) board of directors to lead an investigation into the company's collapse. Over three months, Powers and the Special Investigative Committee reviewed 430,000 pages of documents and interviewed 65 people. Their 203-page report, published in February, 2002, documented far-ranging conflicts of interests, abuses of power, and accounting misdeeds dating back many years at the Houston energy giant.
BusinessWeek Correspondent Andrew Park spoke with Powers on Oct. 30, during the 2003 BusinessWeek CEO Leadership Forum at UT's McCombs School of Business. Edited excerpts of their conversation follow:
Q: The Sarbanes-Oxley legislation is requiring greater accountability from corporate chiefs. Had it been in place during Enron's heyday, would it have had much direct impact on what went on at Enron?
A: Sarbanes-Oxley is a signal to boards that you better take this stuff damn seriously. Anytime you make people take things more seriously, it might have an effect. The things that went wrong with those transactions at Enron were not borderline interpretations of rules.
Nobody who understood the Raptors [off-balance sheet subsidiaries] had any notion that they were legitimate transactions, as opposed to just hedging of themselves [and I believe that includes the very top management of the company]. Once you understood the transactions, these were not technical questions of "Does this comply with some very detailed accounting regulation or not?"
Q: Was it appropriate for Congress to focus on structural reforms rather than substantive changes as to what's legal and not legal?
A: I think if Congress had gotten into a lot of details of accounting rules, -- "Should we outlaw special-purpose vehicles?" or "Should we outlaw off-balance-sheet financing?" -- it would have made a mistake. By focusing on the structure of how accounting firms work and how boards work, they were in the right direction.
Q: Will these changes have an impact on corporate corruption?
A: I think these are questions of virtue and character more than we've got to outlaw this practice or that practice. It's saying, "Remember, you have an awesome responsibility here." Get a corporate culture that's going to maximize compliance -- I think we'll make more progress that way. It's a little bit of what you might call consciousness-raising.
Q: How should the corporate world address conflict of interest?
A: I think we need to continually remind people of the agency [issue]: Who do you represent? Can you have two masters? It's always very tempting to think you can manage conflict of interest, just like it's very tempting to think you can have another bowl of ice cream. Ultimately, it's an attitudinal issue. It looks tempting to have that next bowl of ice cream, and it looks tempting to be on both sides of a transaction. It's very difficult to do.
Q: You groom a lot of future corporate lawyers. How have the corporate scandals affected what you teach?
A: We have courses on professional responsibility. How [to instill] virtue and ethics and social consciousness in lawyers is another question. We wouldn't do that by [saying]... "Time out to the other stuff, and now we're going to talk about social issues and ethics." Those of us who teach law are constantly teaching it much more like a liberal art than the business school teaches business.
Q: Are you troubled that it has been two years since Enron's collapse and prosecutors have not brought any of the top executives to trial?
A: They're proceeding methodically, but I think they're proceeding. I'd give them another few months and see what happens.