Enron Corporate Fraud and Corruption - Organizational Ethics Issue Resolution - Case Study Example

ENRON: WHAT BUSINESS SECTORS SHOULD LEARN FROM IT INTRODUCTION In business, ethics is always a big deal. Without ethics, no business can pursue in peace and mutuality between the businessman and the client and even inside the workplace. Just like in all other things, when ethics is badly hurt, many suffer and get affected. It may lead to misunderstandings, dilemmas and other unwanted incidences in the workplace. Encompassed in the term ethics are several virtues which every workplace should observe and value. Honesty, integrity, accountability and veracity- these are but few of the essential virtues which help maintain and strengthen a certain workforce. These values are inseparable and therefore, one cannot exist without another. They exist interdependently and it certainly takes a lot to observe these things. The moment none of these things are achieved, then the business is in for a ride down the pinnacle. One concrete issue wherein this can be exemplified is that which concerns the huge energy company ENRON. THE ISSUE AT HAND ENRON is a Houston-based energy company which housed about 21 000 employees before applying for bankruptcy last November 2001 (SourceWatch, 2007). It came to be known as the seventh largest US company holding hundreds of assets and businesses which range from communication, computers, oil and many other commodities which are of essence to a certain land. This probably made ENRON a sought-after company. ENRON fell on the cliff of bankruptcy because of a certain organized and systematic accounting fraud. This fraud revealed the under-the-table procedures and wrongdoings which not only involved businessmen but even politicians. The plunge of ENRON to bankruptcy became the greatest catastrophe in the financial and business world (SourceWatch, 2007). ANALYSIS OF THE PROBLEM Enron has become the most analyzed business case in the history of the financial world (Boje and Rosile, 2002). The controversy of Enron is selling like pancakes. Many times the people concerned for the downfall talked to the press, gave their testimonies, stated their opinions- yet, there is still no clear person to blame. One side of the story blames it to the Chief Financial Officer Andrew Fastow who also involved some of his personnel who allegedly created off-the-balance-sheet transactions to avoid Enron’s downfall and to create a successful look amidst the nearing fall of the company. Creating a wider web of turmoil, Fastow further blamed his bosses who were Lay and Skilling. These two Board of Directors were pointed by Fastow and claimed that his bosses were the one who gave him acquiescence in doing things which he deemed forthright for the company per se. As the hole widens, more and more persons become the center of attention and controversy. Another angle of the story is quasi-external to the company- the Arthur Andersen Accounting Firm which does the transactions of all financial ties for Enron. The certain firm acts as the consultant and auditing firm of the company and therefore is so capable of under-the-table transactions in one snap. This blaming process and finger-pointing issue reached even the white house, blaming even the US Presidents for the downfall of the previously rich company. The turmoil is as endless and infinite as a black hole. However, all aspects and angles of the issue boils down to one thing- the unethical behavior and greed of business sectors especially those in the higher offices and has a direct hold to the supposedly secret vault (Papoutsy, 2006). Unethical as it is, we can see that the Executives of Enron plus the Andersen minions showed how a great havoc would happen just because of self-interest and disregard of business values, professional standards and ethics. Ripple or domino effect as you may call it, we cannot conceal that this issue is really the biggest frustration in the business world. IMPLICATIONS OF THE CONTROVERSY As expected, this Enron controversy has negative implications not only limited to the business world. One effect of this issue is that there would be a hesitation for auditing firms and companies from prospect corporations and work places. Because of the unethical behavior and unprofessional standards of the Andersen group, companies may deem it delicate to hire accounting firms external to the mother company. This would be a dilemma even for the companies, too because it would be their decision to hire or fire these accounting firms knowing the possible outcomes of such relations. In the political arena, the Enron downfall also has a bearing since many politicians have been involved in the fraud. Since there are government bigwigs who are shareholders of the billion dollar company, the backlash would most probably be on the political figures behind the company. Even the white house has been part of this downfall since the US Presidents are beneficiaries of the sad company, too. It will then add up to the negative images of politicians not only in the United States but as well as politicians in other nations which has money-launderer and corrupt images. VALUES NEGLECTED IN THE ISSUE There are too many neglected values to mention in this controversy but the most concerning of all are professional standards, disclosure of information those concerned, and other wrongdoings which are encompassed by unethical behaviors. Enron is one concrete example of how even a large business could collapse just because of lack of disclosure. The damage could have been lesser if the Andersen Accounting firm and the executives accepted and revealed the losses and debts of the company. Failure to disclose this to the public and even to the balance sheets brought such a great wreck. Professional standards and code of ethics was also greatly hurt especially on the part of Arthur Andersen Accounting Firm. From being one of world’s leading accounting firms, Andersen has gained a “serial killer” status because of their alleged connivance with Enron’s greedy and manipulative board of executives. Another misconduct committed by Enron is the desperate act of pumping up the earnings (Wheat, 2002) of the company just to show that they are still the leading company and to play a fear against competitors in the business arena. Because of these complex and evil machinations by the Enron top seats and associates, there was a string of failure and an unending loop of “who-should-be-blamed” phenomenon. With these values neglected and other unethical behaviors, Enron came crashing down from a company earning hundreds of billions, it has been tagged as a junk company soon after the dirty manipulations have been revealed to the public. AN ETHICAL RESOLUTION OF THE ISSUE Enron could not have suffered that much if they maintained truthfulness in their profession and veracity in their papers. The values which they neglected are just simple and easy to observe yet the consequences of violating them are colossal. Enron may have a Business Code of Ethics which reflects the corporate social responsibility, however, this piece of paper is a mere façade of how they want to be seen and appreciated. Still, the code of ethics Enron has formulated has no say because the aspect which still has a bearing on the companies organization is the dysfunctional leadership and the culture of the company per se (Sims and Brinkmann, 2003). Using values and conforming to the book of ethics of a company is easy to say but in fact, it is really an intricate act for almost every worker because it entails a lot of sacrifice, control and patience. But through starting at the root of these ethical standards, one may come to know that maintaining ethics while chasing your dreams and personal desires is just at reach- that is through incorporating the correct decision making process within ourselves, within our workforce and within the entire business world. INCORPORATING THE DECISION MAKING PROCESS One may find it intricate to disclose the real happenings inside the work place and to give his opinion about what is right and what is not. This is one key factor which led to Enron’s downfall. Through the decision making process, these kinds of situations may be avoided if not lessened. In the decision making process, there are six important steps- and each works interdependently. Therefore, failure in one step may result to failure in the succeeding steps. This certain process is considered one of the most essential steps in avoiding a certain company to become the next Enron. DEFINING THE PROBLEM The first step- Defining the Problem. Let us use a hypothetical case of a personnel of Andersen Firm in the entirety of the explanation. In this case, let us say that this accountant hired by Andersen and Enron. This person came to know the machinations of the executives and other persons involved in the scheme. In his case and in all cases, identifying the problem is important because this step will mark the series of inquiry and critical thinking. If a person identifies a problem which is not the real case, the succeeding process may not be as effective as it should be. Also, the definition of the problem must be limited and concise because it may lead to further destruction should the definition be vague. Through correctly defining the situation, the right solution will come out as expected. Let us say that in the hypothetical case, the problem identified by the accountant is that the financial statements are being manipulated by other accountants and even the executives of the company. IDENTIFYING ALTERNATIVE SOLUTIONS The second step is identifying alternative solutions. In this part of the process, once the person identifies a problem, he should think of alternative solutions which would solve the problem he has identified. Usually, it is ideal to consider at least three but not more than five solutions. Through this range, the person may not limit himself in being blind to other possible solutions and in most cases, opposing solutions to a problem. Also, the maximum of five solutions would limit the alternatives so as to give focus on each of them and to avoid overlooking at each solution and the consequences which may arise. It would also be ideal to rank the alternatives according to its weight and bearing so as to have a ballpark on the results. In our case, the accountant may think of the following solutions: first, to talk to the accountants, validate the information he obtained and explain the detriments of the case; second, he may give a written complaint to the executives and explain to them the same thing explained to his colleagues; third, if there is no response regarding the written complaint, all is set for a verbal complaint; lastly, if there is really no resolution in the case, the accountant must set himself in complaining the problem to an external office which he deems to have a control over the company. This may be a dilemma for the accountant but if he is brave and has a positive outlook and concern for the company, he may pursue and do things for the greater good. EVALUATE ALTERNATIVES Before pursuing a certain resolution, the person must look ahead and anticipate what would happen if he does this and that. Through this, the person may be emotionally, physically and mentally prepared for what would happen in the future. In this process, a person should be looking at the pros and cons of his alternative solutions. Writing them down is ideal because in writing, the ideas flow and becomes a hard proof whereas when weighing it mentally, he may not avoid being bias and judgmental on things. Once he has decided that his solutions are well-planned and would reap more benefits that detriments, then the next step is at reach. MAKING DECISION, IMPLEMENTING AND EVALUATING OUTCOMES These last three phases of the decision making process are determinants of what the outcome would be. In making the decision, the person must have made his choice regarding the course of action he would take. After making the decision, implementing it would be the next step. This may be a fearful phase but when a person is prepared of the outcomes, he must not fret. Last is the evaluation of the outcome. In this phase, the question would be “Does the solution address the problem? How effective was it in addressing the problem?” In this step, the person must do a self critique about his actions and determine whether his actions did something or did not change the situation. CONCLUSION The decision making process may be deemed shallow and inappropriate in some cases but these steps are essential. And in fact, these essential steps are those being overlooked by most failures in businesses and even in other industries. By properly educating the workforce about these kinds of addressing a certain problem, we may avoid a certain company from following the terrible Enron trail. Decision making may be deemed as a dilemma because it involves deciding upon something positive and something negative. However, it is just a matter of weighing things and assessing the circumstances. If a person knows what he is doing is for the good of others, then it is something which he should pursue whatever happens. As the saying goes, there is no prize for predicting rain, but there is prize in building an ark. Surely, the financial and business world wouldn’t want another Enron in the making. And with this in mind, the arena should be set in practicing ethics and informing people on the ethical steps of decision making. By being faithful to these practices, a company may observe ethics in the workplace and may avoid potential failures in the business world. REFERENCES: Boje, David and Rosile, Grace Ann. (2002). ENRON Whodunit?. Retrieved 14 September 2007 from Brinkmann, Johannes and Sims, Ronald. (2003). Enron Ethics (Or: Culture Matters More than Codes). Retrieved 16 September 2007 from Papoutsy, Christos. (2006). Ethics of US and World Stock Markets. Retrieved 13 September 2007 from SourceWatch. (2007). ENRON Corporation. Retrieved 13 September 2007 from < http://www.sourcewatch.org/index.php?title=Enron> Wheat, Andrew. (2002). System Failure, Deregulation, Political Corruption, Corporate Fraud and the Enron Debacle. Retrieved 15 September 2007 from Read More