Business Ethics

Topics: Business ethics, Ethics, Enron Pages: 7 (2130 words) Published: May 12, 2013
Business Ethics
Business ethics is an important aspect of any organization, and all successful organizations adhere to business ethics. Business ethics ensure that organizations adhere to moral and ethical principles as they undertake their day to day operations. Business ethics ensure that organizations and employees conduct business while following ethical principles. It also enables organizations solve challenges they experience while following moral principles. Corporate social responsibility is a component of business ethics and it involves a commitment by organizations to follow ethical principles while at the same time contributing to social and economic development to both their stakeholders as well as the neighboring communities (Goree 43-47). Corporate responsibility entails following regulations and rules which govern specific industries and fields as well as empowering local communities through economic assistance. Business ethics has been linked to long term success by businesses which have operated over time. It is important to analyze the various ethical issues which may affect organizations in order to understand how to cope with ethical challenges. In order to do this effectively, an organization which has a corporate or ethical responsibility to a specific market or region should be studied and various issues which affect it analyzed. This will enable us to make recommendations on how businesses should deal with ethical challenges which face them and the importance of taking up ethical responsibilities. This paper will focus on Enron Corporation, a firm which faced one of the largest fraud scandals ever witnessed in history. The role of ethical and corporate responsibilities by companies on stakeholders will be analyzed with regard to this company and appropriate recommendations made at the end of the paper. History of Enron

Enron Corporation was founded in 1985 after two natural gas companies, Internorth and Houston gas merged. It gradually grew and began selling electricity to the America market. After deregulation of the natural gas market, Enron was able to sell gas at a higher price, which translated to higher profits. Although local governments and producers complained about the high prices, Enron and its competitors was able to prevent regulation through lobbying (Collins 25-31). In the early 1990s, Enron was the biggest natural gas merchant in North America and it had earnings of over $120 million before tax as at 1992. Enron later embraced the diversification strategy and it engaged in operating pulp, gas pipelines, paper plants, electricity plants, broadband assets and water plants, and this led to a huge increase in both market share and profits made. This also led to an increase in share price with Enron’s share price increasing by more than 300% between 1990 and 1998.

However, the company began facing financial difficulties soon after and these were linked to several fraudulent schemes. The financial statements of Enron were non-transparent and could not reveal its finances and operations to analysts and shareholders. In addition, its business model was very complex and this forced accountants to alter the company’s balance sheet to reflect a positive performance. This falsification of documents continued for many years until it became strongly rooted to the company. The overstatement of income and understatement of liabilities eventually led to the collapse of the company due to bankruptcy in 2001. Ethical responsibility of Enron to stakeholders

As a large corporation, Enron had a responsibility to all its stakeholders who included shareholders, government, suppliers, creditors, debtors and the local community. Enron is a large company which has an impact to these stakeholders and it has an ethical responsibility to undertake its operations while following a code of ethics. Companies have a responsibility to shareholders since they...

Cited: Collins Denis. Behaving Badly: Ethical Lessons from Enron. Washington: Dog Ear Publishing,
2006 p 25-31.
Dharan Bala & William Bufkins. Enron: Corporate Fiascos and Their Implications. New York:
Foundation Press, 2003 p 101–103.
Goree Keith. Ethics in the workplace. Washington: Thomson/South-Western, 2006 p 43-47
McLean Bethany &Peter Elkind
Massachusetts: Harvard University Press, 2008 p 55-58
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