Search for:

Posted on August 17th, 2012, by

The failure of Enron is one of the most notorious examples of ignorance of ethical norms in business. The collapse of the Enron was the result of a permanent violation of ethical norms that gradually transformed into the violation of laws.

One of the main causes of the failure of Enron was a serious ethical conflict, namely 1) significant value conflicts of interests of different people or groups of people, 2) real alternatives that are justifiable, and, finally, 3) significant consequences on ”˜stakeholders’ in the situation (Swartz, 2002).  It is not a secret anymore that top executives hide debts because they were trying to sustain the permanent growth of their company on the market and to increase the value of its shares in order to earn more money for them despite a very probable bankruptcy. They organized a very subtle web of transaction which helped them to hide millions of dollars of debts of the company as well as they also used for the same purposes complex financial partnerships. Moreover, the Enron executives profited from the situation and sold their shares in the nick of time just before the company failure. As for top executives they also earned millions of dollars with the help of their families, some friends and partnerships which were controlled by them.

The next question that logically arises is who exactly was guilty and what were consequences of the Enron collapse.

Among the most important and guilty is often called Andrew Fastow, a former Enron finance chief who is considered by many specialists to be a mastermind of the Enron failure but it is quite natural to presuppose that one person couldn’t organize such a complicated system of transactions without any other executive or manager knowing. Another person responsible for the Enron crisis is a former Enron chief executive Jeff Skilling. But what seems to me the most shocking, immoral, and absolutely unethical is the fact that one more chief executive of the company Kenneth Lay was extensively informed and warned by middle-managers about the situation within the Enron. And in the meantime, hypocritically, he, in person, announced that he was a good, hardworking, and absolutely ignorant about all those transactions and frauds that took place in the company he was responsible for as a chief executive. It seems unbelievable but he is really so hypocritical. Such cynic reaction reveals great problems that existed in the Enron and that there were no ethical norms that regulated relations between the Enron staff. It is even surprising, to some extent, that having such chief executives there still were some people who were fully aware of the danger for stockholders and tried to prevent the catastrophe.

However, the crisis could be prevented. One of the possible ways to prevent it was the Ethical Code of the company.

It shouldn’t be just a set of rules, principles or regulations written by one or several persons. To create an effective Ethical Code all members of the company everyday life should work on the project of such a code. Only this condition could provide that written regulations and principles would work in real life because all opinions would be taken into account. Certainly, an effective system of the control of the execution of norms of the Code would be vitally important and would prevent such situations when a chief executive being warned by middle-managers did not do anything to stop the terrible fraud.

However, none of the measures were taken and, naturally, ethical decay ended in the financial collapse of a gigantic company. As a result many stockholders were ruined, thousands of people lost their jobs, and the criminals were imprisoned. Thus, a prospective company was ruined though who knows what could happen if the ethical principles were dominant in the company’s policy.

Posted in Free essays | Tagged | Leave a comment

Leave a comment

Your email address will not be published. Required fields are marked *