Why Compliance Programs Fail: Economics, Ethics and the Role of Leadership

A major, yet little discussed lesson from the collapse of Enron is that Compliance Programs are fundamentally flawed, as their efficacy relies on the assumption that corporate leaders will always act with beneficence. This paper argues that in an environment of imperfect economic markets, a corporate leader must be pragmatic about what the market economy and government is able to achieve. By adopting a pragmatist view of leadership, understanding both the strengths and weaknesses of our economic and political system and making decisions accordingly, we stand a better chance of successfully fostering ethical cultures by implementing compliance programs and organizational ethics principles in ways that will ultimately be more successful. © Springer 2007.