Table of Contents
Introduction and Situational Analyse
Analysis of Stakeholders
Philosophical principles related to morality
Conclusion and recommendations
Introduction and Situational Analyse
Enron’s demise will have a lasting impact on ethics standards. The stock of the company was worth $90 at its peak, and assets totaled sixty-five Billion. This growth had been almost 16 years in progress. But, all of these gains were lost in three months and the company was forced to file for bankruptcy.
Jennings 1999 states that the Enron scandal was due to unethical business practices. Aside from this, none of those responsible (i.e. Management, SEC and accountants were not responsible for any business practices. It is important to remember that Enron’s code of ethics clearly defined what business practices were ethical. They did not believe Enron could be too good for them and went along with it (McLean & Elkind (2003)). Enron’s leadership was highly competitive. Skilling established the performance review panel that evaluated employees on their respect, integrity and communication. It was biased towards the employee’s ability to produce profits (McLean & Elkind 2003). Skilling was more accessible to employees with good ratings than those who had poor ones. It created fierce internal competition and encouraged employees who were not in compliance to sign contracts to go against the rules.
Analysis of the Stakeholders. The most to lose or gain from Enron’s fall or rise was Jeff Skilling, Kenneth Lay and Andrew Fastow. They created many complex schemes that were designed to conceal losses and make the company appear successful (Swartz & Watkins (2003)). They were motivated by pride and greed to commit their unethical acts. Andrew Fastow managed LJM2 Co-investment LP, which saw him get $30 million in management fee; Enron’s ethics code forbid employees from getting involved with any business that was not Enron-related.
Enron employees received many corporate perks. The traders also got bonuses without caps. Enron stock was heavily incorporated into the employee’s pension scheme. All of these factors resulted in employees hiding the truth about illegal company activities and muting whistleblowers. (Swartz & Watkins (2003)
Authur Anderson, a CPA firm, was responsible for Enron’s outside auditing. Enron also used Authur’s consulting and internal auditor services. This created a conflict which saw Enron cover up five years of accounting frauds.
Ethical TheoriesAs much as there are ways to make money, people will come up with schemes that violate the rules. This business culture has existed since its inception (Jennings, 1999). Enron wasn’t an exception. But, Enron had a rapid growth rate and unethical behaviour increased as a result. The company had grown to the point that its pride made it unable to admit it wasn’t succeeding. (Swartz & Watkins (2003) Utilitarian theory says that one should take into account how their actions will affect everyone involved in order to make the best decision. Enron’s case was a good example of this. The company couldn’t continue on the same course forever. It would be better for everyone had the truth been known earlier. Both parties had a moral duty to report acts they believed were unethical.
Conclusion and recommendationsThe Enron Code for Ethics, which had the foundational values integrity, respect and communication as its core values, did not help in creating an ethical company environment. McLean & Elkind 2003. The company was able to focus on the short-term and not consider the long-term. Their culture was based on profit maximization and encouraged cronyism. They did not pay much attention to other realities. Below are my recommendations for businesses today.
I recommend that companies carefully consider their corporate culture. It will have a significant impact on the company’s success in the future. Second, companies should adhere to their code of ethics. Enron’s case shows that having codes of ethics is not enough. They must be adhered to. Thirdly, companies need to invest in ethical training for employees; managers and employees should be able to see the best interests of everyone.
