orgtheory.net

Brayden

With all of this talk about the Enron, I'm surprised I don't hear more bloggers saying that they agree with the verdict (there seems to be near unanimity at Conglomerate that the jury was technically wrong in their verdict). I guess this just demonstrates how powerful norms are in deciding how the law is interpreted in the courtroom.

In perusing the Enron posts, I found this paper by Jeffrey D. Van Niel and Nancy Rapoport that shows that there was a surprising amount of early analyst discontent with Enron's corporate strategy. Contrary to the popular narrative, gruesomely portrayed in the book and documentary Smartest Men in the Room, not all third-parties thought Enron's business model was foolproof. In fact, many analysts published their cautious views prior to 2001, when Bethan McLean published her debunking article in Fortune.

Why do some perceptions of organizations seem to float to the top and influence investor sentiment more than others? Van Niel and Rapoport suggest that the negative views were ignored because of the complexity of the Enron accounting scheme. Investors, perhaps, ignore what they don't understand (my interpretation). Still, if there was diversity in analysts' perceptions of Enron, you would expect there to be more volatility in their stock prior to 2001. At any rate, Enron is a fascinating case in corporate image management that will likely be discussed in MBA courses for years to come. I think we're just seeing the tip of the iceberg of questions that will be generated due to this case.