The Enron Tea Party

May 26, 2006
The Enron Tea Party
The revolutionary thing about the Enron verdicts – on the scale of the Boston Tea Party – was that the jurors held two C-suite occupants to the same standards of accountability that apply to anyone else. They rejected the Skilling and Lay’s didn’t-know, didn’t-notice, can’t- remember line of defense because they knew it wouldn’t work in their own jobs. As juror Freddy Delgado, an elementary school principal, put it:

I can’t say that I don’t know what my teachers are doing in the classroom. I am still responsible if a child gets lost. So I would say that to say you didn’t know what was going on in your own company was not the right thing.

The jurors included two engineers, a personnel manager, a dental hygienist, a county court clerk and a dairy farmer, among others. Skilling and Lay may have felt they weren’t being tried by a jury of their “peers,” and in a sense they weren’t. The class and wealth gap between the defendants (at least before they started forking out millions for their defense) was big enough to hold a stack of a 100 million one-dollar bills. But that’s just the point: The jurors thought the big guys should be as knowledgeable about their jobs as a humble hygienist or clerk.

This is not how things ordinarily work in corporate America. Take the case of Home Depot’s CEO, Robert Nardelli. His board of directors has paid him $245 million in the five years he’s worked for the company – that’s $45 million a year. But in the same five years, his company’s stock has fallen by 12 percent while that of its major competitor, Lowe’s, has risen by 173 percent. Similarly, Verizon’s CEO has been rewarded with huge pay boosts while his company’s stock fell. As any business reporter could tell you, executive pay has been “de-linked” from performance.

Now suppose you’re the woman who cleans Mr. Nardelli’s office at night, and you start cutting corners – leaving dust on the desk, mud-tracks on the carpet, and greasy streaks on the sink of his personal executive bathroom. Can you expect to be rewarded for this negligence by a pay increase – say, all the way up to $8.50 an hour? No, in any ordinary line of employment, declining performance gets you de-linked from your job.

American corporations, meaning pretty much the American economy, are ruled by a kind of royalty akin to King George III, at whom the tea-dumping was directed. They live in a bubble of privilege, generally exempted from scrutiny until, as at Enron, they go wilding and suck their companies dry. Their pay is set by their true class peers, the CEOs who populate boards of directors, and these fellow know that rising pay for one CEO lifts all yachts, for the simple reason that CEO pay is often based on a survey of other CEOs’ pay. There is no limit, in other words, to their plunderings.

So what was at stake in the Enron trial was not just criminal justice, but democracy itself. Call it the first outbreak of the next American revolution – against our overfed, unappointed, corporate royalty.