Enron was the sixth world largest energy corporation. It claimed a lot of annual revenues and a sizeable workforce and became the biggest company in America representing a new business breed. The story of Enron’s company gives insight into the corrupt business, a culture that is faced by unethical practices.
When talking of Enron, one undoubtedly thinks of its ensuing scandal and collapse. The downfall of the company was as a result of several wrong decisions and accounting practices at almost every level of management. The film shows how top leaders such as the chairman and founder Kenneth Lay, Jeffrey skilling-CEO and Andrew Fastow –CFO took part in bad financial management caused by their greed for power and faulty organizational culture. It finally led to the collapse of the company and several criminal trials. The cutting down the energy and overcharging the users was unethical. Their aim was to maximize stockholder wealth. Even though, stockholder wealth maximization is the primary goal of any corporation it is necessary to balance with ethical considerations. One should ensure that the views of all the stakeholders- customers, shareholders, employees, suppliers, communities- are of concern. However, this was not the case in Enron Company because there are several conflicting interests (Hatfield, Patty, and Aaron 70). For instance, after the collapse of the company the employees lost their source of income, insurance covers, and medical covers among other benefits.
The company management used the moral philosophy of teleology. Teleology philosophy insists on actions can be morally acceptable if aimed to produced certain anticipated results, for instance, utility or realization of self-interest. One of the desired results of the company leaders was for the public and the competitors to view it as a profitable business. To achieve this, it had to provide financial reports that were not true. It used the mark-to-marketing accounting system that was deliberately made sophisticated do ad to include expected and potential future earning to the current earnings. A lot of manipulation was done to the reports to deceive the stakeholders and the public and assume the company was profitable. With the help of CFO Fastow, the company was able to manipulate its debt-to-equity ratio and hide the business debts.
Enron Company should have opted on the moral of justice. Justice moral philosophy refers to ensuring fair treatment all the parties. There are three types of justice used in evaluating fairness in distinct situations namely distributive justice, procedural justice, and interactional justice. The actors should have rewarded it, employees, fairly not giving them extraordinary financial rewards to lure them to the dysfunctional culture. If they followed this, they would have cut the extravagant expenses in salaries and also ensured they had disciplined employees (Hatfield, Patty, and Aaron 75). If they had used interactional justice that advocates for fairness in communication, they would have given accurate information about their financial status and mostly probably different companies would have come to their rescue and hence avoid the collapse.
The other alternative moral philosophy they would have used is goodness moral philosophy. Goodness theory mainly focuses on the end results and the satisfactions and happiness created by them. The actors should have ensured that all their stakeholders will be contented by their activities and but not only mind about the happiness of the stockholders. If they did not overcharge their customers and their employee relations was good, they would have prevented the collapse of the company because its workforce would be more productive and having customer support.
Work Cited
Hatfield, Patty, and Aaron Buchko. “Using "ENRON: The Smartest Guys in the Room" as a Live Case Illustration of Financial Concepts and Ethical Issues”. Journal of Financial Education 34 (2008): 68–94.
