Introduction
Corporate executives are required to maximize shareholder revenue while avoiding agent-principal conflicts, enhancing the reputation of the companies, and conforming to the regulatory standards. The situation in Enron indicates the corporate irresponsibility and managerial negligence that resulted in investor outrage and multiple lawsuits. The shareholders demanded legislation reforms, managerial accountability, and corporate power. The scandal in Enron encircled unethical and illegal activities punishable by law. This essay attempts to evaluate the virtue ethics that apply to the case of Enron.
Body
When it comes to the concept of virtue ethics, the postulates shift from individual, agent-centered, and action-oriented. The theory thus assumes the existence of a set of moral guidelines that a person has developed to identify the rightness of behaviors and actions. Virtue ethics is utilized to examine a breach of duty based on the situation and the virtuous action. Given the differences that are present in today’s workforce, the class of moral values can at times be inevitable. The lack of ethical diversity in an organization can bring about a group think that has the potential to adversely affect the firm’s culture and performance (Sims & Brinkmann, 2003).
Based on the analysis of Madsen and Vance (2009), Enron is an articulate example of a corporation that thrived on the concept of group think. The authors draw on insider information from Ian Warnick who was the vice president for Organizational Development in the firm. The group think was part of the company’s culture that shaped the way employees at Enron chose to pursue objectives. The leadership in the organization had a huge impact on the values and operations of workers at Enron. The group think culture was a unique ideology presented by Skilling that arose from the shift leadership that gave unrealistic visions.
Enron’s company perspective was characterized by overspending with the management acquiring the lion’s share. The laborers were loyal and would never go against the decisions of the executives showing a level of oppression in Enron. The group think stipulated that as long as the personnel cooperated with the interests of the management, they would obtain a good share of the returns in the organization. The standards of virtue ethics in the modern society requires individuals not to engage in fraudulent actions for public losses or private gains. The auditors and managers at Enron were unethical since they intentionally took part in illegal activities (Madsen & Vance, 2009).
The executives and employees at Enron went ahead to substantiate their fraudulent efforts by destroying documents and manipulating financial reports. The CPA at the time, Sherron Watkins acted virtuously with high ethical principles when she found out about the accounting crisis. She expressed her determination and professional duty to uncover the fraud instead of concealing the illegal operations. Her example proves that whistleblowing is right and moral with respect to virtue ethics. Whistleblowing entails the act of reporting fraudulent or repressive actions that interfere with people’s interests (Shaw, 2016).
Virtue ethics requires the whistleblower to first consider adequate evidence and proof before making allegations to counteract any justification or reasons raised by proprietors. A whistleblower is honest and exhibits objectivity in performing his professional duties. He or she must disclose fraudulent activities to the persons in charge to procure the relevant remedies. The prominent leaders in Enron neglected their role of integrity to the corporation resulting in financial and legal problems. Integrity capacity is viewed as the collective and individual capability for a repeated alignment process of conduct, moral awareness, character, and deliberation that portrays a balanced judgment (Free, Macintosh & Stein, 2007).
Integrity capacity encourages supportive systems and moral development for good decision making. It is the primary intangible asset that plays the role of a catalyst for establishing reputational capitals. The erosion of the virtue can jeopardize the credibility and survival of markets and organizations. Arthur Andersen, one of the critical and major stakeholders at Enron shattered his reputation and integrity capacity through unprofessional accounting services to stop the tide of fleeing investors and attract new clients. The board members whose duties of oversight are stipulated by the Sarbanes-Oxley Act also neglected their responsibility to instill sufficient oversight and monitor the excesses of the top management (Free, Macintosh & Stein, 2007).
The failure to observe virtue ethics at Enron brought harm to all the stakeholders in the corporation. The shareholders who were the major players in the enterprise lost substantial portions of their stock when Enron ultimately filed for bankruptcy. The employees were cheated out of their retirement and compensation plans as the management took huge reimbursements. The US Government also lost because the political tradition in the country of chartering companies that serve the interests of the public was violated by insufficient democratic protections that allowed Enron executives to abuse their authority for personal gains (Shaw, 2016).
Conclusion
Virtue ethics such as culture, integrity, and whistleblowing provide the standard of a modern and civilized community that outlines the fraudulent activities of Enron as defiance to moral principles. The concept expects leaders to consider the interests of the public as well as those of their principals to avoid conflicts and promote the reputation of the organization (Shaw, 2016). Virtue ethics incorporates the involvement of shareholders, stakeholders, the society, and government in monitoring the actions of firms and putting restraints that will limit the excesses of the elites or masses. The self-interest of the managers at Enron portrays that a business will be rendered incapable of maintaining and establishing long-term relationships with stakeholders and the public who are essential parties in determining the survival of a corporation.
References
Free C., Macintosh N. & Stein M. (2007). Management Controls: The organizational fraud triangle of leadership, culture, and control in Enron. Ivey Business Journal.
Madsen, S. & Vance, C. (2009). Unlearned lessons from the past: an insider’s view of Enron’s downfall. Corporate Governance, 9(2), 216-227.
Shaw, W. (2016). Business ethics: A textbook with cases. Cengage Learning.
Sims R. R. & Brinkmann J. (2003). Enron Ethics (or culture matters more than codes). Journal of Business Ethics, 45 (3), 243-256.
