In today's world business is very competitive. To compete with other company's executives have turned to corrupt practices. Once respected businesses like Enron, WorldCom, and Arthur Anderson have been found deceiving there customers, stockholders, and employees. C.E.O.'s try to achieve the American dream and pursue capitalism to its fullest potential. In doing so, business leaders have lost their values and ethics, and make bad business decisions. The downfalls of a company are the consequence of C.E.O.'s bad decisions. According to Marjaana Kopperi "business ethics, can simply be defined in terms of social and ecological responsibility of business. According to this definition, business ethics requires that business decisions should not be made exclusively from the narrow, economical perspective, but also the social and ecological concerns should be taken into account. This means that people who work in the business life should consider how their economical decisions affect other people, environment or the society on the whole. In other words, it means that the interests of all the relevant parties, or "stakeholders" are acknowledged and weighed. She also believes that "The "stakeholder" approach to business is especially made known by Kenneth Goodpaster who defines the term as follows: "A stakeholder in an organization is (by definition) any group or individual who can affect or is affected by the achievement of the organization's objectives." As examples of such stakeholder groups Goodpaster mentions employees, suppliers, customers, competitors, governments and communities." Thousands of employees from companies like Enron, WorldCom, and Arthur Anderson have lost their jobs and retirement funds due to the bad decis... ... middle of paper ... ...y punished by the law. When scandals like Enron and WorldCom are brought to the public investors become cautious of the American industry. They become less likely to want to invest in American business. The problem is that too me executives think about themselves when their companies began to do badly. Their greed takes over and they don't think about the employees they hurt and the negative effect their unethical practice is going to have on the industry. Their irresponsibility, greed, and selfishness have cost investors billions of dollars. Hopefully business Executives will stop thinking about themselves and their own well being. And start thinking about the lives they will be affecting. With the results of the Enron and WorldCom scandal, maybe other executives will think twice about altering they are accounting books or diverting funds from their company.
The CFO, Andrew Fastow, systematically falsified there earnings by moving company losses off book and only reporting earnings, which led to Enron’s bankruptcy. Any safeguards or mechanisms that were in place to catch unethical behavior were thrown out the window when the corporate culture became a situation where every person was looking out for their own best interests. There were a select few employees that tried to get in front of the unethical accounting practices, but they were pushed aside and silenced. The corporate culture at Enron became a place where if an employee would not make unethical decisions then they would be terminated and the next person that would make those unethical decisions would replace them. Enron executives had no conscience or they would have cared for the people they ended up hurting. At one time, Enron probably was a growing company that had potential to make a difference, but because their lack of social responsibility and their excessive greed the company became known for the negative affects it had on society rather than the potential positive ones it could have had. Enron’s coercive power created fear amongst the employees, which created a corporate culture that drove everyone to make unethical decisions and eventually led to the downfall and bankruptcy of
While this is a type of corporate culture, it plays a significant enough role in corporate crime that I’m going to touch on it individually. The goal of most every company is to make a profit, but when corporate profit is put above all else, it can easily lead to corporate crime. The phrases ‘profit over people’ and ‘money over morality’ come to mind here, especially when thinking about Enron. One example of Enron putting company profits above all else occurred during the California Energy Crisis. Enron traders learned that by manually shutting down power plants they could create artificial power shortages during California’s already occurring energy crisis. This would send energy prices sky rocketing. These traders would then bet on the price of energy rising, which it did, making them around 2 billion dollars. While those at Enron were fixated on the drive for profit, they were unconcerned with the consequences these outages had such as people getting stuck in elevators, fatal car crashes due to traffic light malfunctions, and deadly
Enron was the model for rapid growth in the 1990’s but part of the culture and ethics of Enron was disturbing. Falsified documents, cutthroat competitiveness among employees and accounting schemes that hid the truth of the company’s indebtedness were just a few examples of the lack of business ethics within the organization. Perhaps a more virtuous management team could have saved Enron from collapse.
Many organizations have been destroyed or heavily damaged financially and took a hit in terms of reputation, for example, Enron. The word Ethics is derived from a Greek word called Ethos, meaning “The character or values particular to a specific person, people, culture or movement” (The American Heritage Dictionary, 2007, p. 295). Ethics has always played and will continue to play a huge role within the corporate world. Ethics is one of the important topics that are debated at lengths without reaching a conclusion, since there isn’t a right or wrong answer. It’s basically depends on how each individual perceives a particular situation. Over the past few years we have seen very poor unethical business practices by companies like Enron, which has affected many stakeholders. Poor unethical practices affect the society in many ways; employees lose their job, investors lose their money, and the country’s economy gets affected. This leads to people start losing confidence in the economy and the organizations that are being run by the so-called “educated” top executives that had one goal in their minds, personal gain. When Enron entered the scene in the mid-1980s, it was little more than a stodgy energy distribution system. Ten years later, it was a multi-billion dollar corporation, considered the poster child of the “new economy” for its willingness to use technology and the Internet in managing energy. Fifteen years later, the company is filing for bankruptcy on the heels of a massive financial collapse, likely the largest in corporate America’s history. As this paper is being written, the scope of Enron collapse is still being researched, poked and prodded. It will take years to determine what, exactly; the impact of the demise of this energy giant will be both on the industry and the
The three main crooks Chairman Ken Lay, CEO Jeff Skilling, and CFO Andrew Fastow, are as off the rack as they come. Fastow was skimming from Enron by ripping off the con artists who showed him how to steal, by hiding Enron debt in dummy corporations, and getting rich off of it. Opportunity theory is ever present because since this scam was done once without penalty, it was done plenty of more times with ease. Skilling however, was the typical amoral nerd, with delusions of grandeur, who wanted to mess around with others because he was ridiculed as a kid, implementing an absurd rank and yank policy that led to employees grading each other, with the lowest graded people being fired. Structural humiliation played a direct role in shaping Skilling's thoughts and future actions. This did not mean the worst employees were fired, only the least popular, or those who were not afraid to tell the truth. Thus, the corrupt culture of Enron was born. At one point, in an inter...
Many other businesses may not want to do business as the company was involved with immoral behavior. The unethical business practices of the company will also gain exposure in the media and to the public (Nicol, 2015, n.p). Employees no longer keep unethical activities of the company to themselves. As a whistleblower, they may be perceived as a traitor, but in this case the senior executives are being traitors. They are taking money from immoral behavior and tarnishing the name of the company (Nicol, 2015, n.p).
Investors and the media once considered Enron to be the company of the future. The company had detailed code of ethics and powerful front men like Kenneth Lay, who is the son of a Baptist minister and whose own son was studying to enter the ministry (Flynt 1). Unfortunately the Enron board waived the company’s own ethic code requirements to allow the company’s Chief Financial Officer to serve as a general partner for the partnership that Enron was using as a conduit for much of its business. They also allowed discrepancies of millions of dollars. It was not until whistleblower Sherron S. Watkins stepped forward that the deceit began to unravel. Enron finally declared bankruptcy on December 2, 2001, leaving employees with out jobs or money.
"This is why the market keeps going down every day - investors don't know who to trust," said Brett Trueman, an accounting professor from the University of California-Berkeley's Haas School of Business. As these things come out, it just continues to build up"(CBS MarketWatch, Hancock). The memories of the Frauds at Enron and WorldCom still haunt many investors. There have been many accounting scandals in the United States history. The Enron and the WorldCom accounting fraud affected thousands of people and it caused many changes in the rules and regulation of the corporate world. There are many similarities and differences between the two scandals and many rules and regulations have been created in order to prevent frauds like these. Enron Scandal occurred before WorldCom and despite the devastating affect of the Enron Scandal, new rules and regulations were not created in time to prevent the WorldCom Scandal. Accounting scandals like these has changed the corporate world in many ways and people are more cautious about investing because their faith had been shaken by the devastating effects of these scandals. People lost everything they had and all their life-savings. When looking at the accounting scandals in depth, it is unbelievable how much to the extent the accounting standards were broken.
Hence, the stakeholders which are described as those who are affected by the organisation performance ,actions and duties and those actions includes employees, clients, local community and investors as well. The theory of stakeholders also suggests that it is the responsibility of firm to make sure no rights of stakeholders are dishonoured and make decisions in the interest of stakeholders which is also the purpose of stakeholder theory to make more profit and balancing it while considering its stakeholders (Freeman 2008 pp. 162-165). In the other words organisation must also operates in a more socially accountable approach by carrying out corporate social responsibility as (CSR) activities.
Business ethics simply can be defined as the application of business values in the business practice of a company (Seawell 2010, p. 2). For a multinational company, business ethics is one of the critical aspects need to be taken into account in business decision-making processes. Failure to give attention on ethics may bring consequences on company’s reputation (Meyer & Jebe 2010, p. 159). The company is expected not only to pursue its own profits but also contributing to the environmental and social welfare of the community where it operates (Svensson & Wood 2008, p. 308).
Ethics and social responsibility are integral components in developing a strategic plan while considering stakeholder needs. As such, ethics and social responsibility should be deemed as an essential strategic concern within all organizations. Ethics and social responsibility has the capacity to make or break an organization; the success of an organization’s strategic plan is dependent upon it. This paper will explain the role of ethics and social responsibility in developing a strategic plan while considering stakeholder needs. Lastly, this paper will elaborate as to how my ethical perspective has evolved throughout the program.
Ciulla, J. B., Martin, C. W., & Solomon, R. C. (2007). Is "The Social Responsibility of Business... to Increase Its Profits"? Social Responsibility and Stakeholder Theory. Honest work: a business ethics reader (pp. 217-253). New York: Oxford University Press.
“When a company called Enron… ascends to the number seven spot on the Fortune 500 and then collapses in weeks into a smoking ruin, its stock worth pennies, its CEO, a confidante of presidents, more or less evaporated, there must be lessons in there somewhere.” - Daniel Henninger.
Ethics are the driving force behind good business. Every ethical choice made by a professional can and will have a much different outcome than any unethical choice. Bad ethics can ruin many aspects of a business and as (Gaye-Anderson, 2007) states how quite easily the lives and professional reputation of the employees can even be severally damaged (para. 3). Everything from morale to motivation can be severely affected by poor ethical choices. Customers will take their business elsewhere. Employees will abandon ship. Other, competing businesses reap the benefits of the bad moral choices. Ultimately, the entire business can be brought down by one poor ethical choice.
Through an organizational culture that focused on financial greed for self, illegal accounting practices, conflicts of interest partnerships, illegal business dealings, fraud, negligence, and massive corruption at all levels, the Enron scandal help to create new laws and regulations with stiff penalties if violated (Ferrell, et al, 2013). The federal government implemented the Sarbanes Oxley Act (SOX) (Ferrell, et al, 2013).