It was Adam Smith who identified what turned out to be the central ethical fault line in Enron. The corporation, he wrote in The Wealth of Nations, was an inherently corrupting business form. The problem was the separation of ownership from control. In partnerships and sole proprietorships, the forms he preferred, the owners ran the business. In contrast, managers hired by the owner-stockholders ran the corporation. And the owners were too busy to monitor how their money was spent by the managers. So managers were institutionally liable to what Smith called "negligence" and "profusion." Negligence, because the business was not the consuming dedication of their lives, as it is for partners and sole proprietors; it was merely a job. Profusion, because they could reward themselves by lavishing other people's money, which spends so much easier than our own, on fine dinners, handsome equipages, and all manner of other frippery—and disguise their profusion as business expenses. Smith's distrust of the corporation had empirical backing in the disgraceful behavior of the East India Company, the Enron of his day, a monument to negligence and profusion.
A bankruptcy auction of Enron's gilded London office turned up the following evidence of profusion: an electric train set used to deliver bonuses to high-performing executives; a high-tech gym; a ToneZone for aromatherapy, tanning, and beauty treatments; pricey paintings and sculptures; a 33-foot maple veneer conference table inlaid with solid walnut; and even marble-covered garbage bins, to deposit decorous garbage from the twelve cafés on the premises. As for negligence, the destruction or rather auto-collapse—as no competitor or regulatory change can be considered responsible—of the nation's seventh largest corporation retires the cup. But this was a kind of negligence bound up with profusion. Criminal negligence.