1. Rectitude before rules.
Almost as startling as the scandals themselves was the fact that much of what made the front pages was technically legal. Until recently, Andersen's practice of auditing and consulting for the same client was commonplace.
2. Look good on paper? Look again.
Former Enron CEO Jeffrey Skilling, who was in the top 5% of his class at Harvard Business School and is an ex-McKinseyite, had a stellar bio. But peers described him as arrogant and out of touch with reality. Even the best résumés are two-dimensional.
3. Myopia encourages shortcuts.
Sayles and Smith remind us that a blinding focus on quarterly earnings was the cause not only of the high-profile collapses we know but also the common thread in the undoing of many lesser-known names. It's the job of leaders to keep people farsighted.
A version of this article appeared in the September 2005 issue of Fast Company magazine.