Subcommittee transcript, cited above).

How to change the legal culture that made such behavior possible?

One promising route is suggested by Stanford Law School ethics professor Deborah Rhode: Change the ethics rules governing lawyer behavior!

“Proposed early drafts of the Model Rules [of Professional Conduct, on which all state rules are based,] would have required lawyers to reveal . . . crimes or frauds in which the lawyers’ services had been used[, or] violations of the law by organizational clients,” she says in her well-received book In the Interests of Justice (2000, emphasis added).

Ms. Rhode is not naive, which is why she also wants courts to “allow wrongful discharge claims where attorneys are fired for reporting, or for refusing to participate in, illegal conduct.”

By changing the ethical rules and backing honest lawyers up with legal remedies, the hope is that more lawyers will bring their consciences to work with them.

Altering employees' behavior

Everyone knows that many Enron employees lost their life savings because their 401(k) pension plans consisted largely or entirely of Enron stock.

What few media outlets have reported, though, is that many employees were responsible for stuffing their 401(k)s with a lot more Enron stock than they had to.

Even after the stock took its first scary nosedive back in 1997, and rumors of accounting irregularities were swirling, employees kept piling on. Maybe everyone thought Enron would be bailed out if anything untoward happened, like Chrysler was.

According to the testimony of Yale Law School professor John Langbein before the Senate Committee on Governmental Affairs (Jan. 24), Enron’s 401(k) plan permitted an employee to contribute up to 15% of his or her salary, and Enron made a matching contribution of half of that -- entirely in Enron stock.

But an employee “could choose to invest his or her contribution among a menu of options.” It didn’t have to be in more Enron stock. It could have been in leading well-diversified mutual funds (www.senate.gov/%7Egov_affairs/ 012402langbein.htm).

Nevertheless, Enron shares accounted for almost 60% of the total when Enron went belly-up (Newsweek, Jan. 21).

Traditional investment advice is that small investors should (a) always diversify their portfolios, and (b) never invest in the company they’re already dependent on for their livelihoods.

To put the culturally relevant question as delicately as possible: How can employees be induced to use their 401(k) pension plans exclusively to provide for a secure retirement?

One part of a visionary realist answer comes from investment writer Mike McNamee: He’d have corporations provide employees with basic investment education.

“Companies shouldn’t bad-mouth their own stocks,” he says. “But they shouldn’t be able to pitch their stock, either. Instead, they must hammer home diversification” (Business Week, Feb. 18).

Another part of the answer comes from Mr. Langbein (cited above): “[L]et the employer . . . continue to contribute company stock [to 401(k)s, and] continue to get the tax deduction for doing so,” he testified. “But require that the plan fiduciary dispose of [the stock] on the open market within a short period, and reinvest the proceeds in a diversified portfolio.”

A third part of the answer comes from Karen Ferguson, director of the Pension Rights Center in Washington, D.C.: Limit the amount of employees’ own 401(k) contributions that can be invested in company stock.

“The simplest approach would be simply to apply the same 10% limit now imposed on traditional pension plans,” she said before the Senate Committee on Governmental Affairs (Feb. 5). “The Boxer-Corzine bill would apply a higher limit [20%]. . . .

“[Some employees] will view such limits as restrictions on ‘personal choice.’ In fact, limits of this kind would not restrict personal choice. Individuals are free to invest their personal money any way they wish.

“[But] Congress has given 401(k)s special tax treatment [worth approx. $90 billion a year] in order to help people provide for a secure retirement. . . . There is simply no justification for all taxpayers to pay higher taxes, or receive fewer government services, to subsidize what [are] universally acknowledged to be highly risky investment strategies” (www.senate.gov/%7 Egov_ affairs/020502ferguson.htm).

Thus with carrots and sticks, visionary realists would teach employees to be wise investors.

Altering visionary realists' behavior

The aftermath of the Enron scandal has not been inspiring. Liberals and conservatives are twiddling the dials; radicals are plotting revenge; transformationalists are envisioning fantasy worlds that go back to Kropotkin and Saint-Simon.

If this article proves anything, it’s that there’s a large group of people at the radical middle (“visionary realists”) who love and are fascinated by our giant corporate entities, and who are trying very hard to make them better.

What it also shows, though, between the lines, is that such people are largely unconnected to one another at this point in time.