In the past decade, a series of illegal activities and ethical scandals have been documented in the business environment. For example, Enron Corporation filed for bankruptcy in December 2001. HealthSouth was accused of using an extreme fraud scheme that resulted in the imprisonment of the involved entities. WorldCom filed for bankruptcy in 2002. The current paper explores business ethics by considering Enron Corporation as a sensitive example of ethical collapse in corporate essays. Research indicates that employees’ behavior is driven primarily by organization culture and that leadership shapes ethical behavior. In spite of Enron’s statement of its core ethical values, top leadership actions resulted in a culture of greed that facilitated unethical behaviors across all levels of its organizational structure. Journals, books and online articles were used to investigate and analyze the case study from a qualitative perspective.
The Enron Culture
At its peak, Enron was a commodity, energy and service company. Its core values were listed as communication, respect, integrity, and excellence. However, several practices suggested that Enron’s culture as opposed to the stated values. Enron’s bankruptcy in 2001 is subject to study because it is one of the most complex and largest bankruptcies in United States history. Enron emerged from bankruptcy in 2004 pursuant to a Bankruptcy Court, which approved the plan of reorganization. Enron Corp. changed its name to Enron Creditors Recovery Corp after the United States Bankruptcy Court approved its reorganization plan. The change of the name was a right move in the sense that it reflected its immediate purpose of reorganizing and liquidating some of its operations and assets before bankruptcy for the benefits of creditors. This decision was not only strategic but also ethical in the sense that the Board of Directors gave the creditors priority. As part of its efforts to avoid problems, ECRC (Enron Creditors Recovery Corp.) took legal action to handle the key financial institutions that it contends and helped the original Enron to deceive the public. As of this writing, those legal efforts had resulted in settlements of approximately $2 billion in cash.
The Enron Backdrop
Ethically, explanation tends to fall in personal, systematic and organizational categories. Personal explanations concentrate on the evils in the character of the involved leaders. Organizational explanations consider the causes of Enron’s collapse in group influences. Such influences include shared beliefs developed about what is permissible, who is important and how things are done at the group level. It also entails shared values or group culture; policies and rules that groups develop to govern their interactions with the internal and external environment. Jeffrey Skilling developed a leadership that used accounting loophole, poor financial reporting and SPE (Special Purpose Entity) to hide debts from failed projects and deals. CFO (Chief Financial Officer) Andrew Fastow and other senior executives misled Enron’s audit committees and Board of Directors on high–risk. In addition, they pressurized AC (Andersen Consulting) to ignore the issues. In response to the lawsuit filed by shareholders, the United States SEC (Securities and Exchange Commission) investigated the scandal. Systematic explanations consist of environmental forces the direct or drive individuals or groups to take an action rather than another. Examples include laws and regulations designed to provide a framework in which people or businesses act. In Enron’s case, one of the systematic causes of the scandal was a shortcoming in the legal and regulatory structure. The existing laws and SEC regulations allowed auditing firms like Arthur Andersen to offer consulting services to Enron and then provide an audited report about its consulting activities. It was a conflict of interest that emanated in the existing legal structure. Additionally, Enron hired and paid its own auditors. This was unethical because the auditors had an incentive to disclose a favorable report of Enron. Enron was also allowed to manage its employe