The Enron Economy
|May 5, 2002||Posted by Staff under Progress Report, The Progress Report|
The Enron Economy
HARMFUL ENRON HABITS WIDESPREAD
A new report has been released by United for a Fair Economy.
Readers should decide for themselves whether “bad behavior” is accurately defined by UFE. When a corporation pays lots of money to its CEO, is that abusive, coerced, or dishonest?
And even when a corporation seeks special privileges, we can deplore that action but we must recognize that a corrupt, undemocratic government is at the root of that problem. Governments can and should stop making corporate welfare handouts.
On the other hand, many of UFE’s findings are right on target. See what you think. The entire report is available from http://www.faireconomy.org/press/2002/titans_pr.html
AWARDS TO ENRON-LIKE COMPANIES; GE IS #1
“Titans of the Enron Economy: The 10 Habits of Highly Defective Corporations,” a new report by financial analyst Scott Klinger, reveals that key maneuvers leading to Enron¹s meltdown are legal and widely practiced.
The report ranks the worst companies in 10 categories and gives Enny Awards to companies that exemplify Enron¹s harmful behavior in each area. The 10 habits encompass profits won through political influence, corrupting the watchdogs, tax dodges, undue risks for workers and excessive rewards for executives.
The Enny Awards winners are COCA-COLA, CITIGROUP, EMC CORPORATION, AOL TIME WARNER, RAYTHEON, BOEING, LUCENT, HALLIBURTON, WORLDCOM, and the financial services industry, represented by CITIGROUP and MBNA.
A special Lifetime Achievement Award goes to General Electric for scoring the highest average rank across all 10 bad habits, the only company to actually outrank Enron itself. GE exceeds Enron¹s score by an astonishing 45%.
Much of the 1990s stock market boom was fueled by Enronesque accounting tricks that are perfectly legal. More than a third of corporate earnings growth from 1995 to 2000 stemmed from the practice of not treating stock options as expenses. For example, Lucent¹s earnings would have been reduced by 30% from 1996 to 2000 if stock options had been expensed. Corporate political contributions and lobbying encouraged lax rules, with Enron¹s price-gouging energy deregulation being only one example.
To break the 10 bad habits, the report proposes a 12-Step Recovery Program: stronger disclosure requirements, independent auditors and boards, rotating auditors, progressive corporate taxes, diversified retirement accounts, earnings statements that expense stock options and exclude pension fund gains, balancing the interests of stakeholders, limits on government subsidies of foreign investments, banning company loans to executives, and ending taxpayer subsidies for excessive CEO pay.
All 10 Enronesque habits and distinguished Enny Award winners are illustrated with glaring examples in the report.
AND THE ENNY GOES TO…
1. Retirement funds full of company stock… COCA-COLA
2. Excessive CEO pay… CITIGROUP
3. Massive layoffs while executives make millions… LUCENT TECHNOLOGIES
4. Cozy insider boards… EMC CORPORATIONS
5. Excessive board compensation…AOL TIME WARNER
6. Auditors whose consulting contracts create conflicts of interest… RAYTHEON
7. Hefty political contributions to buy access… The financial services industry; Accepting the award for the industry are CITIGROUP and MBNA
8. Lobbying for legislative favoritism… BOEING
9. Corporate welfare to finance dubious overseas investments… HALLIBURTON
10. Avoidance of corporate taxes… WORLDCOM
United for a Fair Economy is a national, independent non-profit that spotlights growing economic inequality and advocates solutions for shared prosperity. The report is available on the web at www.FairEconomy.org. Hard copies are available upon request.
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