Corporate social responsibility has in the previous years worked its path into many corporate agendas and policy debates. Its definition has also undergone multiple modifications and is currently evolving along with the societal expectations (Crowther & Aras, 2008). Despite there being no single definition that is globally accepted, several events can be singled out as not fitting the framework of corporate social responsibility. The surprising collapse of Enron Corporation compromised the safety of over 20,000 employees’ pension funds (Silverstein, 2013). The corporation operated as if it was an isolated entity that had no links with the wider society. Due to the staunch adherence to survival, competitiveness, and profitability, Enron Corporation was unable to maintain the standards of a socially responsible organization.
Enron Corporation was socially irresponsible in several ways. Created as a merger of gas companies, the company became the largest trader of gas commodities with over 20,000 employees in different countries (Petrache, 2009). It irresponsibly began the diversification of its portfolios using entities that allowed the organization to focus on less important ventures and neglecting the associated costs on the company’s balance sheets. As a result, the company made dangerous financial associations and subsequently shifted from the main activity of energy supply and began venturing in computer network bandwidth, water, steel, paper, credit risk, space advertising, as well as derivative weather instruments. The result was a corrosion due to lack of ethics and integrity in social dignity, politics equity, ambient viability, and economic profitability (Silverstein, 2013).
The composition of the board at Enron Corporation also represented conflicting interests as well as a lack of ethics in the leadership of the organization. Some of the board members sat in the senate committee and resulted in the approval of laws that exempted the company from some transactions. Other members of the board were directors of a clinic treating cancer and in some way received donations amounting to $600,000 from Enron Corporation (Petrache, 2009). Other board members who had previously served as parliamentarians received money related to consulting services in the name of Enron Corporation. Other board members who owned Enron stocks involved the company with other oil and gas companies resulting in losses and debts. While the board members at Enron focused on the instantaneous generation of financial success, they ended up making socially irresponsible decisions that affected the employees.
A large number of employees at Enron Corporation had invested their pensions and savings in the company. While the top management at Enron sold their portion of shares due to the decreasing performance of the company, the other small-scale shareholders were barred from doing the same with encouragements to maintain all their shares in the company (Petrache, 2009). Such actions from the management of Enron were socially irresponsible and ultimately resulted in the collapse of the corporation.
The failure to observe CSR by Enron resulted in long-term consequences to the organization. It also served as a lesson on the corporate world’s view on the need for companies to be socially responsible (Owen, 2005). Firstly, financial irresponsibility at Enron that led to its collapse resulted to the acknowledging of accountability discharge as a core aim intertwined with the pursuit of the value of shareholders and the business prosperity. The collapse of Enron also resulted in an increment in the government regulations against the manipulation of company financial statements. As such, employees are challenged to invest as shareholders in companies that observe the government regulations in their financial departments to safeguard their pensions and savings (Crowther & Aras, 2008). The government also required that companies conduct financial reporting every year. Consequently, the reports should be made accessible to the public for scrutiny before getting into partnerships with any company (Owen, 2005). Finally, employees were challenged to demand the selection of finance managers that have the professional background in accounting to prevent poor management of company accounts and balance sheets.
References
Crowther, D. & Aras, G. (2008). Corporate Social Responsibility. Bookboon.
Owen, D. L. (2005). CSR after Enron: A Role for the Academic Accounting Profession? International Centre for Corporate Social Responsibility Nottingham University Business School Nottingham University. Retrieved from http://www.nottingham.ac.uk/business/ICCSR/assets/33-2005.pdf
Petrache, A. M. (2009). The collapse of ENRON, a classic case of corporate social irresponsibility. The Ninth International Conference in Investments and Economic Recovery, 12(2). Retrieved from http://www.management.ase.ro/reveconomia/2009-2s/10.pdf
Silverstein, K. (2013, May 14). Enron, Ethics and Today’s Corporate Values. Forbes. Retrieved from http://www.forbes.com/sites/kensilverstein/2013/05/14/enron-ethics-and-todays-corporate-values/#4cee188a7688
