But rather than get hung up on questions of Andersen’s guilt and whether the firm, already doomed before the jury made its decision, will win on appeal, let’s look at the big picture and see what the Andersen story really tells us. The verdict is the clearest signal yet that the market-bubble ethos of greed being good–heck, even a desirable mainstream value–is over. Sure, that “greed is good” speech by Gordon Gekko in the movie “Wall Street” dates back to the ’80s, but the point back then was that we were supposed to be horrified by the notion. In the ’90s, people said it with a straight face, or even with a smile as their fattening portfolios fueled dreams of early retirement and second and third and fourth homes. Adam Smith’s invisible hand of the market–which translated the pursuit of self-interest into public benefit–metastasized into a broad sense that our self-interest in the market’s performance would benefit the public.
Now the Andersen verdict is certain to help clear up any doubts over what greed really is. Greed–defined as an inordinate desire for wealth–is not good, and it doesn’t drive markets. Greed drives people to cut corners for short-term gain, a message that’s been repeated like a jackhammer in recent weeks. Allegations of insider trading against Samuel Waksal, the former CEO of ImClone. Merrill Lynch nailed for publicly promoting trashy, overpriced Internet stocks that its own analysts were disparaging in private. Charges of tax-evasion against Dennis Kozlowski, the fallen chairman of Tyco, for allegedly cheating New York out of $1 million in sales tax by pretending to ship $13 million of art works tax-free to New Hampshire. Obviously, if Kozlowski could afford $13 million for art, he could afford $14 million for art and sales tax. But he allegedly tried to beat the system. All sorts of companies are trying to duck U.S. taxes by incorporating offshore. They’re doing it in the name of staying competitive in a global economy. But that thinking, in the end, really just works to undermine faith in the United States’s capitalist system that helped them prosper in the first place. It’s not just greed. It’s stupid.
Another thing that’s stupid is the idea that we don’t have to regulate anything because the invisible hand of the market will take care of what needs to be done. Certain supposedly pro-business policies coming out of our nation’s capital–saying that the market system is working and all we have to do is leave everyone alone–aren’t really pro-business at all. They’re pro-greed, which isn’t the same thing.
Now, back to Andersen. What exactly undermined the firm? Andersen knew perfectly well that Enron’s accounting was questionable, but it didn’t want to lose the client and the $52 million in annual fees that it paid. So Andersen cut corners, shaved rules and held its nose. And paid a horrendous price.
The legal issues hung on notions of intent, but the actual deeds probably played out in small increments, with a shrug of the shoulders here and there that it all would work out for the best. After all, Enron’s once soaring stock price was the report card, so things were clearly working out for the best for anyone who held Enron stock and stock options, or was charging Enron fat fees.
Andersen is now a zombie company, the walking dead. And the human toll is clear. Its partners and lower-level employees, most of whom were innocent bystanders, have seen their nest eggs wiped out. They’re finding out firsthand what greed can do, and are developing a new appreciation for what can distort capitalism. Sure, Americans have always loved money. De Tocqueville traced love of wealth to the root of all that Americans do. But the important point he added is that this drive “disciplines their lives.’’ That lesson was forgotten at Enron, and it was forgotten at Andersen. Greed replaced self-interest, which by definition has a long-term horizon, rather than gaming the system for a quick hit. Judge Harmon may have thrown the dynamite charge last week, but it was Enron and Andersen that packed the explosives and lit the fuse.
