Enron and Corporate America

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The trial of Enron executives Kenneth Lay and Jeffrey Skilling began this last week in a Houston, Texas courtroom. This corporate scandal and the beginning of the trial of its former executives has reinforced my opinion about why jurors rathern than government or corporate America should have the final say about what corporations should and should not do, and when corporations should be held accountable. Without the protection of our jury system, the quest for profit has the potential to place profits over safety. Please do not misunderstand me. I do not suggest that the quest for profit is a bad thing. Quite the contrary, I believe that coprorations need to maximize shareholder value and earn a return on investment capital. However, looking at the Enron scandal, I simply believe that when a corporation deliberately misleads or places a faulty product into the stream of commerce and people suffer harm, the corporation should be held accountable. With our jury system intact, corporations have more incentive to place safer products into the stream of commerce.

I further believe that government should not have the power to establish a rule to tell all victims of corporate negligence or Enron-type scandals how much damages are too much. Personal injuries vary by person. Corporate scandals vary by corporation. Corporations acting negligently should be treated differently than corporations which deliberately bilk consumers out of hard earned money. Therefore maximum damage awards may create good soundbites for the news media, but they are a bad practice. Caps on damages can do more to encourage corporate misbehavior if a corporation believes that it can earn more than the maximum penalty imposed upon it. The risk of an unlimited punitive damages award can be an amazing tool to discourage corporate malfeasance. Unfortunately, in Enron's home state of Texas, such a risk is non-existent. Texas law places a cap on punitive damages. While the Enron trial continues and you continue to see reports about one of the largest examples of corporate misconduct in America, keep in mind that this case involves such far-reaching issues as corporate governance, punitive damages, and tort reform and not just a trial involving Kenneth Lay and Jeffrey Skilling. Click here for more information about this high profile trial with implications on injury and accident law.