Even if you haven't lost a dollar in the Enron debacle, it should speak to you if you serve on any board of directors -- corporate or nonprofit.

In the nonprofit sector, as on corporate boards that offer big fees, there are no honorary director positions. The same standards of diligence apply, says Richard N. Tilton, the principal author of "Bankruptcy Business Acquisitions" (LexMed Publishing). Tilton distills Enron's core message to all directors:

You have to pay attention, study the financial statements, gain knowledge, understand the operation, ask the hard questions, do thorough investigations, persist in getting answers, resist a don't- rock-the-boat mentality and exercise reasonable business judgment.

If you don't know how to do these things, "you have to learn how or get off the board," says Lawrence Mitchell. The George Washington University Law School professor has just published "Corporate Irresponsibility" (Yale University Press, 2002). Directors must insist on being informed of all options to decisions and the consequences of each course, he adds.

People invited to serve on nonprofit boards often "believe they will be asked only for contributions and for public use of their names," says Ralph Estes, professor emeritus at American University's Kogod School of Business and an expert on corporate social responsibility. They don't understand their duties to oversee performance and to ensure adequate public disclosure, he believes.

Many people go onto volunteer boards "because it puts their names on the letterhead," says Bette Price, co-author of "True Leaders: How Exceptional CEOs and Presidents Make a Difference by Building People and Profits" (Dearborn, 2001). Enron will heighten the awareness of volunteer board members "that this is more than a social thing," that they cannot be lax and still do what is right for the organization.

Many directors are as useful as cars' hood ornaments, worries J. Edward Ketz of Penn State's Smeal College of Business. An authority on accounting ethics, Ketz says Congress and the SEC need to look at ways to get corporate directors more involved in oversight and "maybe go further to protect the interest of whistleblowers."

Dr. Lynne Kiesling, director of economic policy at Reason Foundation, sees the issue differently: "Boards are better positioned to monitor and regulate their organizations than government agencies." Directors have deeper knowledge of their organizations and are more likely to be nimble and flexible than regulators to discipline their organizations. But directors have to act on that responsibility, "or we are likely to find ourselves facing increasing regulation from slow-moving bureaucracies."

How should directors respond when they suspect their organization is misbehaving? Dr. Arthur Levine, professor of legal studies at the College of Business Administration at California State University Long Beach, gives this expert advice:

First, because directors have a fiduciary duty to protect the organization and not to harm it, try to change the offensive practices internally.

If the behavior involves fraud or illegality, note your objections on the record. If the issue is not resolved, the next step is to resign. (Mitchell suggests that you first hire a lawyer to protect you and guide you in the best ways of disclosing or taking care of the problem.)

Levine continues: If the behavior appears sleazy or unethical rather than illegal, the best course is to note your objections and request changes. If that doesn't work, resign if the conduct seriously offends your morals.

Even if the misbehavior isn't illegal, after resigning report it to appropriate authorities if it risks others' health, safety or well- being or involves substantial monetary peril.

A bottom line about directors' accountability: For-profit and nonprofit directors must communicate through their actions, not just through mission statements, that they work in the interest of shareholders and stakeholders. A whitewash won't wash.

To return to Media Coverage click here .

REPORTERS & EDITORS: For more information, please contact Wyatt DuBois in the Smeal College of Business Media Relations Office at 814-863-3798 or wed112@psu.edu .

Penn State's Smeal College of Business offers highly ranked undergraduate, MBA, executive MBA, Ph.D., and executive education opportunities to more than 5,500 students at all levels. Featuring academic departments of accounting, finance, marketing, insurance and real estate, management, and supply chain and information systems, the college is also home to major research centers such as the Center for Supply Chain Research, the Institute for the Study of Business Markets, the eBusiness Research Center, the Farrell Center for Corporate Innovation and Entrepreneurship, the Center for Global Business Studies, and the Center for the Management of Technological and Organizational Change.

Click here for more news.