I tried to restrain myself. What more could be written about Enron and Lay and Skilling in the week of the conviction of the devasted duo? The news dominated most news outlets, although a few were still relentlessly covering the critically important news out of American Idol.

In the end, it was the commentary out of two of my favorite newspapers, The Wall Street Journal and The New York Times, that compelled me to add my few cents. From totally different angles, both used Enron to call into question the efficacy of the Sarbanes-Oxley Act.

To be fair, most of the Wall Street Journal's May 26 editorial, The Enron Verdicts, was pretty darn good. Their concluding paragraph is a classic

"The Enron verdicts are proof, if more were needed, that lying to employees, shareholders and the public about corporate finances is a serious crime that will be punished."

Unfortunately they use the conviction as a foil to revisit one of their favorite issues--how Sarbanes-Oxley is overly burdensome and destroying American competitiveness. So they posit that the conviction of Skilling and Lay "will do more to deter future corporate crime than anything in Sarbanes-Oxley."

Maybe. But Sarbanes-Oxley is demonstrably working now, unless you believe the usually reliable Gretchen Morgenson of the New York Times. I think she was either betrayed by her editors and headline writers, or by her own rhetorical oracle. In a May 28 commentary called "Are Enron's Bustin' Out All Over," Ms. Morgenson states:

"Sorry, pals. Other news from last week showed that the Enron verdicts were, at best, the end of the beginning of this dispiriting corporate crime wave. They were certainly not the beginning of its end."

The "other news" was a recap of the Fannie Mae scandal, courtesy of a 350 page report issued by the Office of Federal Housing Enterprise Oversight. The report is damning. It outlines bad accounting and financial practices, poor controls, a broken culture and a failure of oversight. It contains excellent lessons for all ethics officers. (See Chapter 4, "Corporate Culture and Tone at the Top.") But the report focuses on issues from 1998 to 2003 and into 2004--before Sarbanes-Oxley was fully implemented!

Like most ethics officers, I don't believe Sarbanes-Oxley got everything right. For example, many of the applications of Section 404 have seemed overzealous, and need to be re-calibrated, especially for smaller firms. But contrary to what the Wall Street Journal editors and Ms. Morgenson believe, the combined effect of the corporate governance reform efforts of the past few years is making a difference in corporate practice.

Ms. Morgenson believes that "Unfortunately, questionable corporate practices continue apace." No, at least not apace. Certainly questionable practices continue. But large companies are successfully implementing changes based on Sarbanes-Oxley, the U.S. Sentencing Guidelines, and the NYSE and NASDAQ listing requirements. Controls are more rigorous, auditors are more emboldened, board members more assertive, and ethics programs more robust. These changes are making a difference.

We'll still see scandals. Most involving large companies will be flushing out the last contaminants from the pre-Enron era. Until we forget these lessons, and a new Boesky/Milken/Enron emerges . . . .

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I read the New York Times online. Usually I ignore the advertising--or try to. Whether or not I am successful is a matter debated by advertising specialists. At any rate, the other day I was not successful at ignoring the Starbucks banner ad telling viewers to go to their website to read their Corporate Social Responsibility Report.

A banner ad promoting a Corporate Social Responsibility Report! Granted, it is Starbucks, but this still seems to me to mark a new phase in publicly telling one's story of commitment to doing the right thing.

Meanwhile, many companies, even some large marketers of consumer products, still do not publish corporate responsibility reports. Company leaders tell me that they "do not want to attract attention" to their practices in these areas, because "once you do, 'they' either want more and more" or "'they' keep looking for where you fall short, and attack you all the more."

"They" of course, are NGOs, activists, and Socially Responsible Investment funds.

This may have been a plausible argument a decade ago. But the landscape has changed. Companies are defined by outsiders no matter what. In this environment, management has a fiduciary responsibility to shareholders to help define the company's reputation. Corporate responsibility reports and speeches like Boeing CEO Jim McNerny's at The Conference Board are ideas worthy of serious consideration.

Dow CEO Andrew Liveris, in his recent speech to The Conference Board, described Dow's journey to broader engagement as "the five Ds."

Discovery--when the company learned that reputation mattered even when they thought they were doing the right thing.

Defense--when they tried to defend themselves from criticism, using sound science.

Debate--when they engaged critics in discussion of key issues.

Discussion--when they "actually began to incorporate many of the ideas of critics" in how they operate.

Doing--when they began to set specific goals and metrics, and made progress toward them public.

What stage is your company on?

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The Chicago Tribune is on a roll. Two days ago they had an insightful editorial on corporate corruption. And today they had a lengthy profile of Bonnie Soodik, SVP in their Office of Internal Governance.

I usually find that the more I know about the actual facts of a story, the more disappointed I am about inaccuracies in news coverage. In this case, however, the Tribune seemed to get the story mostly right. In his article titled "Making Boeing Fly Right," Trib reporter Ameet Sachdev included balanced analysis like:

"Keeping a company with more than 150,000 employees worldwide out of trouble is a seemingly impossible job, but it appears Soodik has made a difference since she was appointed head of the office of internal governance three years ago. Calls to the ethics hotline have nearly doubled since 2003, and formal ethics cases are resolved in less than a month, down from an average of 120 days."

This emphasis is especially gratifying to us at ELG, because we highlighted these as challenges for Boeing in an assessment we did for them in 2003. (Which I can only mention here because Boeing took the unprecedented step of posting it on their website.) Boeing has worked extraordinarily hard to move these metrics, and the hard work has obviously paid off.

This leads me to the one major omission in the article. Because Bonnie has many roles, including oversight of Internal Audit and Import/Export Compliance, she relies heavily on Martha Ries, VP of Ethics and Business Conduct, to drive the day to day operations of their ethics program. She and Bonnie both are, in the words of CEO Jim McNerny, among "Boeing's greatest assets."

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Boeing's $615 million dollar settlement with the government was prominently featured in the news this week. Today, it even made it to the editorial page of the Chicago Tribune, where Boeing CEO Jim McNerny's speech to the Conference Board's Business Ethics Conference (which we organize) was dissected in an editorial titled "The cost of corrupt business."

The Tribune highlighted McNerny's analysis of the Boeing culture: "Too many people who thought something 'didn't feel right' failed to raise a red flag . . . They wanted to win a contract, they feared retaliation, they just didn't want to rock the boat, or they lacked the courage to speak up in a command and control culture."

McNerny's speech can't be captured in one quotation, which is why it's great that Boeing has made it available at www.Boeing.com. Boeing as a company and McNerny as a leader are clearly utililizing all the appropriate levers of management power and influence to create a culture of integrity.

And this cultural and behavioral change is the right goal, according to the Tribune. In a slam at the Department of Justice, they contrasted the deferred prosection agreement reached with Boeing to "the ill-fated Andersen prosecution," which only served to "kill the company and penalize thousands of innocent employees."

Maybe a little home town bias there, since Andersen was a Chicago icon. But they do grasp the central points of a good ethics program: change behavior, change culture, get rid of bad guys. Now if only it were as easily done as said.

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The Conference Board's Business Ethics Conference in New York City ended today on a terrific note. Andrew Liveris, CEO of Dow Chemical, gave an excellent keynote speech on the power of integrity, available online at www.dow.com. What was especially impressive to me, however, was Liveris' response to questions, where you can discern if a CEO (or any executive) really know his stuff or is simply good at delivering speeches crafted largely by others. And by this criteria Liveris clearly knows his stuff.

For example, in response to a question about whether Dow encourages suppliers to develop ethics programs, Liveris gave a profound answer discussing how society is based on law, logic and relationships. Europe, the U.S., and Australia (the country of his birth) emphasize law and logic, while the rest of the world emphasizes relationships. Dow's task in the relationship oriented part of the world is to develop, nurture and leverage relationships only with companies where due diligence and history indicate that the other company is ethical and law abiding.

Is either Dow or Liveris perfect? I doubt it. Liveris' speech acknowledges as much, when he describes their journey to greater levels of transparency and integrity in action. But after a period of time in which many companies and CEOs kept their heads down because of the epic business scandals, it is gratifying to see a few with the courage to stand up.

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Finally. After years of reading about Jeff Skilling and Ken Lay, I attended a bit of the trial today, Lay's last day on the stand. We have all read a lot about the trial, so no boring readers with that. But I did leave with a few questions:

In 2006, why are computer-projected exhibits still barely legible (if that) to the jurors? Don't they matter?

In the diverse city of Houston, why is the jury all white? (Or almost all-white--I am relying here on my observation and not on any formal demographic study.) Will this make any difference in the outcome?

Do character witnesses really work? I watched an ex-Mayor of Houston (Mr. Bob Lanier) testify on Lay's behalf. After ten minutes of platitudes, the prosecution rose to ask one question: "Did any of your comments apply to Mr. Lay's work inside Enron?" The firm reply "No," ended his testimony, and perhaps any chance that his compliments would stick.

How do the loved ones of Lay and Skilling steel themselves for day after day of relentless pounding? Regardless of the outcome of the trial, or one's belief in the guilt of Skilling and Lay, this constancy is admirable.

Speaking of the outcome, the ethics community of Houston was marginally more sympathetic to the defendants than the national audience in San Diego profiled in a different blog. I came to Houston not to view the trial, but to give a presentation called "What your Board wants to Know about your ethics program, besides 'everything is fine," to 35 members and guests of the Greater Houston Business Ethics Roundtable (GHBER). 94% of the participants thought Skilling would be convicted, and the same percentage say he deserves it. Lay fares better, with 81% saying Lay will be convicted, and 86% saying he deserves it.

Like me, they haven't heard all the evidence. Watching the jury today zone in and out today, I am not sure they have either. . . .

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