Photograph
© James Nielsen/AFP

An Introductory Note from
the Most Board-Experienced
of Your Three Authors,
Robert A. G. Monks

Those who can function well as directors usually do not write; those who write are unlikely to be selected to join a board. The result has been a confusing literature on the critically important questions of board functioning. This is a field where quantification is confused with meaningful information. We can know age, tenure, experience, education levels, compensation, attendance and all manner of “data” without having any insight into an individual’s contribution to board deliberation; we can know this information and more about all the directors and still be ignorant as to the most elementary of board functioning.

Directorship has many of the characteristics of club membership with written, unwritten and intuited rules. Discretion is one of the primary requirements for culpability. Directors simply do not SPEAK or write critically about the work of their colleagues. And, nobody else really knows. At times of corporate crisis, what a board of directors does and does not do is of critical importance. The May 2002 Senate Subcommittee Hearings, chaired by Carl Levin, provides unique insight into the workings of the Enron board during a period of tortuous collapse.

Carl Levin a former prosecutor, graduate of the Harvard Law School (1959), was superbly equipped to direct the Senate Hearings. He was well prepared – the staff had done a superb job of interviews, document assembly and graphic presentation; he understood the vernacular of commerce; he was patient, but persistent; occasionally he was outraged by what he saw as a failure of witnesses to come to grips with the consequences of their action – or, more often, their failure to act. In brief, this is a bravura performance.

The five senior Enron directors – chairs of the principal committees – appeared voluntarily and without concern over its impact on future litigation before the Subcommittee. As it happened, their backgrounds and demeanor provided a rich contrast in styles contributing to a sense of authenticity for the Hearings as a whole. They were glad of the opportunity to explain their actions publicly and – they hoped – to be vindicated against the indictment of the Powers Committee and public opinion.

The choreography of fully informed and involved directors under oath anxiously trying to make clear the utter propriety of their conduct produced a day that will forever illumine the scholarship of directorial conduct. There is drama – will these credentialed urgent scions of directorial excellence persuade Carl Levin – and the public viewer – that their stewardship was worthy?

If a picture is worth a thousand words, a moving picture is worth a million. The visual record of the articulations of the forthcoming Enron directors provides the finest material ever compiled for understanding the workings of a board in crisis. The material is so rich that we have included with the casebook several hours of the Hearings, taped by the Subcommittee staff, to permit those so inclined to experience the full flow of the proceedings. In fact, this is not so much a case study as an extensive history of the American Board in Crisis, with Enron as the illustration.

To help with the history and the integration of the video, we have created a written text to support the specific illustrative portions of the Hearings, the easier to relate this material to more traditional academic writing. Beyond that, we include extensive supportive material, most of it public documents with outstanding clarity. Students of corporate governance and the board of directors will find this a valuable reference for additional study.