According to the film, "Enron: the Smartest Guys in the Room," weaknesses in the capitalistic system are exhibited such as the cultures that have been created that involves practices of fraud and greed. These practices are fostered by the fact that the economic system is vulnerable to abuse by anyone who could manipulate the stockholders as well as the public. For instance, the management of Enron was able to augment their share price by convincing the public that it was making sufficient money without providing any prove. Another weakness is the ignorance of the regulators to ensure that the organizations that perform audit practices are credible enough to conduct a fair and just audit which then help prevent fraudulent activities within business operations. Also, the vagueness of the rules and regulations of accounting, as well as securities, provides a leeway for abuse of the accounting system.
According to an egoist, Aristotle the executives of a company are entitled to the rights to honest services. That is, both Kenneth Lay and Jeffrey Skilling were supposed to respect the protected ethical rights of each and every stakeholder in the market. Thus, the advice Kenneth Lay and Jeffrey Skilling would get from egoist, Aristotle was that they should strive towards upholding the laws that govern the operation of their duties.
The role of Andy Fastow in the Enron fraud as well as it repercussions can be characterized as unethical. By spearheading the transactions at Enron with an intention of making the company look like it's making huge profits when it wasn’t was a breach of “Honest Service” and “breach of employee fiduciary duties.” Also, the fall of Enron portrayed the fact the company is the one that suffers the most as a result of the existing conflicts between the self-interest of the employees and their duties to the organization.
According to the events that led to the fall of Enron, I think the former executive, directors, accountants and both external and internal legal officers are responsible. It is because of their lax in realizing the presence of illegal or misuse of transactions that is the “special purpose entity” to convey information that is misleading to the public with the aim of hiding debts while inflating profits (Ravenscroft 364).
The slogan of Enron “Ask Why” is ironical to the fact that the general were busy making money out of the inflated profits and stock portfolio rather than asking the question of realizing Enron’s sudden rise to glory. Some of the questions Aristotle would ask include: (a) Why Ken Lay and Andy Fastow acted out of self-interest rather than his duties to the organization? (b) Why did Jeffrey Skilling not respond appropriately to the existing indications of unethical accounting practices by senior officials?
I think that we live in a “Culture of Greed” where we are all responsible for the perpetuation of such culture. For instance, we all believe that greed is good and being in possession of a lot of things makes us happy. We are driven by the values of consumption and greed rather than moderation and sustainability which makes us guilty of propagating a “Culture of Greed.”
I find “mark-to-marketing” accounting unethical. It is because it enabled Enron to utilize gains that may not be collected for more than a decade to heighten their current period net income. Thus, it encourages illegal and unethical transactions that are associated with selfish gains.
The actions of Lou Pai to withdraw his shares from Enron before its fall was motivated by the need for funds to finance his divorce proceedings. The divorce resulted from Lou Pai’s affair with Melanie Fewell, who was a stripper and got her pregnant. He was able to sell each share at 72 USD that accumulated to 280 million USD.
Before the documentary, I knew that Enron was an energy company that ran bankrupt as a result of fraudulent activities by the top management. However, after the documentary, I learned that there are more unethical aspects that contributed to Enron’s fall such as the providing false information regarding the company’s inflated profits and net incomes. Also, I learned about the major plays such as the auditing firm Arthur Andersen LLP who helped ascertain the inflated profits and net revenues. I can apply in my life by ensuring that my duties to every organization as well as honest services to the clients should always surpass self-interest.
Work Cited
Ravenscroft, Sue, and Paul F. Williams. "Rules, Rogues, And Risk Assessors: Academic Responses To Enron And Other Accounting Scandals." European Accounting Review 14.2 (2005): 363-372. Business Source Premier. Web. 12 Mar. 2016.
