1. What is the relationship between ethics and law? Were Enron’s actions illegal?
2. What factors contributed to Enron’s unethical culture? What were the consequences?
3. Did Enron violate Occupational Ethics, Individual Ethics, or Societal Ethics?
4. Whose job was it to step-up, speak out, and take measures to stop the unethical dealings at Enron?
5. What steps can companiestake to prevent this problem-to stop its values and norms from becoming so inwardly focused that managers and employees lose sight of their ethical responsibility?
What is Enron? We first have to understand that Enron’s collapse is more than the story of just one company, it is the collapse of a system, a collapse of public trust in management, accounting, auditing, finance and consulting. Thecollapse of Enron, Sunbeam, Waste management, Tyco, Worldcom, but also International companies like Vivendi were just the results of a significant inconsistency between conflicts of interest and incentive compensations practices. Enron was one of the largest, maybe the largest company to sold gas and electricity and other services such as bandwidth and consulting on risk management and financialservices for potential investors. “At the end of 2001 it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the “Enron scandal”. Enron since has become a popular symbol of willful corporate Fraud and corruption. The scandal was also considered a landmark case in the field of businessfraud and brought into question the accounting practices of many corporations throughout the United States.” (Enron - Wikipedia, the free encyclopedia)
But what is the relationship between ethics and law in this and were Enron’s action illegal? In the 1980’s and after the so-called “Black Monday” on Wall Street, after the Exxon Valdez oil spill in Alaska, or the huge poison gas leak in Bhopal,India, the corporate world has shown bigger interest in raising the ethical standards of the global corporate governance. With Enron the question is focused on financial and accounting integrity or what Enron’s CEOs would have maybe called corporate altruism. In fact Kenny Boy once declared that “American business does not need new laws, but just to make sure that existing laws are enforced” (Prenticediscusses Ethics and Law in the Enron era on NPR). Enron employees and CEOs were running after one thing: money. They were the smartest guys in the room and they lost track of the big picture. When your objective as a company or as an employee is looking at meeting the quarterly earnings or looking at profits you step on everyone’s throat to achieve it and that’s is precisely what Enron’semployees were advised to do. What was illegal, is the number of market analysts, accountants and lawyers that legitimized Enron’s actions at the time. Employees were in charge of looking at all the lupo’s in the law that could help the company making billions. There was nothing “really” illegal as an employee for looking at profits and the bonuses you could make thus the motivation was high.
But then,what factors contributed to Enron’s unethical culture and what were the consequences? My concern here is to know whether information asymmetry is illegal? No. The decision maker simply knows something that the buyer at the other end doesn’t know. In the case of Enron it was a threat to the right of others and to the market in general. Kantian ethics justify that the right action must be done forthe right reasons. The corporate governance at Enron at the time was not engaged in any kind of “value ethics” even if according to Kant their actions could be justified somehow, it is not value ethic nor integrity management and in fact they are the ones that contributed to Enron’s unethical culture at first. The goal of the operation management at Enron at the time was to make profits like...
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