Enron and its Shortcomings

Enron’s overall business practices are not ethical. One business practice of Enron that I think poses an ethical issue is their attitude towards its employees. They create a highly competitive and a result oriented business atmosphere. They used a system where they would rank employees every half a year and fire employees who ranked on the bottom 1/5 of the scores. This kind of attitude where only results matter and if you don’t produce anything good you will get fired will only hurt the company. This promotes unethical behavior and getting what needs to be done to get good results no matter what and if you do well you will receive big bonuses. This approach towards Enron’s employees did not have very good utilitarian reasoning. This doesn’t help employees morale and psychological satisfaction. The cost of this kind of approach was very low because in fact you will weed out the slackers but the results Enron had where employees afraid to question unethical situations in Enron in fear of their jobs.

Another section of Enron’s business practice that is definitely not ethical is their accounting methods. In a technical aspect their accounting methods were fine, but this was only because of a loophole. Andrew S. Fastow was described as a financial whiz kid because of these loopholes that he knew how to take advantage of. Some of these things that he, and Enron, were able to take advantage of were the setups of special purpose entities. They would setup these special purpose entities and have either their friends or employees to invest in these special purpose entities so that Enron my say that their debts and liabilities are actually under the special purpose entities and not of Enron. This made it look like Enron didn’t have as much debt as it should have had.

A second practice in the accounting methods that were not ethical was their manipulation of their revenue. What they did was to make either their earnings more or inflating their stock. They would make sure that any potential deals that could make money in the future they wrote down in the books in the present, which is not a good accounting practice. Also they used sham swaps with other companies that would buy products and services with each other to make it look like they where making sales and money, when in fact that all they did was trade some assets and wrote a sale....

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Enron’s legal responsibility was low while their economic responsibility was relatively high. They wanted to make money but they where doing it the illegal way, and because of this their social responsibility was just terrible. In the end of the company no matter what was done all the illegal actions were catching up to them and this showed to the world how irresponsible Enron was. They were not socially responsible to any of their stakeholder. The stocks fell and their company went into bankruptcy, many people lost money. Employees lost their jobs and life earnings, and because Enron was a huge company the end of Enron had a ripple affect. All other companies that worked with Enron lost business and they might have had to cut back on costs. Customers lost because they didn’t have the services of Enron, a company that deals with electricity, water, broadband, pulp, paper, and lumber. Creditors had to write off loads of bad debt because Enron would not be able to pay it back. Companies should take a look at Enron’s approach to business and learn that you need to responsibly balance all three responsibilities of business to have a successful business in today’s world.