Introduction
Enron Corporation was born of a mildly innovative deal to combine two boring businesses: an Omaha-based natural-gas-pipeline company called InterNorth and a Texas pipeline company called Houston Natural Gas. From humble beginnings as a natural-gas company, Enron rose in a mere 15 years to No. 7 on the Fortune 500, doing 0 billion of business in 2000. Along the way, Enron became one of America’s most admired companies, and a perennial favorite on “best places to work” lists.
At the peak of its power, Enron Corporation was a warpspeed money-making machine that brought in 0 billion a year trading contracts around the globe for oil, gas, electricity, and other commodities from its gleaming 50-story office tower in Houston, Texas. Enron was supposed to be the next new thing, a New Economy company with substance to it. Enron had real businesses, real assets, real revenues and what seemed to be real profits. It owned natural-gas pipelines and electricity-generating plants and water companies.
Enron executives mingle with Presidents, donated huge sums to politicians of both parties, and then won changes in government regulations that favored Enron. Company executives worked long hours, but on the other side some blew as much as ,000 a month in expenses. Other company executives showed up for work in a different luxury car for every day of the week .
Then without warning, a strange thing happened – Enron went bankrupt. Though the auditors were supposed to be keeping an eye on its finances, the seventh-largest company in the U.S. collapsed without warning. It was considered to be the biggest bankruptcy in American history.
Some top level executives made (up) their numbers, took millions of dollars in compensation, and walked out the door leaving Enron with numerous projects that in reality were losing money. Hundreds of thousands of investors with Enron stock lost their money. The entire stock market shuddered, costing millions of people nationwide, since about half of all Americans own stock, either directly or through mutual funds.
Unfortunately, for not only Enron’s investors, but also its employees, Enron’s ethical performance appears to have fallen far short of the image it projected to the world. Thousands of Enron workers sadly lost their jobs.
Enron looked like a dependable, highly ethical, honorable, and responsible corporate citizen to the outside world. The corporation said and seemed to do all of the right things to generate trust and confidence in its policies and methods by investors, regulators, and the general public. Sadly, according to some authors, it appears that the core values Enron actually practiced included deception, arrogance, concealment, and self-interest rather than the values of integrity, communication, and respect for others that it proclaimed to the world.
Problem Statement
In my own point of view, which I believe is also shared by many individuals, the fall of Enron is rooted on the apparent lack of business ethics of its leaders. On the top it may appear as a financial problem leading to bankruptcy, but the driving force for this is the ethical problem that Enron had. How did the lack of business ethics contribute to the downfall of Enron?
Literature Review
Some situations that seem to capture the public’s attention almost daily are situations in which the public or some segment of the public believes that an organization has done wrong or has treated some individual or group unfairly. Typically, ethical questions are raised in these kinds of situations. In some cases, major laws have been broken. In most, questions have arisen of whether or not the organizations have been socially responsible or ethical. Organizations find themselves frequently on the defensive in today’s socially aware environment, being criticized for some action they have taken or failed to take.
One reason for these issues of company conduct and personal conduct in business being higher on the public agenda is the occurrence of disasters even before the Enron scandal took place. The Exxon Valdez tragedy, Bophal, Maxwell, corporate collapses – all of these highlight this question of accountability .
Unethical acts continue to occur, as is evidenced the Enron scandal. In the case now of Enron, questions such as ‘who was responsible’ and ‘what can we do to ensure that this kind of disaster won’t happen again’ arise.
Causes
According to traditional economic analysis, regulation of Enron was unnecessary because Enron, like other rational actors, would voluntarily act honestly in order to reduce long-term costs of raising capital, and its officers would not derail promising individual careers by engaging in financial fraud. But this is not so the case, as it has been found out now.
Faulty operating decisions could underlie some of Enron’s problems. But it appears that a major share of the blame for the collapse may be due to the ethical climate in the company, which allowed a series of ethical missteps to occur. The accounting and security fraud that resulted in the Enron scandal roots itself in ethics. Its top-level executives apparently did not display any ethical considerations. Although Enron publicly refers to its Code of Ethics, it is not a member of the Ethics Officer Association and doesn’t have an Ethics Officer to administer compliance with its code.
In spite of Enron’s commitment to ethics and apparent attention to compliance controls, its actual ethical performance seems to have fallen far short of its proclaimed ethical goals. Many actions have been reported in the press indicating that Enron’s behavior was widely at variance with its stated values and code of conduct. This may be due to the lack of effectiveness of Enron’s ethics management system.
The roots of Enron’s fall can be found in its failed leadership and culture. Enron’s leaders ignored, then denied serious problems with their business transactions and were more concerned about their personal financial rewards than those of the company.
Solutions
Enron should have employed an effective ethics management strategy. The company should have also done periodic checks on their employees from the highest level down to the ordinary employees. Aside from that, they should have had the support of the Ethics Officer Association. All these measures could at least minimize if not completely stop the scandal and bankruptcy that Enron now faces.
Reflection
From this particular paper, I gained more knowledge regarding the big part that ethics plays in doing business. Organizations such as Enron reap what they sow. In the long run, they are the ones who become victims of their unethical practices. Sadly, those who didn’t do any wrong but are part of the company also suffered – like in the case of ordinary employees and the unsuspecting investors.
Credit:ivythesis.typepad.com
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