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Business Ethics: An Enron Essay

Enron, wanting to sustain the explosive growth of the late 1990s, even when they knew that it was not possible entered into a deceiving web of partnerships and employed increasingly questionable accounting methods to maintain its investment-grade status. Enron executives were able to convince themselves that they were doing nothing wrong—they were pushing the envelope—but rather acting for the good of the organization, as evidenced by their foray into limited partnerships, keeping debt off the balance sheet, and conflicts of interests. Whether one entity is independent of another is a matter of degree and requires judgment. The firm, desiring to recognize the gains on sales to these entities, sought to structure the entities so that they were sufficiently, but not totally, independent of Enron.

Enron consulted with its auditor, Arthur Andersen, as it set up these entities to ensure that Arthur Andersen concurred with Enron’s treatment of these entities as independent. These consultations led to certain changes in the structure of these entities until Arthur Andersen concurred with Enron’s treatment as independent. In this light, it could be asserted that it is unethical for supposedly independent auditors to be so closely involved in decisions and actions made by the management. Additionally,

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it was wrong not to disclose sufficient information about these entities for users of the financial statements to make their own judgments about independence.

At Enron, it appeared that senior leadership was more concerned about their actions appearing ethical than by their legitimate morality – a public relations-guided morality. It is this kind of thinking that leads companies like Enron to create an environment in which unethical behavior can occur, while also hiding their unethical actions (e.g., Andrew Fastow’s network of questionable partnerships) or otherwise justifying them by attempting to explain them as completely acceptable, as implied by Gini (2005).

Rather than disclose the rampant conflicts of interest within the company, Enron hired countless lawyers and accountants to help it meet the letter of the law while ignoring its intent. Further, it was common knowledge at Enron that if you didn’t ask the right questions you didn’t get the right answers.

Enron was a human refinery, where managers wrung their hands over their advancing age and feared their superiors would deem them too meek. Some worried that not giving enough to the chairman’s favorite political candidate could send their careers into a dive. Some even detected a menacing tone in letters urging them to offer large contributions to United Way. Other employees noted that one day you were viewed with favor and the next day you were not. Employees knew who was in the in-crowd and who was not; and many wanted to continue to be liked in the organization and would do everything they could to ensure that they would be liked.

Ethical Issues Related to Corporate and Personal Decision-Making

The challenge of corporate versus personal decision-making is especially difficult because standards for what constitutes ethical behavior lie in a gray zone where clear-cut right-or-wrong answers may not exist (Sims, 2003). As a result, sometimes a case can be made that unethical behavior is forced on organizations by the environment and by laws such as the Foreign Corrupt Practices Act. Based on personal experience, the choice of whether to accept a bribe from someone wanting me to do something against my principles is a struggle of personal versus general good. The ethicality of making a decision is established in the situation.

Effective leadership and management of ethical issues require that organizations ensure that their managers and employees do not commit unethical acts and are familiar with how to deal with ethical issues in their everyday work lives. These charges are especially important today as it appears that American society in the first decade of the 2000s is clamoring for a renewed emphasis on values, morals, and ethics and that the business debate of this period is but a subset of this larger societal concern. Whether the business community will be able to respond and raise its reputation to a new plateau remains to be seen.

WORKS CITED

Gini, A. (2005). Case Studies in Business Ethics. (5th Ed.). Upper Saddle River, New Jersey: Prentice Hall.

Sims, R. (2003). Why Giants Fall. Westport, Connecticut: Praeger Publishers.

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