The collapse of Enron gives new urgency to the corporate social responsibility debate. Managers like to stress the difficulties of implementing and monitoring a group-wide CSR policy and ensuring that it is followed by staff, including suppliers. Yet the lapses at Enron lay not with some rogue supplier in a developing country, but in the ethical performance of the most senior executives. This was not a failure of management controls on practices down the line – management itself is charged with having behaved irresponsibly.
But the biggest bankruptcy in US history has not just revealed gaping holes in corporate governance – Enron’s board was largely made up of non-executive directors who depended on the chairman and chief executive to tell them what was going on. Nor is it just about the inadequacies of the accounting regime, which apparently allows huge liabilities to be shuffled off the balance sheet. It is also, crucially, about the role of disclosure in building and maintaining trust.
Enron and Kenneth Lay, its former chief executive officer, were models of community involvement. But crucial aspects of the company’s internal operations lay hidden. Many firms have little to hide, yet still disclose as little information as possible. It is not only of social, but also of economic interest if a company has employee health policies in place, so why not publish data on the number of workdays lost through accidents and work-related illnesses? If staff are encouraged to do community work, why not say how many, and for how long? Few companies reveal even such uncontroversial data.
Commercial confidentiality is often cited to justify non-disclosure, but a great deal of CSR data is simply not in this category. The suspicion is that many companies simply don’t know much about their social and environmental impact. They had better start finding out. The calls for greater disclosure are no longer coming solely from shrill pressure groups. Far from increasing risk, disclosure would benefit companies. A leap of faith, certainly – but better to jump than be pushed.