Forget Spitzer, and Remember Enron

Like every other clever little scribbler in the blogosphere, I'm using the Spitzer Scandal as my lead-in today. Many other risk-related blogs will revel in the details of his so-dramatic-it-can't-be-real fate. For example, this entry from Directorship magazine's site links Mayflowergate to Monicagate. Yes, the poetic nature of Spitzer's problems -- the criminal investigation originated with the IRS looking into odd financial transactions (i.e. exception reporting and response by compliance professionals) -- compels me to rubberneck. However, my intention here is to build more edifying insights from any attention I gain by typing "Spitzer."

So, humbly, here it is: Eliot Spitzer didn't have anything to do with Worldcom, Adelphia, HealthSouth or Enron. He's now a Shakespearean character -- tragically comic, or comedically tragic or, just plain tragic thanks to a Big Apple dose of hubris. Right or wrong, many link Spitzer's aggressive pursuit of financial services industry wrongdoing (actual and perceived) with corporate governance and corporate governance regulation. While his former opponents clink their champagne glasses to his downfall, there appears a tendency to discredit all of his previous work and, with it, all of the corporate governance regulation and practices that emerged in response to scandals that preceded Spitzer's well-timed rise to national prominence.

This is a problem.

Why? Because there will always be a next organizational scandal. The Ethics Resource Center's National Government Ethics Survey (NGES) suggests that the next Enron could occur in the public sector. The report finds that with "employees at all levels of government witnessing a high incidence of ethical misconduct -- and with many local and state entities, particularly, failing to establish strong ethics programs -- the public sector is at considerable risk of seeing major ethics scandals unfold."

Sixty-three percent of local government employees observed at least one type of misconduct in the previous year. At the state level, the rate of reported misconduct was 57 percent. And 52 percent of federal workers reported that they witnessed ethics breeches.

Yesterday, a veteran ethics and compliance professional told me that she almost used to wish that her company would get into trouble when she was an anti-trust lawyer. She wanted her executives and managers to understand how serious the risks were -- and the spectacle of appearing before a grand jury would drive that home. Let's hope the Spitzer spectacle doesn't encourage us in any way to forget how serious the risks of ethics and compliance breeches are.