That was Then, This Is Now

Paul Krugman writes about Enron today; he denounces the company and argues that the plea bargain apparently being reached with Andrew Fastow and his wife doesn’t mean that “the system is working.” As usual, Krugman’s Enron punditry fails to mention that he is a former paid adviser to the company; in 1999, he received $37,500 as a member of Enron’s Board of Advisers.
Krugman’s chief evidence for the proposition that nothing has changed since Enron collapsed is the fact that the law still does not require stock options to be expensed before they are exercised. Whether this accounting change would be a good idea or a bad idea is debatable; there are good arguments on both sides. What Krugman really seems to believe is that stock options are inherently evil and should be banned.
But when he was serving as an adviser to Enron, Krugman certainly knew that its executives were eligible to receive stock options, and he undoubtedly knew how they were treated for accounting purposes. Did he do anything at the time to protest what he now views as a corrupt (although nearly universal) practice? Or did he just pocket his $37,500 in silence? Oddly enough, Krugman’s column makes no mention of his having opposed Enron’s options program when he was in a position to actually do something about it.

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